Equity, Performance, and Employee Compensation

October 3, 2012 | Blog

Every employee at UW-Madison believes they deserve to be paid more, and the vast majority are right. It’s time we recognize and begin to address the fact that most workers across Wisconsin are underpaid–in UW and far beyond. Increasing compensation for everyone in the bottom half of the income distribution should be a state and national priority, especially given the evident and long-lasting consequences of widening income inequality.

Unfortunately, the HR Design plan at UW-Madison is nearly silent on the issue of raising compensation for all currently underpaid employees. Instead, it focuses on how compensation levels will be determined and how raises will be distributed when money is available.  It does nothing whatsoever to make sure more money is available. Remember that– don’t allow the desire for more pay to lead you to blindly accept the terms of a plan that doesn’t bring more pay but rather changes the terms on which you are paid.  

The biggest change related to compensation in the HR Design is the new and explicit attention to “market competitiveness” in setting compensation levels and determining raises. This is a response to the status quo, which has been identified as a problem with this statement:

“State law prohibits UW–Madison from giving unclassified employees performance-based pay raises unless they are part of an annual pay plan—and there has not been a pay plan in four years” (p. 24).  

What exactly is the problem?  Is it that performance pay cannot be given outside of annual pay plans? Or is it that there hasn’t been a pay plan in 4 years? These are two separate issues, and should be tackled separately.  The first is about pay equity, and the second is about the consequences of austerity agendas.  Current discussions conflate these issues– employees are upset about the lack of a pay plan and thus some are desperate to agree to anything that leads to pay, for anyone, no matter the consequence. That’s a recipe for disaster.

It seems the HR team has concluded that the former issue must be addressed and therefore proposed mechanisms for awarding performance pay even in the absence of a pay plan by calling for a model that “balances market competitiveness and internal equity.”  Essentially, instead of developing a new model for UW-Madison that leverages scarce resources for fair and humane treatment of all employees, this model opens the door to further growth in salary inequities across and within units.  It does this by promoting salary increases based at least partly on market competitiveness without explicitly requiring attention to internal equity, as part of both the compensation philosophy and the roles and responsibilities of managers.

The reasoning provided for this approach is fallible. We are told that employees want their pay based on market competitiveness– yet the survey questions utilized in the employee polls ask about these issues in isolation. A better approach would ask employees to rank their preferences– a pay plan distributed equitably, with some additional pay for performance; pay distributed inequitably, with no overall pay plan provided, etc. In other words, when presented with a false choice, it isn’t at all surprising that employees choose to protect themselves. But what we’re given here isn’t our only option.

A review of extant research leads me to conclude that pay for performance has uneven effects in environments like UW-Madison. The main issue at Madison and across Wisconsin is that pay levels are low– not that they aren’t tied to performance.  Tying pay to a combination of performance and equity will reduce, not enhance, the transparency of the compensation process, and thus likely increase the sense of injustice that already pervades campus.  Basing pay on an unspecified assessment of market value will lead employees to feel even more left out of the process, making them even unhappier. In other words, it is likely that HR Design will do nothing to improve the feelings among UW employees that their compensation levels are unfair and inappropriate.   It may even make things worse.

As an alternative, I therefore propose the following revisions to the HR Design’s compensation plans:

(1) Make internal equity a priority in the setting of compensation by describing it as an explicit priority central to the compensation philosophy and part of the compensation function’s roles and responsibilities.  Educational institutions are unique environments that place a priority on collaboration, including across disciplines, and it is for the good of our teaching and research at UW-Madison that we be allowed to prioritize internal equity when distributing any and all forms of compensation.  This is an essential revision of state statutes and one we should fight for.

(2) Clearly define the terms “market,” “performance,” and “merit” in the plan and delineate among them. Be clear, which types of pay result in base increases, and which do not?

(3) Provide explicit guidance to managers working with employees who work across units or in interdisciplinary settings. These areas are where pay based on markets are likely to do the most harm – imagine the sociologist teaching alongside the economist in the same department, where the latter professor (most often a male) out-earns the former (usually a female) 2 to 1. It happens under our current system, and is demonstrably counterproductive. These are the types of problems we can and should fix in order to enhance our ability to retain workers and ensure their flourishing.

(4) Include all employees– included contracted employees–in the plan to provide a living wage.
 The only people who will clearly benefit from HR Design in terms of current base pay are those at the bottom of the pay scale who will remain university staff and will now receive a living wage under this plan.  The number of people meeting that description is not mentioned in the plan.  That number should be considered in relation to the likely number of jobs that are currently university staff jobs and will instead be contracted out to save the university money. The City of Madison pays living wages to all contractors on contract over $5,000.

UW-Madison should take the lead in reducing income inequality in Wisconsin, not exacerbating it. We are national leaders when it comes to our collective devotion to our work, and that strong intrinsic motivation should be leveraged whenever and wherever possible.  No, it should not be exploited–as it now is– to justify underpaying us. But do not let the poor practices of our neighbors compel us to lose what’s great about our community–we have no desire to become a “winner take all” society.

0 Comments


Would you like to share your thoughts?

Would you like to share your thoughts?

Leave a Reply

© 2013 The EduOptimists. All Rights Reserved.