How to Prepare for Rising Minimum Wages & Pay Compression

Evaluating the Impact of Faculty Compensation Systems on the Quality of Higher Education

A 2017 Bureau of Labor Statistics (BLS) report revealed that increased compensation helps improve employee productivity. This is true even for higher education faculty. Unfortunately, institutions of higher learning have little to no control over the availability of funds to compensate their faculties appropriately. Other than the higher education stakeholders who determine the availability of funding, compensation systems used also directly affect faculty funding.

Here’s a guide to the types of faculty compensation systems and how they affect the quality of higher education.

The Contract Salary System (CSS)

Also referred to as merit pay, the contract salary system is one in which each faculty member discusses their compensation terms with the employing institution. In this system, salaries and wages differ across faculty members depending on factors, such as their skills, experience, level of education, work done, and negotiation ability. This system has been politically and culturally accepted in higher education because it has proved to be an excellent catalyst for improved productivity. With this system, every faculty member gets the compensation they deserve, which keeps them motivated to stay productive and enhance the quality of higher education. However, it is difficult to establish fairness in this system, which is something that can kill collaboration and bring about hostility amongst faculty members, and therefore, negatively affect performance.

The Single Salary System (SSS)

In this system, faculty members of equal rank receive the same salaries or wages. For instance, all department heads receive the same pay regardless of their overall qualifications and performance. According to the National Bureau of Economic Research, pay inequality across co-workers within the same productivity level can reduce individual productivity by up to 0.24 standard deviations. This means that the SSS can help improve faculty morale and productivity as it ensures equality in compensation. It also fosters collegiality, fairness, and cooperation amongst faculty members. The downside of this system is that it focuses more on compensating ranks rather than performance.

The Non-Traditional Faculty Compensation System

Unlike traditional faculty compensation systems, some payment systems combine features of the contract salary and single salary systems (traditional compensation systems). For example, some faculties comprise a portion of members compensated under the SSS system and another portion paid following the CSS system. When implemented properly, non-traditional faculty compensation systems can solve the problems experienced in the traditional systems and help improve productivity and the quality of higher education.

Qualities of a Good Faculty Compensation System

An effective faculty compensation system is crucial in improving productivity, saving costs, enhancing the quality of higher education, and improving an institution’s image. Therefore, higher education stakeholders should formulate strategies for developing suitable compensation systems. The qualities of an ideal faculty compensation system include:

  • Must reflect the vision, mission, values, and objectives of the institution
  • Must be administered fairly and objectively
  • Improved performance must be rewarded with increased compensation
  • Each faculty member and stakeholder must take personal initiative towards the achievement of institutional goals and mission
  • Must consider the differences among disciplines and only reward deserving faculty members
  • Must adhere to regional, state, and accreditation association standards set to govern compensation in higher learning institutions
  • Must include a fair and feasible assessment program aimed at safeguarding compensation decisions
  • Must consider individual strengths and abilities rather than generalizing faculty members under categories

How McKnight Associates, Inc. Can Help

Looking for a consulting firm with experience working with salary, legal, and other human resources issues?  Then don’t hesitate to contact the professionals at McKnight Associates, Inc. We are ready to offer you hands-on human resources consulting for colleges, universities, medical centers, and organizations of all sizes.