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“Fuzzy” Salary Systems

Fully 50% of the nation’s independent schools operate with salary “systems” that are not “systems” at all, but negotiated entry salaries with flat, fairly fixed annual percentage increases on top of them. They are “fuzzy”, in fact, in the minds of those affected.

However, teachers at many of these schools say and believe that the salary negotiated upon entry forever determines their fiscal health and those hired later always fare better than those who have served in the “trenches” for years.

These teachers also believe that despite denials, exceptions are made. Periodically a strong argument can be made with the head of school to obtain a higher salary increase. Sometimes a stipend for a new position or more money added to base needs to be the tool to keep a valued teacher. Sometimes the head has no other legitimate response to a teacher’s valid “argument”, and there may no formal assessment which can be tied to this increase. This scenario favors the teacher who is a skilled negotiator.

Most teachers, being too timid or embarrassed, never attempt to approach the head for a better deal. Teachers are care givers and generally “risk averse.” The vast majority of 55,000 interviewed by this consultant could not quote their annual salary accurately and 95% could not state a good approximate value to their retirement accumulation when asked the question in an interview.

Thirty percent of the salary systems in independent schools operate on “lane and track” scales, where longevity, graduate credits and advanced degrees determine one’s advancement. In public schools the bumps in pay for an advanced degree can be major. In most independent schools those bumps are modest. Credit for years of experience in public schools continues to advance at a competitive rate.

On the other hand, in most independent schools, the increases are larger in the early years and slow down in the later, higher steps on the scale. In addition, salary systems with flat percentage increases always benefit the higher paid individuals. Flat dollar increases always benefit the lower end of the salary system.

Twenty percent of the salary systems in independent schools are described as “bands, ladders or ranges.” This particular approach has continued to become more popular, but to implement such a system takes more work. Boards tend to press for changes in this direction away from both of the previously described systems of flat percentage increases (with some negotiation) and lock step salary scales.

Wherever you are in your salary system, periodically it is a good idea to get a fast “grip” on its general health. Here are two easy ways to do a quick “check.”

    1. Cohort Analysis

Compare the average (not the median) of each of the NAIS five year cohorts and look at the signals sent. For example, here is one School’s average salaries organized in this way: 0-5 years of experience- $32,000; 6-10 years- $37,000; 11-15 years- $40,000; 16-20 years- $42,000; 21-25 years- $52,000; and 26 years and above- $62,000.

What do these numbers show us? Clearly here the mid career group is hurting the most. The increase from the first cohort to the second is $5500, a respectable number. The increase for the next cohort is $2500, clearly a signal that the young mid career group is hurting. The next cohort is $42,000, or an increase of only $2000, another major signal that the school is probably experiencing a “bottom bell” of losing mid career teachers. This scenario is also called salary “compression”.

The top two cohorts have an increase of $10,000. Senior teachers are doing better, and perhaps they have helped to negotiate the particular raises now in place. On the other hand, there are just as many if not more schools where the senior cohorts are the weakest, and starting cohorts the strongest and the mid career bumps are average.

The general rule of thumb is that each cohort should have a bump in the average salary over the previous one by at least $5000, and preferably more. How does your school fare on this measure? Who is being favored and who is being hurt?

    1. Graph Analysis

Draw a graph with salaries on the left side and years of experience along the bottom. Run a diagonal line up at a 45 degree angle to the right. Then plot two different scenarios. Do not include coaching or other extra curricular pay in determining the placement on the graph.

First, put a dot above or below the line for the salary of each person based solely on teaching experience. See how many fall above or below the line in the SAME experience range. If there is a number way above the line or way below the line, can you explain this? If not, and if there is no written evaluation of performance in the file, then you may have potential material for an age discrimination lawsuit against the school, especially if you are looking at people over the age of 40 or 50, whose salaries are lower than those in their 30’s or 20’s.

Second, examine the potential for sex discrimination. Using different indicators for the sex of the teachers, note the male and female faculty based on experience. If there is a clear bias in favor of men, do you know why?

In either case, it may be necessary to make some equity adjustments to the base compensation of those teachers with “outlying” salaries. Giving such teachers a new stipended position is not the solution which is in the best interests of either the teacher or the school.

    1. Flexible Salary Systems

The vast majority of 55,000 teachers interviewed worldwide respond in similar ways to questions about compensation. Elementary school teachers usually oppose the concept of “performance” pay for fear of undermining a sense of collegiality. They have almost never experienced true performance pay. They tend either to define head discretion as “merit pay” or have serious misconceptions about merit pay as a result of rumor.

Middle school teachers, especially younger ones, tend to favor some differentiated pay. They often see themselves as going the extra mile for demanding middle school students while struggling to build a home and support a growing family.

Upper school teachers generally oppose performance pay, and this is more the case with older mid career faculty. Younger upper school teachers are more open to the concept, again because they are looking for some way to demonstrate their value and boost their pay other than simply teaching another year or amassing graduate credits.

Most heads do not want to engage in a discussion of performance pay, merit or flexible salary systems because they perceive (and often rightly so) that there are specific pitfalls for them inherent in this agenda

    1. The Board is pushing the topic but the Board does not have to deal with the political fall out.
    2. Senior teachers may oppose the idea vociferously.
    3. It would impose a demand for a truly more rigorous teacher evaluation process. Most existing systems are too “soft” and “goal centered” to be used effectively as a basis for differentiated pay.
    4. It might trigger a fear by teachers about loss of “collegiality” and fairness.
    5. It would require them to make differentiated pay decisions and most heads do not wish to do this. Heads can accept an individually negotiated system if in general everyone THINKS that almost all the increases are percentage increases across the board, OR if there is a lock step scale which in theory needs no interpretation.
    6. Managing a real performance or differentiated pay system either for individual teachers or groups and teams of teachers requires more time and effort. However, there are ways to do this that are not “threatening”.
  1. IV. The Salary System Dialogue

Whether one is in favor of flat percentage increases each year, periodic bumps to a published salary scale, or a salary band or range system, it is important to know the rationale behind it and whether keeping it makes sense.

Most salary systems were inherited by the current head and may have been in place for years. Others were created in response to an earlier crisis or sense of mistrust in salary management. Almost none have ever been discussed in the context of “mission based compensation”, i.e., should we not be paying money to recruit, retain, nurture, promote, and grow teachers who seem to be especially interested and successful in carrying out the school’s particular mission?

If the mission itself is too fuzzy, or sounds like that of most other competing schools, then that argues for a serious mission review process as part of strategic planning. Perhaps from that process might come a more rational explanation for the current salary and benefits approach. And perhaps stemming from the mission conversation would come an “intellectual dialogue” that would enable key parties from the Board to the Head to a cross section of the faculty to understand how the current salary system works and whether some appropriate changes are needed or desired in the salary and benefits delivery systems.

This is not an esoteric discussion. Salary, benefits, evaluation, workload as well as trust within the school community about these issues are crucial to the health of a school culture. As boards press heads more to explain how salary increases are delivered each year, they are raising the stakes and asking that heads look at effective mission based salary systems. This is a difficult place for heads to find themselves, one of a thousand pressure points in the job.

Almost 85% of most day school budgets are spent on compensation. When board members do not understand the philosophy of compensation or mission behind the delivery of those monies, there is a major gap in the appropriate role that boards should play in overseeing mission and fiscal matters.

Boards, parents administrators (and yes, even teachers themselves) want and expect opportunities for professional growth. Done correctly, a flexible salary system, such as a band model which is tied to specific expectations for professional growth that support the unique mission of the school, can be a “win-win” for all, including the students.

John Littleford
Senior Partner