Staff Compensation Program – Phase 2

1. Staff Compensation Program – Phase 2 Internal Equity Adjustments October 2005

2. Today’s Agenda • Background Information • Methodology • Process • Implementation

3. Staff Employment Value Strategy • Salary levels that are competitive with Lehigh’s competition in the marketplace • Cash based rewards for performance • Benefits that are equitable and competitive • Career opportunities for employees • Professional development that is aligned with department goals and University’s strategic plan • Work that is interesting and engaging • Affiliation with a nationally recognized university

4. Our Timeline 2004 2005 2006 2007 • Develop Staff Compensation Program • Implement Market Referenced Job Evaluation Program (1/1/05) • Develop process to address internal equity concerns • Develop Job Family Accountability and Skill Guides • Establish Job Family Career Development Resource Guides • January Equity Adjustments • Complete Job Family Accountability and Skill Guides • Complete Job Family Career Development Resource Guides • Begin comprehensive benefits allocation review • Begin alignment of training and staff development with SEVS • January Equity Adjustments • Performance Management • Complete alignment of training and staff development with SEVS • Complete comprehensive benefits allocation review

5. Staff Compensation Program • Phase 1 – External Equity Assign positions to salary grades that mirror the pay rates found in the job families and labor markets in which Lehigh competes • Phase 2 – Internal Equity Determine appropriate position in range for individual staff members

6. Market Referenced Program The market for each job family determines the salary grade, and knowledge, skills, experience, and performance determine position in range. Job Role, Responsibilities and Skill Requirements Knowledge, Skills, Experience and Performance Salary Grade Position in Range RecommendedBase Salary + =

7. Determining Position in Range What factors contribute to a recommendation of position in range? Knowledge, Skills, Experience Performance Overall Measure Individual Measure Position in Range + =

8. Possible Approaches • Set targets based on years of service – or years in position • Set targets based on performance appraisal ratings for the current year – or the last five years • Set targets based on individual competencies • Etc.

9. Back to the Bank -- Compare 2 Customer Service Managers (CSM) – Who should earn more?

10. Based on Hire Date -- Who should earn more?

11. Based on Position History Who should earn more?

12. Based on the 2004 Appraisal Who should earn more?

13. Based on 5 years of Performance -- Who should earn more? ?

14. Who should earn more? ?

15. And, what about? • Individual competencies • Educational background • Total work experience before the bank • Etc.

16. What criteria are valid?

17. Lehigh’s Criteria • Time in Position and Classification • Performance history as supported by merit increases rather than appraisal rating

18. How to set the targets? • Fixed percentages or dollar amounts for each year in the position and classification • Ranges of salary targets for each year in the position and classification • Fixed percentages or dollar amounts for relative merit adjustments

19. And what are those amounts? How should we determine the percentages or dollar amounts? What should they be based on?

20. Building a Model The equity model was developed in consultation with University leadership over the spring and summer. We needed answers to these two questions: • What do we want to accomplish with the equity adjustments? • Where will we find the appropriate salary values to use in building the model?

21. Our Goal – To define an appropriate salary for each staff member based on time in role and individual performance

22. Our salary change measures: Lehigh’s actual staff salary budget history since 1989.

23. An Example – Back to the Bank

24. New Salary Program at the Bank Effective January 1, 2005: • CSM positions assigned to Grade 3A • Salary range for Grade 3A: $30,000 to $48,000 • Jane and Sue have salaries increased to the range minimum of $30,000

25. Setting salary targets for CSMs The bank will use their own salary budget history over the last 5 years to determine appropriate salary targets for the Customer Service Managers.

26. The Bank’s Salary Budget History

27. The Bank’s Salary Growth

28. Minimum Maximum Moving through a range 2002 At Minimum Minimum Maximum 2003 2% over minimum Minimum Maximum 2004 3.53% over minimum Minimum Maximum 2005 5.6% over minimum Average salary of all Grade 3A employees hired in 2002

29. The 2002 Hiring Class

30. Target for 2002 Hiring Class

31. Developing Salary Targets for All Assume Salary Grade Minimum of $30,000

32. Targets for Sue and Jane Assume Salary Grade Minimum of $30,000 Target for Sue Target for Jane

33. What a Target Represents The salary target represents the average salary that would be paid to all individuals in the salary grade who were hired in the same year. It does not represent the salary that each individual employee should earn.

34. Determining Salaries Jane and Sue both paid $30,000 at 1/1/05 • Step 1 – Targets from HR • Target for Sue = $30,600 (+/-) for performance • Target for Jane = $32,790 (+/-) for performance • Step 2 – Salary Determined by Branch Manager • Salary for Sue = $30,300 • Salary for Jane = $33,500

35. Setting Salary Targets at Lehigh Applying the Bank Example

36. Our Goal – To define an appropriate salary for each staff member based on time in role and individual performance

37. Our salary change measures: Lehigh’s actual staff salary budget history since 1989.

38. Setting the Targets Targets for individual staff member salaries are determined based on: • Length of time in position and classification • Actual potential for salary growth since assuming that position and classification

39. Setting the Salaries Department Heads and Stem Leadership will set actual salaries. They will consider: • Targets provided by HR • Employee performance history as evidenced by actual merit increases received

40. The Process at Lehigh • Confirmation of position and classification dates by supervisors and staff • Development of targets by HR • Determination of salaries by area leadership and department heads • Communication of salary changes to staff