Equitable Compensation: Pay Action 7 is a Systematic Approach to Determining Pay Increases

Dec. 7, 2007 — The University of Virginia has tried out a new approach to determining pay increases, and so far it’s a hit with both managers and employees — especially the 319 employees across the University who received raises earlier this year in the pilot program.

Pay Action 7, or PA7, sounds like an administrative decree, but in reality it’s a new set of tools that gives managers a framework for assessing employees’ pay. “Pay Action 7 is a reliable way of leveling the playing field,” said Susan Carkeek, vice president for human resources. “It makes the ‘when’ and ‘why’ of giving increases so much more consistent.”

Carkeek first presented PA7 to the administration in November 2006, and it was piloted in all areas and schools from February to April 2007, backed by state supplemental funds and Board of Visitors funds designated for strategic staff salary alignments. Each vice presidential area or school was given a workbook that included detailed instructions, definitions, relevant employee data and an employee-specific PA7 worksheet to help managers distribute the funds they were allocated.

Pay Action 7 provides a holistic assessment of an employee’s pay based on seven factors:

• Pay history
• Length of total state service
• Qualifications (education, experience, unique skills)
• Job content and individual performance contribution
• The position of the employee’s pay in the competitive “market range”
• Employee’s pay relative to similar jobs at U.Va.
• Employee’s pay relative to average market salary for similar jobs outside U.Va.

PA7 balances these factors and suggests whether or not there is sufficient justification to warrant a pay adjustment. The tool provides information and a methodology, but the manager is still responsible for making decisions.

The pilot marked the first time market data has been openly distributed to departments to help them make pay decisions. The success of PA7 is heavily dependent on accurate market data.

“Making market-relevant pay decisions and using competitive pay ranges is the goal here,” said Rod Kelly, director of compensation management. “It requires that we have a good understanding of true job content, so we can match those jobs to external market data. That’s a continuous work in progress.”

The Office of Compensation Management is currently working to make better job matches as well as expand its market survey library, with the help of supervisors and executives around the University, Kelly said.

Using the salary surveys, the Office of Compensation Management created market ranges for 86 percent of classified and University staff positions. For comparative purposes, the salary ranges are divided into thirds (see graphic).

 “It’s critical that we recognize that there is no magic number for a salary,” said Kelly. “We want to look at where an employee falls in a general range, not how close they come to hitting a specific number.”

Employees that have job survey matches are distributed in the three sections of the market ranges as follows: 26 percent are in the lower third, 25 percent are in the middle third, and 22 percent are in the upper third. Thirteen percent of employees have no match for their job yet, and 14 percent are below the relevant market range altogether.

“The ranges give us a picture of where we are now and where we want to go,” said Carkeek. “They help us identify the employees in the most need. Ideally, we’d like to see a bell curve, with the majority of the employees in that middle third.”

In the recent pilot, the overwhelming majority of PA7-driven increases were applied to salaries that either fell below the market range minimum or in the lower third. As a result of the pilot, 208 employees below the minimum were given an increase to bring them into the pay ranges, and 87 in the lower third were given increases. In all, 319 people received an increase in pay.

University managers who used the tool were pleased enough to commit significant additional dollars from their budgets. In total, $889,000 was committed to increase annual salaries as part of the pilot: $398,000 came from the BOV and state supplemental funds, while nearly
$491,000 was committed by individual managers.

The pilot project was so well received that the University decided to submit the process to the state’s Department of Human Resource Management for approval to use with classified staff pay adjustments. As a result, PA7 will be applied to the in-band adjustment process at the University sometime in the first half of 2008. PA7 allows University Human Resources to look at jobs and occupational families across the University more broadly and do marketbased adjustments.

“Moving forward, we wanted to provide University managers with a way to consistently and equitably make pay decisions from year to year,” said Carkeek. “Pay Action 7 provides that uniformity in an easy-to-use framework.”