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HR Summit 2024

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One HR: Shaping the Future of Work Together

Developing a Compensation Strategy:

Compa-Ratios, Midpoints, and More

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Objectives for today

After today’s training you will:

  • Understand standard compensation terms
  • Know more about appropriate placement of salaries in a pay range

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External Market

  • Board of Regent’s policy on employee compensation states that we want our positions to be paid competitively with the market.
  • Market = the geographical area and types of organizations from which we recruit and to which we lose our employees.
  • Generally, we identify the median rate of pay that is being provided by all organizations in the Twin Cities for each of our jobs (each level within each specialty).
    • Determined by using a library of more than 30 formal salary surveys that are published annually by independent third-party consulting groups

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Salary Ranges - 2024

  • As part of the Market Refinement project, we established a 36-grade salary structure
    • Accommodates positions with a wide range of market medians
    • Most of our positions reside in grades 7-27
  • Minimums and Maximums are calculated off the midpoint
  • Each job is assigned to a salary grade with a midpoint that closely aligns with the median rate of pay in the market
    • Example: Market median rate is $66,000. Job placed in grade 12.

Grade

Minimum

Midpoint

Maximum

27

$157,854

$209,157

$260,460

26

$146,302

$193,850

$241,398

25

$135,595

$179,663

$223,732

24

$125,672

$166,515

$207,358

23

$116,475

$154,329

$192,183

22

$107,950

$143,034

$178,118

21

$100,050

$132,567

$165,083

20

$92,728

$122,865

$153,002

19

$85,942

$113,873

$141,804

18

$79,652

$105,539

$131,426

17

$73,823

$97,816

$121,808

16

$68,420

$90,657

$112,894

15

$63,413

$84,023

$104,632

14

$58,772

$77,873

$96,974

13

$54,471

$72,174

$89,878

12

$50,485

$66,892

$83,300

11

$46,790

$61,997

$77,204

10

$43,366

$57,460

$71,554

9

$41,600

$53,255

$66,317

8

$41,600

$49,357

$61,464

7

$41,600

$45,745

$56,966

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Salary Ranges Reflect the External Market

Key terms:

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  • Range Spread
    • Percentage difference between the minimum and the maximum
    • Standard at the University for market refined jobs = 65%
  • Midpoint
    • Median rate (50th percentile) being paid for the job in the external market
  • Minimum
    • Lowest rate the University is willing to pay for the job
  • Maximum
    • Highest rate of pay the University is willing to pay for the job

Minimum

Midpoint

Maximum

$50,485

$66,892

$83,300

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Compa-Ratio: �Assessment of an Employee’s Pay

  • Measure of how closely individual or group salaries compare to the range midpoint (market median)
  • Calculated by dividing employee’s actual salary by the range midpoint

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$65,000

Salary

$62,954

Salary Range Midpoint

1.03 Compa ratio

Compa Ratio

Relation to Market

1.0

Exactly matches market median

0.75

25% below market median

1.25

25% above market median

Low compa-ratios do not necessarily signal a problem. A low compa-ratio may be appropriate if the employee is new, has not fully mastered, or is not performing all of the responsibilities associated with the position.

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Ranges with Larger Spreads

  • During the Market Refinement project when jobs were assigned to new grades, we found that current salaries did not always fit into ranges with our standard 65% spread
  • The minimums for some job codes were lowered to accommodate those salaries
  • Employees with a compa-ratio lower than .75 are paid outside the 65% spread
  • The midpoints of these ranges are still tied to the market median, so we have a clear picture of the market 50th for each job.
  • Over time, we will adjust any ranges that are wider than 65%, to eventually reach a 65% spread.

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Ranges with Larger Spreads

  • If the salary range assigned to a job code includes a letter, this indicates the salary range has been widened.
  • The letter corresponds to the percentage by which the minimum needed to be lowered.
  • W, X, Y, and Z are > than 23% below the minimum
  • Grades with letters will be adjusted over time to reflect the percentage by which the minimum remains lower than our standard.
  • You should try as much as possible, to hire people at a 0.75 compa-ratio or higher.
  • How do I recognize a widened salary range?
    • A letter behind the grade number corresponds to the percentage the minimum was expanded.

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15 F

Letter

% Widened

A

1%

B

2%

C

3%

D

4%

E

5%

F

6%

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Utilizing Salary Ranges

  • Salary ranges provide a clear and up-to-date picture of what the external market is paying for our positions
    • This is very different than our ability to pay
    • We don’t need to, and would be unable to, provide pay increases that match the market perfectly across every department, position and employee
  • Compensation decisions are a continual effort to balance the University’s ability to pay with the need to recruit and retain talent

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Steps to Determine Pay Strategy

  • Understand the appropriate zone of the salary range for employees, based on their job mastery
  • Identify constraints that influence what we are able to pay
  • Consider other reward components unique to the University and your department that may allow us to offer a slightly lower salary and still meet the goal of recruiting and retaining strong talent

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Goal:

Recruit and retain strong talent while remaining fiscally responsible

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Job Mastery vs Years of Service

  • The University encourages managers to pay employees in their salary range based on their job mastery

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  • Years of experience, education or years of service with the University should not be a primary factor in distinguishing pay among employees

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  • Typically, more experience and more certifications/education, leads to stronger job mastery, but this is not always the case

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  • Internal equity in salaries = compensating employees based on their relative performance and job mastery, rather than their years of experience

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Identify Ideal Range Placement

Range Placement Based on Overall Mastery of Position

LEARNER

Learner +

Mastery -

MASTERY

Mastery +

Exceptional -

EXCEPTIONAL

The bottom 1/3 of the salary range is reserved for employees who are fairly new to their job or whose performance level is below full mastery. Employees in this area are learning job duties, technical skills, or behavioral competencies or have not yet mastered the job duties, technical skills, or behavioral competencies needed to complete the job. ��Most employees will typically be placed between the learner and mastery sections of the salary range. �

This employee has moved beyond the initial learning phase but is still relatively new to their role and exhibits more characteristics of the Learner than the Mastery performer.

This employee is just short of fully mastering their role. Many of the characteristics of the Mastery performer are displayed but some learning & development is still needed.

The area just below, or at, the midpoint of the salary range is reserved for employees who have mastered all the technical skills and behavioral competencies and abilities associated with their job and are performing their job in a fully competent manner. The employee understands what is needed of them and does all that is required for their job with little or no guidance.

This employee has fully mastered their role and sometimes even exceeds the expectations of their role.

This employee is just short of being an Exceptional performer. They often exceed the expectations of the role and frequently displays characteristics of an Exceptional performer.

The area above the midpoint of the salary range is reserved for the individual who meets all the criteria outlined for the full Mastery employee but, in addition, consistently goes above and beyond the expected standards and consistently displays desired behaviors. The person sustains exceptional performance. ��Typically reserved for only the very few top performers.��Pay for these employees should generally not exceed ½ of the distance between mid and max.

Minimum + 3%

 

 

Midpoint

 

 

Midpoint + 10%

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Identify Ideal Range Placement

Range Placement Based on Overall Mastery of Position

LEARNER

Learner +

Mastery -

MASTERY

Mastery +

Exceptional -

EXCEPTIONAL

The bottom 1/3 of the salary range is reserved for employees who are fairly new to their job or whose performance level is below full mastery. Employees in this area are learning job duties, technical skills, or behavioral competencies or have not yet mastered the job duties, technical skills, or behavioral competencies needed to complete the job. ��Most employees will typically be placed between the learner and mastery sections of the salary range. �

This employee has moved beyond the initial learning phase but is still relatively new to their role and exhibits more characteristics of the Learner than the Mastery performer.

This employee is just short of fully mastering their role. Many of the characteristics of the Mastery performer are displayed but some learning & development is still needed.

The area just below, or at, the midpoint of the salary range is reserved for employees who have mastered all the technical skills and behavioral competencies and abilities associated with their job and are performing their job in a fully competent manner. The employee understands what is needed of them and does all that is required for their job with little or no guidance.

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This employee has fully mastered their role and sometimes even exceeds the expectations of their role.

This employee is just short of being an Exceptional performer. They often exceed the expectations of the role and frequently displays characteristics of an Exceptional performer.

The area above the midpoint of the salary range is reserved for the individual who meets all the criteria outlined for the full Mastery employee but, in addition, consistently goes above and beyond the expected standards and consistently displays desired behaviors. The person sustains exceptional performance. ��Typically reserved for only the very few top performers.��Pay for these employees should generally not exceed ½ of the distance between mid and max.

Minimum + 3%

 

 

Midpoint

 

 

Midpoint + 10%

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Identify Ideal Range Placement

Range Placement Based on Overall Mastery of Position

LEARNER

Learner +

Mastery -

MASTERY

Mastery +

Exceptional -

EXCEPTIONAL

The bottom 1/3 of the salary range is reserved for employees who are fairly new to their job or whose performance level is below full mastery. Employees in this area are learning job duties, technical skills, or behavioral competencies or have not yet mastered the job duties, technical skills, or behavioral competencies needed to complete the job.

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�Most employees will typically be placed between the learner and mastery sections of the salary range. �

This employee has moved beyond the initial learning phase but is still relatively new to their role and exhibits more characteristics of the Learner than the Mastery performer.

This employee is just short of fully mastering their role. Many of the characteristics of the Mastery performer are displayed but some learning & development is still needed.

The area just below, or at, the midpoint of the salary range is reserved for employees who have mastered all the technical skills and behavioral competencies and abilities associated with their job and are performing their job in a fully competent manner. The employee understands what is needed of them and does all that is required for their job with little or no guidance.

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This employee has fully mastered their role and sometimes even exceeds the expectations of their role.

This employee is just short of being an Exceptional performer. They often exceed the expectations of the role and frequently displays characteristics of an Exceptional performer.

The area above the midpoint of the salary range is reserved for the individual who meets all the criteria outlined for the full Mastery employee but, in addition, consistently goes above and beyond the expected standards and consistently displays desired behaviors. The person sustains exceptional performance. ��Typically reserved for only the very few top performers.��

Minimum + 3%

 

 

Midpoint

 

 

Midpoint + 10%

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Adjust Placement Based on Ability to Pay

  • Funding for any pay adjustments must be based on the department’s/unit’s ability to pay.
  • Most organizations struggle to fund all their needed pay adjustments
  • When prioritizing consider giving priority to roles that have low compa-ratios and also:
    • Have high turnover AND
    • Are very difficult to fill AND
    • Are critical to operations if vacated

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Range Placement Based on Overall Mastery of Position

LEARNER

Learner +

Mastery -

MASTERY

Mastery +

Exceptional -

EXCEPTIONAL

The bottom 1/3 of the salary range is reserved for employees who are fairly new to their job or whose performance level is below full mastery. Employees in this area are learning job duties, technical skills, or behavioral competencies or have not yet mastered the job duties, technical skills, or behavioral competencies needed to complete the job. ��Most employees will typically be placed between the learner and mastery sections of the salary range. �

This employee has moved beyond the initial learning phase but is still relatively new to their role and exhibits more characteristics of the Learner than the Mastery performer.

This employee is just short of fully mastering their role. Many of the characteristics of the Mastery performer are displayed but some learning & development is still needed.

The area just below, or at, the midpoint of the salary range is reserved for employees who have mastered all the technical skills and behavioral competencies and abilities associated with their job and are performing their job in a fully competent manner. The employee understands what is needed of them and does all that is required for their job with little or no guidance.

This employee has fully mastered their role and sometimes even exceeds the expectations of their role.

This employee is just short of being an Exceptional performer. They often exceed the expectations of the role and frequently displays characteristics of an Exceptional performer.

The area above the midpoint of the salary range is reserved for the individual who meets all the criteria outlined for the full Mastery employee but, in addition, consistently goes above and beyond the expected standards and consistently displays desired behaviors. The person sustains exceptional performance. ��Typically reserved for only the very few top performers.��Pay for these employees should generally not exceed ½ of the distance between mid and max.

Minimum + 3%

 

 

Midpoint

 

 

Midpoint + 10%

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Consider Other Rewards

Range Placement Based on Overall Mastery of Position

LEARNER

Learner +

Mastery -

MASTERY

Mastery +

Exceptional -

EXCEPTIONAL

The bottom 1/3 of the salary range is reserved for employees who are fairly new to their job or whose performance level is below full mastery. Employees in this area are learning job duties, technical skills, or behavioral competencies or have not yet mastered the job duties, technical skills, or behavioral competencies needed to complete the job. ��Most employees will typically be placed between the learner and mastery sections of the salary range. �

This employee has moved beyond the initial learning phase but is still relatively new to their role and exhibits more characteristics of the Learner than the Mastery performer.

This employee is just short of fully mastering their role. Many of the characteristics of the Mastery performer are displayed but some learning & development is still needed.

The area just below, or at, the midpoint of the salary range is reserved for employees who have mastered all the technical skills and behavioral competencies and abilities associated with their job and are performing their job in a fully competent manner. The employee understands what is needed of them and does all that is required for their job with little or no guidance.

This employee has fully mastered their role and sometimes even exceeds the expectations of their role.

This employee is just short of being an Exceptional performer. They often exceed the expectations of the role and frequently displays characteristics of an Exceptional performer.

The area above the midpoint of the salary range is reserved for the individual who meets all the criteria outlined for the full Mastery employee but, in addition, consistently goes above and beyond the expected standards and consistently displays desired behaviors. The person sustains exceptional performance. ��Typically reserved for only the very few top performers.��Pay for these employees should generally not exceed ½ of the distance between mid and max.

Minimum + 3%

 

 

Midpoint

 

 

Midpoint + 10%

Employee Value Proposition: The University offers competitive benefits, an excellent work environment and a compelling mission. These are factors that are highly valued by many employees and allow organizations to pay a bit less than the market, without affecting their ability to recruit and retain talent.

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Final Pay Decision

Range Placement Based on Overall Mastery of Position

LEARNER

Learner +

Mastery -

MASTERY

Mastery +

Exceptional -

EXCEPTIONAL

The bottom 1/3 of the salary range is reserved for employees who are fairly new to their job or whose performance level is below full mastery. Employees in this area are learning job duties, technical skills, or behavioral competencies or have not yet mastered the job duties, technical skills, or behavioral competencies needed to complete the job. ��Most employees will typically be placed between the learner and mastery sections of the salary range. �

This employee has moved beyond the initial learning phase but is still relatively new to their role and exhibits more characteristics of the Learner than the Mastery performer.

This employee is just short of fully mastering their role. Many of the characteristics of the Mastery performer are displayed but some learning & development is still needed.

The area just below, or at, the midpoint of the salary range is reserved for employees who have mastered all the technical skills and behavioral competencies and abilities associated with their job and are performing their job in a fully competent manner. The employee understands what is needed of them and does all that is required for their job with little or no guidance.

This employee has fully mastered their role and sometimes even exceeds the expectations of their role.

This employee is just short of being an Exceptional performer. They often exceed the expectations of the role and frequently displays characteristics of an Exceptional performer.

The area above the midpoint of the salary range is reserved for the individual who meets all the criteria outlined for the full Mastery employee but, in addition, consistently goes above and beyond the expected standards and consistently displays desired behaviors. The person sustains exceptional performance. ��Typically reserved for only the very few top performers.��Pay for these employees should generally not exceed ½ of the distance between mid and max.

Minimum + 3%

 

 

Midpoint

 

 

Midpoint + 10%

Ideal range placement is based on an assessment of job mastery.

Actual placement includes assessing:

Goal:

Recruit and retain strong talent while remaining fiscally responsible

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Key Compensation Moments

  • Initial Offer – Place salary appropriately in the range considering:
    • Years of experience and education
    • How you expect this employee to perform relative to others

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  • Promotion - Place salary appropriately in the range considering:
    • Expected mastery and performance in the new role
    • How you expect this employee to perform relative to others

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  • Annual Merit Increase – Distribute increases based on:
    • The difference between the employee’s current vs ideal range placement and performance over the last year

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  • Periodic Market Adjustments – Award based on:
    • The difference between the employee’s current vs ideal range placement

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Signs that Salary Adjustments May Need to be Considered

  • Difficulty Attracting and Retaining Talent
    • Offers are being rejected by top candidate(s) due to low salary
    • Experiencing high turnover and salary is the reason for departure

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  • Experiencing Compression
    • Too many employees paid low in the salary range, including employees who are high performing with strong experience.=
    • Usually noticed when hiring from the outside market and the salary of the new hire exceeds internal salaries for top performers

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  • Salaries are within 2% - 3% of the range minimum
    • These salaries may fall below range minimum when the salary ranges are adjusted the following January

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Resources to Support Units

  • Dedicated Classification Analyst and Compensation Consultant
  • Compensation planning worksheet to assist with prioritization and identification of ideal range placement
  • Compensation and Classification website

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Thank you