Introduction of Total Rewards & Introduction of Total Rewards & Implementation of Market Pay Zones Implementation of Market Pay Zones

Presented by:Presented by:UMHS Compensation UMHS Compensation

5/15/085/15/08

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Objectives Objectives

• Share work to date regarding the Total Rewards ModelShare work to date regarding the Total Rewards Model– Process for supportProcess for support– Outcomes of Market Pay Zone Management Review period for Outcomes of Market Pay Zone Management Review period for

staff in CFCSstaff in CFCS

• Introduce UMHS Total Rewards Philosophy for UMHSIntroduce UMHS Total Rewards Philosophy for UMHS– Formalize UMHS Compensation philosophyFormalize UMHS Compensation philosophy

• Gain support on next steps toward implementation of Market Gain support on next steps toward implementation of Market Pay Zone structurePay Zone structure– Compensation guidelinesCompensation guidelines

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TOTAL REWARDS STRATEGY

Compensation-Base Pay

-Variable Pay-Other Pay

-Develop Pay Structure-Validate Structure-Develop Salary Administration Guidelines-Communicate/Educate

Benefits-Health-Dental

-Life & Disability-Retirement

-Conduct Benefits Study-Identify market position-Communicate/Educate

Work Experience-Training/Development

-Work/Life-Cultural

-Recognition

-Identify approach to illustrate value of work experience-Communicate/Educate

TOTAL REWARDS TOOLS-Website

-Statements

Total Rewards - Total Rewards - The End in MindThe End in Mind

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UMHS Current Strategies – WIP UMHS Current Strategies – WIP

Become Widely RecognizedAs a Great Place to Work

Coordinate Recruitment Efforts.

Expand and Diversify thePotential Applicant Pool

Mentoring, Mentoring, MentoringRe-Recruit Current Employees

Invest in Leadership Development

WorkforceInvestment

Plan2003 to Present

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Management ReviewManagement ReviewPurposePurpose

UMHS Executive Leadership expressed interest in UMHS Executive Leadership expressed interest in gaining organizational support:gaining organizational support:

• IntroduceIntroduce and gain support on “Total Rewards” model and and gain support on “Total Rewards” model and new base pay structurenew base pay structure

Meet with Management to understand:Meet with Management to understand:• Current departmental compensation practicesCurrent departmental compensation practices

• Organizational “fit” of proposed base pay structureOrganizational “fit” of proposed base pay structure

• Desired compensation guidelines & resourcesDesired compensation guidelines & resources

• Zone implementation preferencesZone implementation preferences

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Management ReviewManagement Review Communication Process Communication Process

Management Review Period :Management Review Period :

• General information via Total Rewards websiteGeneral information via Total Rewards website

• Department specific information via UMHS HR Department specific information via UMHS HR Consultants Consultants

– 1:1 meetings with Department Management 1:1 meetings with Department Management

All feedback was documentedAll feedback was documented Department specific issues are being resolved with Department specific issues are being resolved with

the department/HRthe department/HR Organizational issues are being resolved with Organizational issues are being resolved with

appropriate stakeholdersappropriate stakeholders

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Market Pay Zone ReviewMarket Pay Zone Review Outcomes Outcomes

Review period itself was well-received:Review period itself was well-received:

• Continued dialog on implementation of new Continued dialog on implementation of new classification system and UMHS compensation classification system and UMHS compensation practicespractices

• Continued improvement of job classification within Continued improvement of job classification within the new systemthe new system

• Process supported philosophy of “transparent” HR Process supported philosophy of “transparent” HR practicespractices

• 1:1 communication to discuss business needs1:1 communication to discuss business needs

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Market Pay Zone ReviewMarket Pay Zone Review Outcomes Outcomes

Management expressed support for:Management expressed support for:

• Total Rewards ModelTotal Rewards Model– Integrated design of compensation, benefits and work Integrated design of compensation, benefits and work

experience programs to support recruitment and retentionexperience programs to support recruitment and retention

• Target market competitive pay for UMHS positions Target market competitive pay for UMHS positions – Market target is higher for some positionsMarket target is higher for some positions

• The proposed Market Pay Zone structureThe proposed Market Pay Zone structure

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Market Pay Zones Market Pay Zones OutcomesOutcomes

Management expressed interest in: Management expressed interest in:

• Formalized compensation philosophy as part of a UMHS Formalized compensation philosophy as part of a UMHS Total Rewards philosophyTotal Rewards philosophy

• Formalized compensation guidelines to ensure department Formalized compensation guidelines to ensure department compensation practices align with leadership intentionscompensation practices align with leadership intentions– Consistent compensation practicesConsistent compensation practices

• A “management implementation” period of market pay zone A “management implementation” period of market pay zone structure and accompanying guidelinesstructure and accompanying guidelines

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Market Pay Zones Market Pay Zones Outcomes Outcomes

• More information on current UMHS compensation, benefits, More information on current UMHS compensation, benefits, and work experience programsand work experience programs

– To assist in recruitment and retention of staffTo assist in recruitment and retention of staff

– To support selected rewards strategy (competitive To support selected rewards strategy (competitive advantage of creating the ideal work experience) advantage of creating the ideal work experience)

• Information on common career paths and growth Information on common career paths and growth opportunities in UMHSopportunities in UMHS

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Market Pay Zone ReviewMarket Pay Zone ReviewOutcomesOutcomes

Over 600 market titles/zones out for review:Over 600 market titles/zones out for review:

• Approx. 85% market titles/zones have been “validated”;Approx. 85% market titles/zones have been “validated”;• Reviewed, discussed and support recruitment/retentionReviewed, discussed and support recruitment/retention

• Some with recommended changes: Some with recommended changes: • To align with internal pay relationshipsTo align with internal pay relationships• Core positions with recruiting and retention challengesCore positions with recruiting and retention challenges

• Remainder require further review:Remainder require further review:

• Market titles with utilization or design issuesMarket titles with utilization or design issues

• Director level titles require more review to ensure proper Director level titles require more review to ensure proper pay relationshipspay relationships

Recommendations Recommendations

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RecommendationsRecommendations

• Formalize UMHS Total Rewards PhilosophyFormalize UMHS Total Rewards Philosophy– To set guiding principles for the design of compensation, To set guiding principles for the design of compensation,

benefits, and work experience programs benefits, and work experience programs

• Considerations:Considerations:– Organizational fit of guiding principles Organizational fit of guiding principles

– Identification of desired market position for programs Identification of desired market position for programs

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RecommendationsRecommendations

• Formalize UMHS Compensation Philosophy Formalize UMHS Compensation Philosophy – To set guiding principles for the design of compensation To set guiding principles for the design of compensation

programs programs

• Considerations:Considerations:

• Identification of desired market position (w/HSEG)Identification of desired market position (w/HSEG)

• Identification of pay factors (importance of Identification of pay factors (importance of performance, LOS)performance, LOS)

• Balance of internal and external equityBalance of internal and external equity

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RecommendationsRecommendations

• Formalize UMHS Compensation Guidelines Formalize UMHS Compensation Guidelines – To set guidelines around compensation policies & To set guidelines around compensation policies &

practices:practices:

• Considerations:Considerations:

– Placement within new market pay zonePlacement within new market pay zone

– Pay for zone “outliers” (tolerance & criteria)Pay for zone “outliers” (tolerance & criteria)

– Pay change guidelinesPay change guidelines

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Market Pay Zone Placement Guidelines Market Pay Zone Placement Guidelines (Sample 1)(Sample 1)

Range of CompetitivenessMarket Pay Zone

Developing Staff

Highly Experienced

&Highly

ProficientStaff

Experienced/Competent

StaffMidpoint

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Market Pay Zone Placement Guidelines Market Pay Zone Placement Guidelines (Sample 2)(Sample 2)

Position in ZoneFirst Quartile

($40,660-$44,470) Second Quartile

($44,471- $50,820) Third Quartile

($50,821 - $57,170)Fourth Quartile

($57,171 - $60,980)Typical Skill and Competency Level

The employee is new to the position and meets the minimum qualifications required for the position. However, the employee does not have substantial experience, is in a learning mode, and typically requires a training period to become fully familiar with the requirements of the position.

The employee exceeds the minimum requirements of the position by offering additional experience, knowledge and skill level and is progressing to becoming fully proficient in the position. The employee needs minimal training to fully perform all the requirements of the position.

Employee is highly experienced is able to offer significantly more skills and expertise than is generally required for the position. Employee has knowledge of all criteria of the job and has knowledge of related areas. Employee typically has specialized and/or exceptional expertise. Employee typically demonstrates skills and competencies associated with a market title in a higher pay zone.

Employee is highly experienced and consistently exceeds job expectations. Employee able to offer significantly more skills and expertise than is required for the position. Employee has broad knowledge of all criteria of the job, of related areas, and UMHS as a whole. Employee has specialized and/or exceptional expertise. Demonstrates skills and competencies associated with a market title in a higher pay zone.

Typical Performance Level

The employee is new to the job and is in a learning mode or the employee is not new to the job but performance is less than satisfactory and the employee needs to demonstrate growth and improvement in order to meet job requirements.

The employee is meeting expectations considering the level of experience and is progressing to becoming fully proficient, effective, and performing the job as it is defined.

The employee consistently performs the position at a higher level than what position requires. S/he serves as a role model, shows dedication, and provides significant value to the organization.

The employee continuously increases the quality and quantity of their contribution. S/he serves as a role model, shows dedication, and provides high value to the organization. Is recognized by you and others as an outstanding performer.

Market Pay Zone Placement Guidelines (DRAFT)

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Pay Change GuidelinesPay Change Guidelines

Level of responsibility of newly assigned

duties is:

Assign New Market Title

Different Market Pay Zone

% Change

Sigificantly Higher: Job- Based Change

Yes Yes / HigherSee Pay Change

Guidelines

Significantly Lower: Job-Based Change

Yes Yes / Lower Case-by-Case

Significant Different: Job-Based Change

Yes No / Same Case-by-Case

Essentially the same but somewhat expanded: Person-Based Change

No No / Same 0-5%

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Pay Change GuidelinesPay Change Guidelines

From Market Title in: To Market Title in:Typical % Increase in

Base Pay (1)

Professional Job Role Professional Job Role 5 -10%

Professional Job Role Managerial Job Role 10-15%

Managerial Job Role Managerial Job Role 10-15%

Other Typical %

Added Duties 5-10%

Administrative Differential 10%

Pay Guidelines for Job-Based Changes

Note 1: Placement beyond midpoint of the new market pay zone is generally not appropriate at initial assignment of the new market title.

Guidelines are based on actual UMHS pay action occurances 2005-2006. Aligned with common industry wide compensation practices.

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.

Compensation Philosophy

FY08 Pay Structures

Managerial Pay ZonesProfessional Pay Zones

Establishing Pay Rates

Adjusting Pay Rates

Premium Pay

Pay SPGs

UMHS Pay Administration Pay Policies Pay Laws and Regulations

UMHS Pay Administration

UMHS Total Rewards

The UMHS Pay Zones apply to all market titles utilized within the UM Health System that are part of the Career Family Classification System (CFCS). There are two pay structures; one for market titles in the professional job role and one for market titles in the managerial job role.

The UMHS Market Referenced Pay Zones are designed to establish a competitive range of pay for respective jobs within the Zones. UMHS Human Resources annually evaluates the external pay rates of benchmark jobs through pay surveys in order to establish competitive pay rates. The Zones are reviewed annually for appropriateness and revised to meet the objective of remaining competitive within the market. Compensation trends in the market and external economic factors – such as the Consumer Price Index and unemployment rate – as well as internal factors are also taken into consideration when establishing annual salary and structure recommendations.

The purpose of the Market Referenced Pay Zones:

Inform of the typical salary range for each market title in our labor market to: o Provide reference points for setting salaries for current and new staff o Manage salaries to be market competitive o Measure the competitiveness of salaries o Identify possible career opportunities for staff o Set realistic salary expectations for staff

The two pay structures are designed to be:

Market-referenced Externally competitive Consider internal pay relationships Flexible in addressing our business needs

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Next StepsNext Steps

Long-term:Long-term:– Formalize UMHS Total Rewards strategyFormalize UMHS Total Rewards strategy

• To support UMHS strategic goalsTo support UMHS strategic goals

– Integrate total rewards in employment brand to fully Integrate total rewards in employment brand to fully support recruitment and retention strategies (& WIP) support recruitment and retention strategies (& WIP)

• (i.e., “The MI difference is U ” Rewards)(i.e., “The MI difference is U ” Rewards)

– Individual Total Rewards Statements Individual Total Rewards Statements

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Next StepsNext Steps

• What (unit) management should be able to communicate after What (unit) management should be able to communicate after trial period:trial period:

Basics of the Total Rewards Model and how it supports Basics of the Total Rewards Model and how it supports recruitment/retention and our strategic goalsrecruitment/retention and our strategic goals

UMHS compensation philosophy, overall targets for owned UMHS compensation philosophy, overall targets for owned positions based on metrics and labor marketpositions based on metrics and labor market

Pay range for each of the utilized positions and basics of Pay range for each of the utilized positions and basics of how they were establishedhow they were established

Employees’ position in the range and how that relates to Employees’ position in the range and how that relates to peers, market, and performance peers, market, and performance

Opportunities for career development for staff (next levels Opportunities for career development for staff (next levels and/or closely related market titles) and/or closely related market titles)