MEMORANDUM

TO:               Vice Presidents, Deans, and Chairs

FROM:         Edward J. Ray, Executive Vice President and Provost

DATE:          July 7, 2003

SUBJECT:    Fiscal Year 2004 Compensation Guidance

This is to provide you with the attached Fiscal Year 2004 Salary Budget Process document.
Please review the document carefully as there are significant changes relative to past
practices. Increases will be effective September 1, 2003 for individuals with appointment
years that begin any time between July 1st and September 1st. Individuals with appointment
year begin dates after September 1st will be effective at the beginning of the appointment
year.

Attracting and retaining a talented university work force is a key university priority in the
Academic Plan. Although we are experiencing another difficult budget year, we must
maintain our focus on reaching the compensation levels of our benchmark institutions.

Consistent with a decentralized budget environment, each college and vice presidential area
is authorized to implement a specific salary budget of at least 2.5%. However, each college
and vice presidential area is encouraged to exceed this percentage in order to make progress
toward appropriate benchmarks. In developing the salary budget, consideration should be
given to the overall market position of the college/unit, the goals of the Compensation
Initiative, availability of funds and expected increases at comparable institutions and
markets. College/unit budget pools will be posted on the Office of Human Resources
website after the budget process has been completed.

If for any reason budget pool increases are expected to average more than 3.5% and/or
include a differential of 1% or more between faculty, unclassified staff and/or classified
staff, prior approval must be received.

Also note that specific merit increases are again recommended to ensure we meet the
implied commitments of the Compensation Initiative. The recommended increases are

based on performance, market and equity considerations and are not the same as across-the-
board increases. Zero increases are still possible.

Questions regarding this process should be addressed to J. Stephen Henderson, Director of
Compensation – Office of Human Resources at henderson.104@osu.edu and copied to
Senior Vice Provost Alayne Parson at parson.1@osu.edu .

Attachment

c:     President Karen A. Holbrook                                               Senior HR/Fiscal Officers
       William J. Shkurti                                                                  OHR Consulting Services
       J. Stephen Henderson                                                           OHR Payroll
       L. Alayne Parson                                                                  Human Resources Council
       Larry M. Lewellen                                                                Laura C. Gast
       Barbara R. Snyder
       Chair, Faculty Compensation and Benefits Committee
       Chair, Staff Compensation & Benefits Committee

The Ohio State University
Offices of Academic Affairs and Human Resources
Fiscal Year 2004 Compensation Guidance

A. Colleges and administrative units have been approved to provide no lower than a 2.5%
budget. Colleges/units are encouraged to make efforts to meet or exceed our
compensation initiative goals of exceeding the average external market increase by 1%.
Each Dean/Vice President who anticipates a budget pool that averages more than 3.5%
must seek written approval from OAA by no later than July 11, 2003. Summary
compensation data will be posted at the Office of Human Resources web site for each
college/unit, http://www.ohr.ohio-state.edu/, once the process is finalized.

B. The budget pools for faculty, unclassified, classified staff and graduate associates must
remain separate, but units may differentiate these budget pools with supporting
rationale. The differentiation may not exceed 1.0% from the college/unit aggregate,
unless approval is obtained. Salary increases for vice presidents and deans on average
should be consistent with Guidelines.

Salary increases for faculty promotions, counter-offers, and other related actions are not
included in the aggregate calculations.

Within colleges or administrative units, departmental budget pools may be
differentiated, but department aggregate increases below the discipline's average
anticipated external market increase for FY04 must be approved.

C. Faculty promotions were not delayed and each promoted faculty member received a
promotional increase of 6%, funded centrally. During the SLDP process, each
promoted faculty member should receive at least the aggregate percentage merit
increase from the unit, in addition to the promotional increase (which is already
reflected in the system.)

D. All faculty and staff, regardless of hire date or probationary status, are eligible.
Colleges/Units should delay implementation of raises for staff on probationary status
until successful completion of probation.

Colleges/Units may make recent hires ineligible if covered in an offer letter or unit
policy or other communication that the hiring salary is intended to remain constant until
July 2004 or some other planned salary review date.

Colleges/Units may make individuals who are resigning, retiring, being laid-off, or on
severance ineligible.

E. Merit is the primary determinant for pay decisions, appropriately combining
performance with other factors such as market competitiveness and internal equity.

Individuals who are performing well and are representatively behind the market (in
other words, as far behind the market as the group average in that
discipline/department) should receive compensation increases of at least the expected
average external market increase for their discipline/department. Individuals with
salaries closer to the market or who are not performing well may receive less.

Prior approval is required for any individual increase exceeding 10%. Any faculty or
staff member receiving less than the expected external market salary increase for their
department/discipline due to performance or market position must be notified in writing
with supporting rationale. Approval of the list is not required.

F. Returning graduate associates with equivalent appointments are also considered to be
participating in the Compensation Initiative. Those who are performing well should
receive compensation increases consistent with the average increase in the pool.

G. Individuals paid by ledger 9 account funding or other non-general funds accounts
(certain affiliated entities) will be governed by the raise guidelines set by each entity's
board. If no such guidelines exist, then such units shall have the same flexibility as
colleges/units as noted under Section A with approval of the appropriate college/unit.

H. External grant-funded areas are given flexibility to use available increase funds with
college/unit approval.

I. Colleges/Units are encouraged to make additional one-time cash payments to a limited
number of faculty and staff to reinforce outstanding performance, retain individuals
whose salaries are most significantly behind market or as an additional aid to the lowest
paid individuals to help offset healthcare costs and other fee increases.

During the FY 2004 annual increase process, colleges/units have the latitude (without
central approval) to provide one-time cash payments of up to $2,500 or 5% of an
individual's annual base rate, whichever is greater. Prior approval is required for any
individual receiving one-time cash in excess of this amount.

Cash payments that are provided after this annual increase process should be
administered according to Policy 3.15 Reward and Recognition.

Annual rate increases in excess of 10% for faculty and staff and Cash Awards in excess
of $2,500 or 5%, whichever is greater, must receive prior approval. In addition, any
faculty or staff member receiving no salary increase due to performance or market
position must be notified in writing with supporting rationale (a performance evaluation
is sufficient). A list of these individuals with confirmation that notification will be sent to
each person must be forwarded to J. Stephen Henderson, Director of Compensation no
later than July 25, 2003. Final approval of proposed salary increases will not be granted
until a complete list is received.

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