Kctcs Compensation analysis Board of Regents Workshop – September, 2016

Studies undertaken without implementation. Why we are here Background KCTCS’s colleges need a revised classification and compensation system. Studies undertaken without implementation. Continued loss of key staff and faculty. Difficulties backfilling positions. Inconsistent application of exceptions. KCTCS needs a strong compensation philosophy. One standard classification and compensation system Easy to implement and administer Provides flexibility Reduces the need for exceptions Ensures system equity, consistency, and legal compliance Allows the colleges of KCTCS to recruit and retain qualified employees

Why we are here In March, 2015 the KCTCS Board requested a compensation classification study. History Last compensation and classification study was conducted and implemented in 2003. Scope 373 unique faculty and staff titles were benchmarked by HRG. Benchmarks were 36 colleges, universities and similar systems in surrounding states. College and University Professional Association of Human Resources (CUPA-HR), Kenexa and Economic Research Institute (ERI) databases were used for benchmarking.

Why we are here Results Consolidation and clarity of pay bands. A proposal to reduce the number of current job titles from 373 to 248. Adjustment of pay bands to better reflect market conditions. Financial modeling of moving everyone to at least band minimum. A consistent approach to the federally required Fair Labor Standards Act (FLSA). Financial modeling of new FLSA regulations. A proposal to implement a pay program to fund hard to fill faculty disciplines. A financial forecast of an annual 3% salary increase. Updated compensation policies and procedures.

Team and resources KCTCS Leadership Hanna Resource Group (HRG) Wendell Followell Lyle Hanna Jackie Cecil Kurt Kessler KCTCS President’s Cabinet Candra Bryant KCTCS System Office Compensation Team Allison Pettrey Jean-Paul Philippe Stephanie May Shirley Snodgrass Tiffany Wagers

Team and resources Human Resource Directors from the colleges Kellie Allen Ashland Toni Whalen Jefferson Bryen Goble Big Sandy May Wright Madisonville Barbara Goatley Bluegrass Sandra Estill Maysville Kris Wood Elizabethtown Vicky Hohiemer Owensboro Phyllis Yeager Gateway Jill Meece Somerset Vickie Combs Hazard Sherri Forester Southcentral Doris Lake Henderson Billie Franks Southeast Yvonne Glasman Hopkinsville Bridget Canter West Kentucky

Team and resources President’s Leadership Team Dr. Gwen Joseph (interim) Jefferson Dr. Kay Adkins Ashland Dr. Judy Rhoads Madisonville Dr. Devin Stephenson Big Sandy Dr. Steve Vacik Maysville Dr. Augusta Julian Bluegrass Dr. Thelma White Elizabethtown Dr. Scott William Owensboro Dr. Jo Marshall Somerset Dr. Keith Bird (interim) Gateway Dr. Phil Neal Southcentral Dr. Stephen Greiner Hazard Dr. Lynn Moore Southeast Dr. Kris Williams Henderson Dr. Barbara Veazey West Kentucky Dr. Jay Allen Hopkinsville

Faculty - Average Compa ratio by college by Service Compa Ratio = Market / Salary * Does not include Corrections, Fire Commission System Office, Fire Rescue System Office, KBEMS, Virtual Learning/KCTCS Online

STAFF - Average Compa ratio by college by Service Compa Ratio = Market / Salary * Does not include Corrections, Fire Commission System Office, Fire Rescue System Office, KBEMS, Virtual Learning/KCTCS Online

Summary of findings Overall pay to market (compa ratio) for faculty is 85%. 45% of the faculty has over 15 years of service and their pay is 88% of market Overall pay to market (compa ratio) for staff is 87%. 29% of the staff has over 15 years of service and their pay is 96% of market

Faculty - Average Compa ratio by college by age Compa Ratio = Market / Salary * Does not include Corrections, Fire Commission System Office, Fire Rescue System Office, KBEMS, Virtual Learning/KCTCS Online

STAFF - Average Compa ratio by college by age Compa Ratio = Market / Salary * Does not include Corrections, Fire Commission System Office, Fire Rescue System Office, KBEMS, Virtual Learning/KCTCS Online

Summary of findings Overall pay to market (compa ratio) for faculty is 85%. 57% of the faculty is over 50-years-old and their pay is 86% of market Overall pay to market (compa ratio) for staff is 87%. 48% of the staff is over 50-years-old and their pay is 90% of market

Costing Compensation Philosophy “A compensation philosophy is simply a formal statement documenting the company’s position about employee compensation. It essentially explains the “why” behind employee pay and creates a framework for consistency. Employers can benefit from being transparent about their compensation philosophy and having an official pay strategy.” https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/compensationphilosophy.aspx

Costing Compensation Philosophy KCTCS recognizes the importance of providing market competitive pay and benefits in order to attract, retain, and engage the caliber of faculty and staff our institution requires to achieve excellence. The compensation system incorporates Performance Planning and Evaluation (PPE), rewards employees for achieving KCTCS goals and balances both internal and external financial resources. KCTCS is committed to providing equitable compensation in accordance with applicable laws. Guiding Principles Annually review market pay rates Achieve competitive market pay and benefits for all employees Bring people to band minimum first Address compression Periodically review hard-to-fill positions Reward performance

Costing Results – 3 Year Plan Cost – System-wide (excluding benefits)

Costing Results – 3 Year Plan Cost $7.8M, excluding benefits, for first year cost. This includes: 3% salary increase is modeled at $5.8M. $1.2M for expected FLSA adjustments (assuming a 40 hour work week). $375K per year to get people to minimum of the salary range. $377K for Hard to Fill Adjustment - Biomedical Sciences, Nursing, Precision Production (this is a 5% increase spread evenly over 3 years). A rough guess for compression costing is $2.5 million…   For those employees NOT under the proposed band min I determined their range penetration.  For those with a range penetration of 0-10%, I modeled an increase of 3% for compression.  For those 10-15%, 2%, 15-20%, 1%.  I did this for Staff and Faculty. Range Penetration % Increase Count Total 0 - 10% 3% 1,480 $2,012,547 10 - 15% 2% 340 $320,451 15-20% 1% 309 $137,262 $2,470,260   This includes the 5% Hard-to-Fill budget in the first year.  It was not split out over 3 years.

Costing Results – 3 Year Plan Cost $6.8M, excluding benefits, for the second year cost. This includes: 3% salary increase is modeled at $6M. $375K per year to get people to minimum of the salary range. $377K for Hard to Fill Adjustment - Biomedical Sciences, Nursing, Precision Production (this is a 5% increase spread evenly over 3 years). $7M, excluding benefits, for the third year cost. This includes: 3% salary increase is modeled at $6.2M. A rough guess for compression costing is $2.5 million…   For those employees NOT under the proposed band min I determined their range penetration.  For those with a range penetration of 0-10%, I modeled an increase of 3% for compression.  For those 10-15%, 2%, 15-20%, 1%.  I did this for Staff and Faculty. Range Penetration % Increase Count Total 0 - 10% 3% 1,480 $2,012,547 10 - 15% 2% 340 $320,451 15-20% 1% 309 $137,262 $2,470,260   This includes the 5% Hard-to-Fill budget in the first year.  It was not split out over 3 years.

Costing Results – 3 Year Plan Cost FLSA costing is valid as of 12/1/2016. Compensation and classification recommendations are valid as of 7/1/2017. The cost of salary compression is not included in this model. Compression occurs when someone is hired at a salary equal to or greater than existing employees. A rough guess for compression costing is $2.5 million…   For those employees NOT under the proposed band min I determined their range penetration.  For those with a range penetration of 0-10%, I modeled an increase of 3% for compression.  For those 10-15%, 2%, 15-20%, 1%.  I did this for Staff and Faculty. Range Penetration % Increase Count Total 0 - 10% 3% 1,480 $2,012,547 10 - 15% 2% 340 $320,451 15-20% 1% 309 $137,262 $2,470,260   This includes the 5% Hard-to-Fill budget in the first year.  It was not split out over 3 years.

recommendations HRG recommends: Adopt a Compensation Philosophy. Standardize Policies and Procedures. Implement starting salary algorithm. Develop Career-Pathing to provide employees career growth opportunities. Review Compensation Program annually. Hiring pay algorithm - Successful candidates should receive additional 1% per year above the band minimum up to the midpoint for each year in excess of minimum education and experience requirements they have obtained. Exceptions must be approved by the System HR Director. See policies and procedures recommendations in Backup

recommendations HRG recommends (con’t): Benchmark new jobs periodically to ensure external and internal equity and to maintain structural integrity. Redefine and standardize Supplemental Pay procedures. Centralize job code creation attributes KCTCS System-wide. Conduct further analysis to reduce compression. Fund Under Minimum, FLSA, Hard to Fill Adjustment and Annual Increases. Hiring pay algorithm - Successful candidates should receive additional 1% per year above the band minimum up to the midpoint for each year in excess of minimum education and experience requirements they have obtained. Exceptions must be approved by the System HR Director. See policies and procedures recommendations in Backup