Salaries in most jobs are characterized by seniority-based pay systems. This is partially to account for increasing productivity over time, but primarily it is designed to defer compensation from the early part of the employee’s career to the latter part. Depending on the nature of the job, the salary-experience gradient may be short and steep or long and gradual. Universities typically have very long gradual deferred salary systems with faculty starting at salaries well below the salaries they expect to have at retirement, and typically reaching top-of-scale at a very senior stage, or possibly not at all. In addition, universities typically combine seniority-based pay with performance-based pay by having separate pay grids for different ranks and/or incorporating merit pay into the career advancement plan.
At UBC our Career Advancement Plan is designed so that the average member’s salary will increase by 2.5% per year, every year. This represents a very significant salary deferral. For example, a member hired at $80,000 who earned exactly 2.5% in deferred compensation increases each year would be earning the equivalent of $185,225 after 35 years on the job (assuming across-the-board increases match inflation). In present value terms (with a real discount rate of 3%) that would be equivalent to a salary structure where the same employee earned approximately $116,615 per year, each and every year for 35 years.
In other words, when someone is hired at UBC at $80,000 they understand that they can expect their real salary to rise significantly over the course of their career so that salaries above $116,615 later in their career will compensate for salaries below $116,615 earlier in their career.
Of course, in practice it’s a lot more complicated than that. The CAP is divided between annual salary-based increments (CPI) and performance-based awards (Merit, PSA). There are a total of 38 CPI increments available to members of the professoriate, 14 increments to 12-Month lecturers, and 22 increments to Instructors. For members of the professoriate CPI are awarded within ranks, so that faculty whose promotion is delayed may see some of their increments delayed or possibly even never earned.
The monetary value of a CPI increment is determined so that the value of the total number of increments earned exactly equals 1.25% of the total salary bill. Last year that number turned out to be $1,499. This number in turns determines the value of a single merit point. The total number of merit points awarded each year must sum to exactly 0.75% of the total salary bill, so the total number of points available to be awarded over all continuing members is actually residually determined. Finally, the total amount of PSA is simply equal to 0.50% of the total salary bill.
Obviously since some members earn above average amounts of merit and PSA over their career, and others earn below average merit and PSA, individual experience-salary gradients will vary widely.
UBC’s particular approach to the Career Advancement Plan is a little unusual, but well within the general approach used by universities in Canada. One of the features of the plan is that since the amount of compensation deferral is specified in percentage terms, and increment, merit, and PSA values are determined residually, UBC’s plan is always, by definition, cost neutral. The total salary bill of the continuing professoriate is completely unaffected by the number of people in each rank. If every single Associate Professor were promoted to Full Professor tomorrow, it wouldn’t cost UBC a penny more in salary.
In our survey, members expressed general, although not unanimous, satisfaction with the current split of the CAP between CPI, merit, and PSA and the Association has made no proposals to change the split. Our Proposal 1 to the university simply sets out to improve the transparency, accountability, and collegiality of the processes used to allocate merit and PSA. The university, on the other hand, has suggested very significant changes to merit and PSA. They have proposed to eliminate PSA entirely, and have that money put into the merit fund. They have also proposed to eliminate the merit units, so that the entire fund could possibly be allocated to a handful of individuals, rather than spread more evenly, as is currently the practice. The Association is unenthusiastic about the University’s merit and PSA proposals and has indicated that to the University.