TO:	Vice Presidents, Deans, and Chairs
FROM:	Edward J. Ray Executive Vice President and Provost
DATE:	April 8, 2002
SUBJECT:	Fiscal Year 2003 Salary Budget Process Guidance

In conjunction with the goals of the Compensation Initiative, and improving communications, we want to ensure that our annual salary increase process is as clear and effective as possible. The attached Fiscal Year 2003 Salary Budget Process document should be reviewed carefully for changes relative to past practices. This is subject to the approval of the Board of Trustees, currently scheduled for the May 3, 2002 meeting.

In meeting our Compensation Initiative goals, a university budget target has been established in the range of 4.5%, with some variance among colleges/units. Consistent with the university budget target and a decentralized budget environment, each college and vice presidential area has been authorized to implement a specific salary budget of at least 4.0%. College/Unit budget pools will be posted on the Office of Human Resources web site after the budget process has been completed.

If for any reason a budget pool increase other than that approved during the Budget Reduction Plan process is contemplated, contact J. Stephen Henderson, Director of Compensation, who will coordinate the approval process with the Office of Academic Affairs.

Also note that specific merit increases have been proposed 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 also 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 Kirwan
Senior HR/Fiscal Officers
William J. Shkurti
J. Stephen Henderson
Alayne Parson
Larry Lewellen
Barbara Snyder
Chair, Faculty Compensation and Benefits Committee
Chair, Staff Compensation & Benefits Committee
OHR Consulting Services
OHR Payroll
Human Resources Council
Laura Gast

A. The university-wide salary budget pool target is in the range of 4.5%, which is expected to be 1% above market. This meets our compensation initiative goal of exceeding the average external market increase (approximately 3.5%) by 1%. Colleges and administrative units have been approved to provide no lower than a 4% budget. 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 administrators, 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 0.5% from the college/unit average, except with approval of the Provost.

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

C. Faculty being promoted will receive 6% centrally, in addition to at least an average percentage merit increase from the unit.

D. All faculty and staff, regardless of hire date or probationary status, are eligible.

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 2003 or some other planned salary review date.

Colleges/Units should delay implementation of raises for staff on probationary status until successful completion of probation.

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

Fixed cost increases for health and other benefits for the last two years had the greatest impact on lower paid employees, and administrators should take that into consideration in setting salaries. Administrators should also be mindful that merit raises last July were minimal and that they need to take into account performance over a two-year period where appropriate.

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 3.5%, which is the expected average external market increase. Individuals with salaries closer to the market may receive less. Prior approval is required for any individual increase exceeding 10%, excluding promotions. Faculty increases will be approved by the Office of Academic Affairs while the Office of Human Resources will serve as the approval authority for staff increases.

Any faculty or staff member receiving no salary increase due to performance or market position must be notified in writing with supporting rationale. Please forward a list of these individuals, with confirmation that a letter will be sent to each person. Approval of the list is not required.

A list of individuals with increases exceeding 10%, excluding promotions, should be submitted to the assigned Human Resources Consultant. He/she will coordinate with J. Stephen Henderson, Director of Compensation and the Office of Academic Affairs for approval.

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.

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 2003 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. The Office of Academic Affairs must approve cash payments in excess of this amount or any one-time cash payments that are granted to chairs, school directors or other university administrators.

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