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UNM Hospitals New Employee Pay Plan Overview and Roll Out January 2004

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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 - PowerPoint PPT Presentation

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  • UNM HospitalsNew Employee Pay Plan Overview and Roll Out

    January 2004

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    What We Will DiscussBackground Of The ProjectThe UNM Hospitals Pay PhilosophyNew Base Pay PlanThe Rollout PlanWhats In It For You As A LeaderThe Communication PlanYour Role In CommunicationQuestionsScenariosDistribute Communication Tools Copies Of:New Compensation Philosophy And Compensation ManualKey Messages/Questions And AnswersThis PresentationIndividual Employee Data Sheets Department Summary Sheets

    We know you are anxious to see the numbers for yourself and your staff . . .

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    What We Will DiscussDistribute Communication Tools Copies Of:New Compensation Philosophy And Pay PoliciesKey Messages/Questions And AnswersThis PresentationIndividual 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 positionIts 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

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    Background Of The ProjectUNM Hospitals Human Resources performed an assessment of our general and management pay programs over the past several months As a result of our assessmentWe redesigned our general and management pay plans to improve plan administration by:Assuring development, implementation and utilization of consistent, effective policies related to payDeveloping broader organizational understanding and support for pay decisionsExpanding the databases to assure our competitive position in the relevant talent marketsImproving turnaround in responding to requests for market data and/or new hire pay offersWe developed a base pay philosophy for UNM Hospitals

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    The UNM Hospitals Base Pay Philosophy1Years 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.

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  • New Base Pay Plan

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    Key Objectives Of The New Base Pay PlanEnsure base salaries are and remain market competitiveEstablish 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 programProvide pay managers with the structure to make market-based, economically sound pay decisionsIncrease 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

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

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    Design Team

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    Understand and Document UNM Hospitals Desired Pay PhilosophyThe design team drafted a preliminary compensation philosophy that:Defined the competitive market for UNM Hospitals positionsSet 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.

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

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    Select Benchmark PositionsThe design team selected benchmark positions which are defined as jobs that are:Commonly found in other organizationsFunctionally similar to jobs at UNM HospitalsGenerally included in credible published survey sources for which competitive market data can be gatheredIn 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 staffAn array of pay levels, from highest to lowestPositions within each job family

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    Match Benchmark Positions to Published Survey Data and Analyze DataTowers Perrin collected data at the 25th, 50th and 75th percentiles of the competitive market for each benchmark positionThese 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 tabulationThey include large numbers of participantsThey provide job summaries of the jobs in the surveyThe survey data can be cut several ways to compare by organization size, number of employees, and/or geographic location

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    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 matchThe following page displays the survey sources used for this analysis

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    Survey SourcesYoull note that some survey data are from 2001-2002 as well as 2003We have taken those data and added an additional 4% per year to bring all the information up to January 2004This is called aging and well talk more about it on the next slide

    Hospital & Healthcare Compensation Service/John R. Zabka Associates, Inc.- Hospital Salary and Benefits Report, 2002-2003Management Science Association, Inc. (MSA)- National Survey of Key Professional and Technical Jobs, 2001Medical Group Management Association- Management Compensation Survey: 2002 Report based on 2001 DataSullivan, Cotter and Associates, Inc.- Survey of Manager and Executive Compensation in Hospitals and Healthcare Systems, 2001Towers Perrin- 2002 Middle Management and Professional DatabaseWarren Surveys- The HMO Salary Survey - Spring, 2001Watson 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, 2001/2002William 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

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    Example: Market Pricing Worksheet

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    Build Pay StructureEstablished preliminary range midpoints for each positionBased on the 50th percentile dataThis is not average payThese midpoints are market targets half of the organizations in the data pay less than the 50th percentile and half pay moreBy 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.

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    Build Pay Structure (continued)Established preliminary range midpoints for each positionJobs 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 rangesFinal Midpoint For This Range$10.45 Job 50th % Pay X $10.50 Y $10.44 Z $10.38Average = $10.44

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    Build Pay Structure (continued)Developed pay ranges around the preliminary pay midpointsUNM Hospitals has17 pay ranges under the new management base pay plan24 pay ranges under the new general base pay plan

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    Build Pay Structure (continued)Developed pay ranges around the preliminary midpointsAs 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 jobA 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 staff50th PercentileMidpointDifferences in midpoints should be greater than the usual annual salary increaseMidpointMidpoint5 %7 %45%35%

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

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    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.

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    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 rangeEducation/training requirementsExperience requirementsHistoric relationshipsLevel of responsibility

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    Identify Appropriate Incumbent Placement in New Pay RangesHuman 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 possibleYou 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 issueUNM Hospitals will not, however, make changes to the employee files (i.e., have employees provide updated resumes, etc.)

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    Identify Appropriate Incumbent Placement in New Pay Ranges (continued)Pay Range for Job11Years 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.

    Entry LevelNo experience beyond minimum requiredMatureApproximately 8 years of experience beyond minimum requiredVeteran

    MinimumMidpointMaximum

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    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 minimumsWithin our financial constraints, we will adjust employee pay above the minimum based on experienceThis is called decompressionOnly some employees pay will require adjustmentIn 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 . . .

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    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 1:1Previous experience must be at least 80% comparable to the current UNM Hospitals positionFull-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 positionRelevant experience at UNM Hospitals or another organization (25%-50% comparable to the current UNM Hospitals position) was counted 4:1 and capped at 1 yearBoth 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 calculatedBy applying the above parameters, we gathered total experience for each employee

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    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) yearsPerry worked as a Clinical Analyst at Brand X Memorial for two (2) yearsPrior to that, Perry was a Staff RN at Brand X for three (3) yearsThe 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)

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    Identify Appropriate Incumbent Placement in New Pay Ranges (continued)Total years of experience were gathered up to 25 yearsWe 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 dataWe prepared several cost models using the experience dataWe were only able to employ a model that adjusts to the midpoint of the new ranges for 8 years of experienceThis methodology is consistent with market practiceIt assures that all staff with at least 8 years of experience are at the median of the market or betterNo methodology can totally eliminate compressionAll organizations have limits to what they can pay maximums of the pay rangesIf one employee has 30 years of experience and another has 35 years, they both may have reached the maximumNo 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

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    Identify Appropriate Incumbent Placement in New Pay Ranges (continued)Using the calculated years of experience, incumbents were then placed appropriately in their respective salary gradeCosts were then determined using the incumbents 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 grade4 years to the 1st quartileAnother 4 years to the midpoint (total = 8 years)

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    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).1For 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.

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  • The Rollout Plan

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    Whats In It For You As A Leader?New base pay structures that are consistent across the organization and competitive in the marketTraining for pay managers to help you effectively administer the new pay plan and make pay decisionsOpen communications about UNM Hospitals pay plan

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    Communication PlanJanuary 16All UNM Hospitals leadership will see this overview and be provided information specific to their staff

    January 26 February 6Pay managers meet one-on-one with employees to present the new planFebruary 6Pay day with pay changesFebruary 6 - 20HR available to address any necessary changesJanuary 16 23 Leaders review data/correctJanuary 18Grade and pay changes effectiveFebruaryJanuary

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    Your RoleHelp ensure a successful implementation by:Providing feedback today and throughout the processSupporting this process with your employeesConduct 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 planAnswer your employees questions using the scenario information we will provide you with in a few minutesShare the employees profile sheet with the employeeAllowing the employee to keep the white copyHaving 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 employees personnel fileKeeping HR informed of employee feedback throughout the process

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    Your Role (continued)Work with HR to make future pay decisions and maintain the new programThe new philosophy and compensation manual will help guide this effortParticipate in the scenario sessions after this presentation part of the programSchedule one-on-one meetings with your employeesUse the communications tools you will be providedNew Compensation Philosophy And Compensation ManualKey Messages/Questions And AnswersThis Presentation

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    Presentation TitleIts important that both you as managers and your employees understand what great news this is for the company and for each one of us. We all know that 2002 was a particularly challenging year for our economy. The fact Dey is making these positive adjustments to the way it rewards employees demonstrates its commitment to all of you and to making sure that the concerns you voiced in the employee survey are addressed.We are moving to a pay for performance culture in which there are significant opportunities for pay increases based on performance. We view this as an important and positive step.For managers, these changes bring the additional benefit of improved training and communication regarding pay issues. Knowing about the performance management and pay programs--how they work, and how you can work with them--will make you an even better manager.