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Faculty Salaries: Doing More Than Talking About It

Breaking $100,000 at the upper range of a senior teacher’s salary is no longer unheard of. The salary scales of public schools in affluent cities and suburbs topped that level long ago. Independent schools in similar areas began paying their most valued long-term teachers comparable salaries about five years ago. Every year more independent schools are breaking the six-figure barrier even in locations in the US that might be surprising.

Many boards still presume that the mission of independent schools; a teacher’s’ inherent “calling” to serve; and/or some of the typical characteristics of independent schools, i.e., small class size, fewer disciplinary problems and less bureaucracy, and tuition remission will attract and retain quality teachers and offset lower salaries. Dream on.

John Shank, now deceased but world renowned compensation consultant and a personal friend, often said: “Hire all the independently wealthy teachers you can; hire all the monks, nuns and ascetics you can; hire all the kept spouses you can; because after that you will need to pay a living wage!”

We do know that teachers, for the intangible benefits above, WILL accept from $5,000 to $10,000 less in annual salaries than those offered to cross town public school peers. However, when the differential reaches $20,000, $30,000, and even $40,000, all bets are off, as they should be unless a very rich benefit package helps to offset such gaps. We know of one independent school in a very wealthy community where there is a $40,000 difference at one salary level for comparable years of experience and credentials. Even though that independent school offers an exceptional benefit package, teachers know about and are quick to focus upon the cash salary gap.

Independent schools cannot compete with most top public school benefits. They cannot fund lifetime medical benefits or in most cases, full family coverage. They cannot deliver defined benefit plans, supplemented by defined contributions plans which together may double what the typical independent school teacher may save in a life time.

Even though some public school benefit and pension plans may face bankruptcy unless bailed out by their state funding and/or higher taxes, that provides little solace for independent schools and their teachers. Most independent schools offer individual, not family medical coverage and an average retirement contribution of 5-7% of base salary in addition to lagging significantly behind their public school cohorts in base salaries.

Most independent schools still tend to have two very powerful weapons, the old trusty rusty swords that come out at times of diminished competitive status: tuition remission and professional development funds. These are strong lures for those who qualify for tuition remission and for those who know how to take advantage of professional development opportunities. Yet tuition remission is viewed increasingly as a discriminatory benefit, and professional development funds often are either too limited in total dollar amount or allocated in irrational ways.

The picture is not as bleak as it may appear. Independent schools need to become less reliant on those “trusty rusty swords” and more creative, flexible, tax smart and appealing in the entire realm of compensation and benefits. They need to consider all or some of the following options:

    1. Press for better usage of the 125 Cafeteria plan and child care/dependent care and medical reimbursement accounts by educating faculty and staff ANNUALLY on the “win-win” of maximum usage of these plans. They are still greatly underutilized and can generate substantial FICA savings for schools and FICA and income tax savings for staff.
    2. Examine long term group care options. These plans are inexpensive if offered in a group and started early enough. Teachers can continue to pay premiums after they leave the employment of the school.
    3. Consider a benefit bank concept. Benefit banks represent viable options for controlling sky rocketing medical costs and for providing flexibility for teachers in deciding how to allocate a “bucket” of options. It forces staff to focus on the important trade off between rich benefits and disposable cash. Such plans are viable if 80% or more of your staff is covered by your plan.
    4. Offer financial planning services. Having interviewed over ten thousand teachers on the topic of faculty compensation, this consultant has observed the following pattern: Most teachers do not know in detail their own salaries much less the value of their retirement assets.

Thus financial planning could be most helpful. Schools should conduct confidential surveys of teachers with 20 years or more service to ascertain retirement assets, housing status and level of anxiety about retirement. Financial planning from a certified financial planner, not a sales person, can be provided inexpensively and can lead to thoughtful plans for helping teachers manage their resources.

    1. Provide on site day care. On site day care gained traction a few years ago and then died. Offering it only to staff children minimizes some of the bureaucratic problems, and even if a tuition is charged, the benefit and convenience of having on site child care are a powerful boost to staff morale.
    2. Support flexible hours for young mothers. Part time employment is generally not a good deal for the teachers themselves and sometimes not for schools either. However, there is a huge pool of part time talent that could be attracted back with more flexible schedules. Below a certain number of work hours per week there is often not the need to offer benefits.
    3. Provide opportunities for promotion and growth. A school may wish to consider the possibility of offering an “early buy out plan” whereby the School provides a window of eligibility (perhaps three months) for all teachers of a certain minimum age and years of experience, defined as either years taught at that school or as total years of teaching experience. The School might offer this to teachers of at least 55 years of age and at least 20 years of teaching experience. This is but an example. The school could set any.

The school might then offer that teacher or teachers their last year’s highest salary, paid over a three year period. During this three year payout period, the school would continue to provide retirement and medical contributions. Thus a teacher who was earning an annual salary of about $60,000 and elected an early buy out plan would receive $20,000 a year for three years. This leaves the School with $40,000 to pay to that person’s successor. The plan would not be offered only once. After three years, that $20,000 would return to the school’s cash flow. Early buy plans are optional, do not necessarily lead to the loss of valued teachers but can provide windows of opportunity for younger teachers to move up the ladder. Surveys show that lack of promotion is one of the key complaints of young and mid career teachers in our schools.

    1. Offer more creative and flexible salary systems such as ladders and bands. Promotion and growth tend to be minimal in schools with long serving faculty and high tenure. Most of our schools are STILL stuck with unpublished salary systems with annual across the board percentage increases OR with rigid salary scales based on degrees and years of service.

The movement toward bands, ranges and ladders continues but much too slowly. Lethargic administrations and lack of understanding from teachers are the two main reasons for this. Note that the 20% of NAIS schools with such systems tend to report on greater satisfaction with their “systems” than the other two traditional approaches.

  1. Consider providing apartments or condos for short term bridge housing for young teachers. Most day schools cannot afford to provide housing, but some have provided locally purchased condos, apartments or “units” as “bridge” housing for up to three years to help recruit young teachers and enable them to search the market at greater leisure for other housing options.
  2. Consider providing 457 (b) and even 457 (f) non qualified deferred compensation plans for those senior teachers who have maxed out on their TIAA or similar retirement plan contributions. These plans are familiar to most heads of schools but not as tools to assist specific groups of senior administrators or faculty. They are especially appropriate for senior faculty groups whose retirement assets may have been under funded over time due to low salaries or low levels of retirement contributions. While not as complicated as some may think, these plans do require thoughtful consideration. They can provide creative and unusual opportunities to provide greater financial security for teachers.
  3. Create the position of “Master Emeriti” for older beloved teachers. The Haverford School gives these “masters” a reduced workload and they perform, among other roles, the valuable function of preserving institutional memory.

In other words: What else is in YOUR toolbox?

Quality classrooms, top notch technology, bright motivated students, supportive parents, small class size, all help attract and retain talented teachers as well. Strong nurturing division heads and heads also help keep the dream alive. But the bottom line is still: MONEY.

Let’s bring an old idea back. Some years ago, Breck School in Minneapolis needed a tool to recruit young science and math teachers to the School. It was exceedingly difficult to recruit math, science and computer teachers when so many were entering the high technology business world at high starting salaries. The CEO of the time at Cray Research offered to fund Cray Fellowships to help Breck attract Middle and Upper School math and science teachers. Cray was concerned it was eating its own “seed” corn by luring young graduates and also hiring teachers away from schools for its research and computer business instead of supporting them to teach the next generation of its own employees. Cray was willing to offer a pilot project which it would promote to other companies nationwide in both public and private schools.

The idea had three components:

  1. The Cray Fellowship would offer an annual stipend of $10,000 a year (in today’s dollars) to the “Fellows” in addition to a two month summer assignment working in research at the company for a salary of about $9,000 (again in today’s dollars)
  2. Cray would help Breck recruit teachers nationwide among the top universities as it searched out for the top minds in math, science and computers.
  3. Cray would provide up to five such fellowships a year and each fellowship would last for three years. The hope was that after three years, the teacher might decide teaching was a rewarding career and might stay with Breck, and might even keep some summer assignment with Cray, thus conveying the feeling to the teacher of not having left the field of research completely.

The program lasted about five years. The Cray Fellow concept gained attention in the media, at schools and certainly at Breck. There were twenty some Cray Fellows in total. For a single school over five years it was a meaningful number. Dozens of companies nationwide adopted a similar plan.

The concept of schools partnering with business is not new. The concept of schools partnering with businesses to recruit, nurture, pay, and support teachers is not new at the University level but is very unusual at the elementary and secondary level. But must it be that way?

Could not more schools partner with more companies in a similar way, first perhaps as a result of a parent/alumni connection, but also because the idea may have intrinsic value and worth?

To remain competitive in recruiting and retaining teachers independent schools must become more creative, more expansive, and look outward more.

Littleford & Associates has worked with over 1500 schools worldwide on analyses of compensation needs and salary and benefit systems for both teaching and non teaching staff. We have helped schools evaluate and implement some of the salary and benefits options above based upon their own needs, budgets, timeframes, circumstances, competitive markets and unique culture.

Not all of the concepts or tools mentioned above are appropriate for every school, and in all cases, any and all changes can be implemented over time. At the 2007 Annual Conference in Denver John Littleford presented on the topic of faculty compensation with Joe Wandke, President of the Stevenson School in Pebble Beach, CA. The title of the session was “Sustaining Our Faculties: Plan, Pay, and Deliver”. “Plan, Pay and Deliver” are the key words meaning; decide which tools you want to use; announce your plan to the faculty and/or staff; and follow through on schedule as promised. Effort and good intentions have a powerful impact on faculty as well as absolute dollars delivered.

The dialogue surrounding compensation decisions is very important. Even if a school makes few if any changes, engaging in an honest intellectual discussion about costs, benefits and trade offs with a core committee of teachers, board members and administrators, facilitated by an outside consultant, has proven to be an exercise ranging from modestly successful to powerfully helpful to many schools. It is critical that the dialogue and ultimate decisions (if any) are sensitive to and reflect the culture and climate of the school. Without that sensitivity, even the most well-intentioned and carefully planned compensation and benefit package decisions may encounter political fallout. While the bottom line is MONEY the key to positive repercussions and acceptance is an appreciation for school climate and culture and what the community will embrace.

John Littleford
Senior Partner