New pay plan adds flexibility in negotiating salaries

By Dan Heuchert

A proposed overhaul of the state classified employee compensation system will reward performance and provide greater flexibility for employees and employers, one of its chief architects said this week.

Among the plan's major recommendations: the collapsing of the current 23 pay grades into eight broad, stepless pay bands; the overhaul of 1,650 job classifications into 275 "job roles"; and a strong recommendation in favor of performance-based bonuses and increases instead of across-the-board pay raises.

Employees will be asked to assess their own performances as well as that of their supervisors. The rating scale itself will offer three options -- "extraordinary contributor," "contributor" and "below contributor" -- rather than the current five, and raises and bonuses will be allocated using a formula based upon those ratings.

The state Commission on Reform of the Classified Compensation Plan endorsed the proposal Jan. 14 and forwarded it to the governor and General Assembly, where it is expected to draw substantial support.

While the new plan will drastically change the way in which classified employees' pay is determined, implementing it will not change the amount they are paid right away, said Thomas E. Gausvik, the University's chief human resource officer, who had a major role in shaping the new plan as chair of the commission's technical advisory committee.

The new performance measures, if implemented, would first affect pay in November 2001. For this year, Gov. James S. Gilmore has proposed a 2.4 percent across-the-board pay increase, effective in November. That proposal will be taken up by the current session of the General Assembly.

Among the goals laid out for the commission, formed by the 1998 General Assembly, were to reward outstanding performance, institute modern compensation practices and provide flexibility to meet the needs of a variety of agencies. "I think this plan achieves what was set out for the commission, and more," Gausvik said.

The current classified plan dates back to around 1960, Gausvik said. It has been tweaked many times since then, but the commission's report makes it clear that it is no longer viable.

"The workplace is very different than it was 40 years ago," he said. "The old-style civil service-type plans are no longer supportive of today's environment."

The stepless pay bands -- which were piloted at U.Va. in February 1998 -- are the centerpiece of the new system. Under current practice, the only ways to reward an employee for performance are through rigid, state-determined "step" increases, or through promotion or job reclassification. The new plan allows greater flexibility in rewarding performance both at the time of annual reviews and during interim periods, in recognition of new skills and responsibilities, additional training, market competitiveness and to correct "salary compression² issues within a unit.

The pay bands themselves are wider. The maximum salary in each band is twice the minimum; under the current system, the maximum is only 56 percent higher than the minimum.

"In some ways, it gets rid of 'I've got to job-hop, I've got to move up the ladder" feeling," Gausvik said.

Employees who are promoted will now be able to negotiate their salary increase, up to a ceiling of 15 percent. Under the current plan, raises attached to promotions were fixed at 9.3 percent, although those hired from outside the state system were allowed to negotiate a larger raise.

Gausvik expects the pay-for-performance plan to be met with some skepticism. The commission's report notes that the state introduced a plan with similar goals in 1989 which, it said, "received wide criticism, especially since it has been funded fully or partially only three times in nine years.

"Š A major challenge was to develop a new system that would restore manager and employee perceptions of fairness, trust and consistency in pay for performance."

The new plan also mandates training for both employees and supervisors, beginning as soon as this summer and fall.

The plan proposes that the governor and legislature set the amount of money available for annual salary increases, which would then be allocated to employees based upon a state-determined formula. "Extraordinary contributors" would receive a one-time bonus and a base salary increase, while "contributors" would get a smaller base salary increase. "Below contributors" would receive nothing.

"The important thing for employees to know is that no matter the cost of the increase, the state will be able to fund performance," he said.

For the first time, employees will be asked to rate their own performances, while employers will have the option of reviewing employees as part of a team. The plan also provides employees the chance to offer feedback on their supervisor's performance, although at least initially such information will be used only for developmental purposes and not for setting their salaries.

"It's not meant to be threatening to the supervisor," Gausvik said. "It is to provide information to the supervisor so the supervisor can do a better job."

Taken as a whole, the new plan should reduce the culture of entitlement and remove the sense that performance is a dirty word, Gausvik said. "The idea is not to give the most money to employees. The idea is to identify the best employees and reward them."

The new plan must be ratified by the General Assembly and signed into law by Gov. Gilmore. It has the support of the Virginia Governmental Employees Association, and received input from an 18-member Employee Advisory Committee.