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UNM Hospitals

UNM Hospitals. New Employee Pay Plan Overview and Roll Out January 2004. What We Will Discuss. Background Of The Project The UNM Hospitals Pay Philosophy New Base Pay Plan The Rollout Plan What’s In It For You As A Leader The Communication Plan Your Role In Communication Questions

yvonne-quinn
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UNM Hospitals

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  1. UNM Hospitals New Employee Pay PlanOverview and Roll Out January 2004

  2. What We Will Discuss • Background Of The Project • The UNM Hospitals Pay Philosophy • New Base Pay Plan • The Rollout Plan • What’s In It For You As A Leader • The Communication Plan • Your Role In Communication • Questions • Scenarios • Distribute Communication Tools – Copies Of: • New Compensation Philosophy And Compensation Manual • Key Messages/Questions And Answers • This Presentation • Individual Employee Data Sheets • Department Summary Sheets We know you are anxious to see the “numbers” for yourself and your staff . . .

  3. What We Will Discuss • Distribute Communication Tools – Copies Of: • New Compensation Philosophy And Pay Policies • Key Messages/Questions And Answers • This Presentation • Individual Employee Data Sheets • Department Summary Sheets . . .You will get the data for your direct reports at the end of our session today. Your manager will get information for your position It’s truly important that, for now, you focus on the information we will be sharing in this session so that you can effectively interpret the data sheets and know what to do with the information. In that regard, we ask that you stay to receive these data sheets and we will commit to keeping this session on track and helpful for you

  4. Background Of The Project • UNM Hospitals Human Resources performed an assessment of our general and management pay programs over the past several months • As a result of our assessment • We redesigned our general and management pay plans to improve plan administration by: • Assuring development, implementation and utilization of consistent, effective policies related to pay • Developing broader organizational understanding and support for pay decisions • Expanding the databases to assure our competitive position in the relevant talent markets • Improving turnaround in responding to requests for market data and/or new hire pay offers • We developed a base pay philosophy for UNM Hospitals

  5. The UNM Hospitals Base Pay Philosophy 1Years of experience data were gathered up to 25 years; pay adjustments that result from this analysis can only be made for employees below the midpoint of their new pay grade.

  6. New Base Pay Plan

  7. Key Objectives Of The New Base Pay Plan • Ensure base salaries are and remain market competitive • Establish a more consistent and equitable pay platform that ensures pay is based on current responsibilities as well as past experience • Streamline the number of pay ranges and tighten the overly wide range widths to improve administration of the base pay program • Provide pay managers with the structure to make market-based, economically sound pay decisions • Increase understanding of the plan and help managers address pay-related questions and issues Important!No one will see a reduction in pay as a result of the new program That said, we are making some equity adjustments (increases) for employees based on their years of experience. However, our budget will only allow us to adjust pay up to the new salary range midpoints. Further detail is provided later in this document

  8. We Used A Market-Based Method To Develop the New Pay Plan • A design team consisting of UNM Hospitals Executive Directors, representing various business lines within the organization, provided guidance and input on new pay plans • The members of the team are listed on the following page • Towers Perrin, a global human resources consulting firm, was retained to assist in the design and implementation of the new pay plan • Throughout the process, the Human Resources team reviewed each employee file to develop a profile of previous experience for each person

  9. Name Title Barbara Ohm ED Carrie Tingley Hospital Cindy Paulsen Benefits Manager Donna Lockridge ED Primary Care Commentary Outreach Erin Doles ED Children's Hospital Glen Jornigan ED Information Systems Iris Cowles Director of Employee & Labor Relations Jamie Silva-Steele ED Ambulatory Specialty Clinics/Bus. Ops Jim Pendergast HR Administration Judee Harrington ED Diagnostics Kitty Fleschute AD Patient Financial Services Mark Kistner ED Facility & Support Nancy Purtell ED Behavioral Health Rod Michael Budget Director Design Team

  10. 1 Understandand DocumentUNM Hospitals DesiredPayPhilosophy Understand and Document UNM Hospitals Desired Pay Philosophy • The design team drafted a preliminary compensation philosophy that: • Defined the competitive market for UNM Hospitals positions • Set a market target for pay that aligns pay for an employee who is mature in his or her job (approximately eight years of relevant experience) with the 50th percentile of the competitive market1 (as defined earlier) 1Years of experience data were gathered up to 25 years; pay adjustments that result from this analysis can only be made for employees below the midpoint of their new pay grade.

  11. 2 IdentifyCompetitiveMarket(s) Identify Competitive Market(s) • The competitive market may vary from job to job and may include: • Other healthcare systems with similar net operating revenues • Other businesses within the healthcare industry (i.e., clinics) • Other industries within the region with whom UNM Hospitals competes for talent • A “competitive” base salary range has a midpoint that falls at the median (50th percentile) of the market

  12. 3 SelectBenchmarkPositions Select Benchmark Positions • The design team selected “benchmark” positions which are defined as jobs that are: • Commonly found in other organizations • Functionally similar to jobs at UNM Hospitals • Generally included in credible published survey sources for which competitive market data can be gathered • In order to assure the validity and reliability of data, approximately 150 benchmark positions were selected that represent: • At least 60% or more of the incumbent staff • An array of pay levels, from highest to lowest • Positions within each job family

  13. 4 MatchBenchmarkPositions toPublishedSurvey Dataand AnalyzeData Match Benchmark Positions to Published Survey Data and Analyze Data • Towers Perrin collected data at the 25th, 50th and 75th percentiles of the competitive market for each benchmark position • These data are from credible, reliable published survey sources, i.e.: • The surveys are produced by unbiased third party firms that specialize in survey data collection and tabulation • They include large numbers of participants • They provide job summaries of the jobs in the survey • The survey data can be “cut” several ways to compare by organization size, number of employees, and/or geographic location

  14. 4 MatchBenchmarkPositions toPublishedSurvey Dataand AnalyzeData Match Benchmark Positions to Published Survey Data and Analyze Data (continued) • The design team reviewed the results of the benchmark study to assure accuracy of job match • The following page displays the survey sources used for this analysis

  15. Survey Sources You’ll note that some survey data are from 2001-2002 as well as 2003 We have taken those data and added an additional 4% per year to bring all the information up to January 2004 This is called “aging” and we’ll talk more about it on the next slide Hospital & Healthcare Compensation Service/John R. Zabka Associates, Inc. - Hospital Salary and Benefits Report, 2002-2003 Management Science Association, Inc. (MSA) - National Survey of Key Professional and Technical Jobs, 2001 Medical Group Management Association - Management Compensation Survey: 2002 Report based on 2001 Data Sullivan, Cotter and Associates, Inc. - Survey of Manager and Executive Compensation in Hospitals and Healthcare Systems, 2001 Towers Perrin - 2002 Middle Management and Professional Database Warren Surveys - The HMO Salary Survey - Spring, 2001 Watson Wyatt Data Services - ECS Geographic Report on Middle Management Compensation, 2001/2002 - ECS Geographic Report on Office Personnel Compensation, 2001/2002 - ECS Geographic Report on Professional and Scientific Personnel Compensation, 2001/2002 - ECS Geographic Report on Technician and Skilled Trades Personnel Compensation, 2001/2002 - ECS Hospital and Health Care Management Compensation Report, 2001/2002 - ECS Hospital and Health Care Professional, Nursing and Allied Services Personnel Compensation Report, 2001/2002 - ECS Report on IT Personnel Compensation, 2001/2002 - ECS Report on Sales and Marketing Personnel Compensation, 2001/2002 - ECS Report on Top Management Compensation, 2001/2002 William M. Mercer, Incorporated - Finance, Accounting and Legal Survey 2001 - Human Resource Management Compensation Survey, 2001 - Information Technology Personnel Compensation Survey, 2001 - Integrated Health Networks Compensation Survey, 2001 - Metropolitan Benchmark Compensation Survey - Southeast Region, 2001

  16. Example: Market Pricing Worksheet

  17. 5 Build PayStructure Build Pay Structure • Established preliminary range midpoints for each position • Based on the 50th percentile data • This is not average pay • These midpoints are market targets— half of the organizations in the data pay less than the 50th percentile and half pay more • By using the 50th percentile for the “middle” of the range, we can create starting rates that are lower and appropriate to inexperienced new hires and maximum rates that are higher and appropriate for employees who are mature in their jobs1 1Years of experience data were gathered up to 25 years; pay adjustments that result from this analysis can only be made for employees below the midpoint of their new pay grade.

  18. Build Pay Structure (continued) • Established preliminary range midpoints for each position Jobs that have similar salaries at the 50th percentile of the market are clustered into the same range Their 50th percentile values are then averaged to create a preliminary range midpoint As the entire structure is built, this average may be modified slightly to create appropriate differences between ranges Job 50th % Pay X $10.50 Y $10.44 Z $10.38 Average = $10.44 Final Midpoint For This Range $10.45

  19. 5 Build PayStructure Build Pay Structure (continued) • Developed pay ranges around the preliminary pay midpoints • UNM Hospitals has • 17 pay ranges under the new management base pay plan • 24 pay ranges under the new general base pay plan

  20. Build Pay Structure (continued) • Developed pay ranges around the preliminary midpoints 50th Percentile • A structure that is narrow at the low end and wider at the top allows for: • A more competitive position for entry level jobs • More room to grow talent in professional jobs • The opportunity to compete for experienced staff As a result of the averaging method and creating a final structure, the midpoints of some jobs are slightly higher or lower than the actual market target of the 50th percentile for that job Midpoint 45% 7 % Midpoint Differences in midpoints should be greater than the usual annual salary increase 5 % Midpoint 35%

  21. 5 Build PayStructure Build Pay Structure (continued) • The new pay grade structure is detailed on the following page.

  22. Management Salary Structure Salary Hourly Grade Minimum Midpoint Maximum 17 $11.15 $13.38 $15.60 18 12.08 14.50 16.92 19 13.04 15.65 18.26 20 14.08 16.90 19.72 21 15.31 18.38 21.44 22 16.75 20.10 23.45 23 18.44 22.13 25.81 24 19.88 24.35 28.82 25 21.88 26.80 31.72 26 24.24 29.70 35.16 27 26.48 33.10 39.72 28 29.60 37.00 44.40 29 33.36 41.70 50.04 30 37.40 46.75 56.10 31 41.76 52.20 62.64 32 46.72 58.40 70.08 33 52.28 65.35 78.42 Build Pay Structure1 (continued) 1General and management salary structures are identical except that the management salary grades begin at grade 17 of the general structure. In the payroll system, the general salary grades begin with the letter, “G,” and the management grades begin with the letter, “M.”

  23. 5 Build PayStructure Build Pay Structure (continued) • Non-benchmark jobs were placed into the new pay structures based on internal evaluation and comparison using the following criteria: • Current pay range • Education/training requirements • Experience requirements • Historic relationships • Level of responsibility

  24. 6 IdentifyAppropriateIncumbentPlacement inNew PayRanges Identify Appropriate Incumbent Placement in New Pay Ranges • Human Resources has developed experience data to determine where employees should be placed within their assigned pay ranges (parameters used are described on page 24) • These data were developed from resumes and applications in employee personnel files • HR has endeavored to be as accurate as possible • You will be asked to review their work • If you think HR has made a significant error in calculation, HR staff will work with you to address the issue • UNM Hospitals will not, however, make changes to the employee files (i.e., have employees provide updated resumes, etc.)

  25. 6 IdentifyAppropriateIncumbentPlacement inNew PayRanges Identify Appropriate Incumbent Placement in New Pay Ranges (continued) Pay Range for Job1 1Years of experience data were gathered up to 25 years; pay adjustments that result from this analysis can only be made for employees below the midpoint of their new pay grade.

  26. 6 IdentifyAppropriateIncumbentPlacement inNew PayRanges Identify Appropriate Incumbent Placement in New Pay Ranges (continued) • All employees whose pay falls below the new pay range minimums will have their pay adjusted to the new minimums • Within our financial constraints, we will adjust employee pay above the minimum based on experience • This is called “decompression” • Only some employees’ pay will require adjustment • In this first year, our budget will not allow us to do all the decompression we would like • Using the assumption that employees with eight or more years of experience should be at or near the midpoint of the new salary range, we have spread the available budget as follows . . .

  27. Identify Appropriate Incumbent Placement in New Pay Ranges (continued) • All general and management pay plan employees’ files were evaluated and their years of experience were calculated using the following parameters: • Full-time direct experience at UNM Hospitals or another organization was counted 1:1 • Previous experience must be at least 80% comparable to the current UNM Hospitals position • Full-time indirect experience at UNM Hospitals or another organization was counted 2:1 • Previous experience must be 50%-80% comparable to the current UNM Hospitals position • Relevant experience at UNM Hospitals or another organization (25%-50% comparable to the current UNM Hospitals position) was counted 4:1 and capped at 1 year • Both part time and casual pool experience at UNM Hospitals or another organization are calculated at half the applicable rate (i.e., if experience is direct, rather than 1:1 it was counted as 2:1) • The minimum years of experience requirement for each job were deducted from the total years of experience calculated • By applying the above parameters, we gathered total experience for each employee

  28. Identify Appropriate Incumbent Placement in New Pay Ranges (continued) Example: Perry Towers is a Clinical Analyst who has worked in the position of Clinical Analyst at UNM Hospitals for five (5) years Perry worked as a Clinical Analyst at Brand X Memorial for two (2) years Prior to that, Perry was a Staff RN at Brand X for three (3) years The minimum requirements for a Clinical Analyst at UNM Hospitals are: • At least 1 year of experience as a clinical analyst • At least two years of experience as a clinical professional (RN, Med Tech) Perry has 7 years of direct experience as a Clinical Analyst. One year of this experience “opened the door” along with his prior experience as an RN Therefore Perry is credited with 6 years of experience (7-1)

  29. Identify Appropriate Incumbent Placement in New Pay Ranges (continued) • Total years of experience were gathered up to 25 years • We knew going into the project that we would have to limit decompression at some level of experience, so we erred on the side of gathering more rather than less experience data • We prepared several cost models using the experience data • We were only able to employ a model that adjusts to the midpoint of the new ranges for 8 years of experience • This methodology is consistent with market practice • It assures that all staff with at least 8 years of experience are at the median of the market or better • No methodology can totally eliminate compression • All organizations have limits to what they can pay – maximums of the pay ranges • If one employee has 30 years of experience and another has 35 years, they both may have reached the maximum • No pay plan can ever truly recognize loyalty – we as managers need to send messages that affirm our appreciation for employees’ efforts but acknowledge the limits we have for rewarding people through cash

  30. Identify Appropriate Incumbent Placement in New Pay Ranges (continued) • Using the calculated years of experience, incumbents were then placed appropriately in their respective salary grade • Costs were then determined using the incumbent’s current pay relative to their new salary grade and where, in that salary grade, they should be placed relative to the following parameters: • Everyone is brought to the minimum of their grade • 4 years to the 1st quartile • Another 4 years to the midpoint (total = 8 years)

  31. Identify Appropriate Incumbent Placement in New Pay Ranges (continued) • In year 1, the budget available for UNM Hospitals to implement the new plans ($519,000) was first used to bring all of the incumbents below the minimum of their salary grade to the new salary grade minimum. • After all of the incumbents were brought to the minimum, the remaining amount was divided equally among all of those incumbents who were below the midpoint of their grade and needed an adjustment based on experience (unless the increase needed is less than or equal to $0.05).1 • For example: If $100,000 was available and the true cost to decompress to the midpoint was $400,000, 1/4th (25%) is available. An incumbent requires $.60 per hour to be fully decompressed. In year one, we can get 1/4th of the way providing the incumbent $.15. • In year 2, the same method will be used as in year 1, except that there will be no cost to minimum and the salary structure will be updated in order to keep it competitive with market practice. • In year 3, the salary structure will be updated again, and UNM Hospitals will complete the transition. 1Years of experience data were gathered up to 25 years; pay adjustments that result from this analysis can only be made for employees below the midpoint of their new pay grade.

  32. The Rollout Plan

  33. What’s In It For You As A Leader? • New base pay structures that are consistent across the organization and competitive in the market • Training for pay managers to help you effectively administer the new pay plan and make pay decisions • Open communications about UNM Hospitals’ pay plan

  34. Communication Plan January February January 16 All UNM Hospitals’ leadership will see this overview and be provided information specific to their staff January 26 – February 6 Pay managers meet one-on-one with employees to present the new plan February 6 - 20 HR available to address any necessary changes February 6 Pay day with pay changes January 16 – 23 Leaders review data/correct January 18 Grade and pay changes effective

  35. Your Role • Help ensure a successful implementation by: • Providing feedback today and throughout the process • Supporting this process with your employees • Conduct one-on-one meetings (beginning next week) with General and Management pay plan employees who report to you in order to communicate the new pay plan • Answer your employee’s questions using the scenario information we will provide you with in a few minutes • Share the employee’s profile sheet with the employee • Allowing the employee to keep the white copy • Having the employee sign the yellow copy (indicating only that they have seen it) and then return the yellow copy to Human Resources for placement in the employee’s personnel file • Keeping HR informed of employee feedback throughout the process

  36. Your Role (continued) • Work with HR to make future pay decisions and maintain the new program • The new philosophy and compensation manual will help guide this effort • Participate in the scenario sessions after this presentation part of the program • Schedule one-on-one meetings with your employees • Use the communications tools you will be provided • New Compensation Philosophy And Compensation Manual • Key Messages/Questions And Answers • This Presentation

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