Faculty and Staff Salaries
A Discussion Paper
Greg Moran, Provost and Vice President (Academic)
Bill Trimble, Acting Vice-President (Administration)
Peter Mercer, Vice-President (Administration) -- Designate
Given that salary and benefit expenditures for full-time faculty and staff comprise roughly 70% of Western's operating expenditures, it is not surprising that both formal and informal discussions about planning for 1996-97 almost always make reference to salary negotiations and the role that these could play in lessening or worsening the difficulties of the coming year. The issue of salary adjustments is unusually complicated this year. This discussion paper is aimed at providing the University community with the information necessary to assess the issues and to evaluate the consequences of various options. We believe that it is particularly important that faculty and staff be well-informed at this very important point in Western's history. We are confident that all those who will be directly involved in formal negotiations in the new year will welcome any input and advice from members of the Western Community.
It is important to note that, although we have attempted to provide a description of the context of salary discussions for 1996-97, this paper in no way takes away from the traditional importance of discussions with our various employee groups. The final settlement will be, as in the past, a result of normal negotiations, scheduled to begin in the new year.
The Context
Discussions and negotiations regarding salary settlements for 1996-97 will take place during a period of unprecedented
change and restructuring at the University of Western Ontario.
These diverse elements of the current planning environment have given rise to expectations of the upcoming round of negotiations that are more radical than in the past; some of these expectations are incompatible. There are those in our community who advocate that a large part of the budgetary problem be addressed by a substantial across-the-board reduction in salary . Others begin their consideration of 1996-97 salaries from a position that existing expectations (i.e. return to pre-Social Contract salaries and "5th place" provision for faculty) must be fulfilled to the letter. Still others give highest priority to the allocation of merit increments, particularly to our most junior faculty, irrespective of the cost to other areas of the University's operations. There are also those who would have us follow our traditional approach to faculty and staff salary settlements and give highest priority to "scale" or across-the-board increases, even in these very difficult fiscal circumstances. These sometimes competing considerations have created an unprecedented challenge for those approaching salary discussions for 1996-97. It is important that members of the University community be fully apprised of the situation if they are to be able to contribute to these discus sions and evaluate the diverse options and associated consequences.
Constraints and Priorities
a. Timing
Although, from the outset of its election campaign, the current Government of Ontario has made no secret of its fiscal plans for 1996-97, it was impossible to proceed with detailed negotiations regarding salary until after the late-November budgetary announcement. Once begun, all negotiations must follow agreed-upon guidelines. In the case of faculty salary negotiation s, these guidelines call for a series of initial meetings in the fall, with actual negotiations beginning in late January and lasting for a maximum of 6 weeks (unless both sides agree to extend this period), taking the process well into March, 1996. If discussions reach an impasse, a period of mediation and finally fact-finding could stretch into the summer or fall of 1996 before the Board of Governors is in a position to make a final decision. A similar process governs salary negotiations with the Staff Association and the Professional and Managerial Association.
This drawn out timetable clearly represents a worse-case scenario in which an agreement cannot be reached by negotiations, but it illustrates the difficulty of incorporating salary assumptions into an academic planning cycle that requires the majority of budgetary commitments to be made in the winter term. Also, this potentially lengthy timetable makes it difficult to use salary settlements as the principal part of the University's response to the massive resource reductions of 1996-97.
b. The requirement to control expenditures in response to announced revenue reductions
The reduction in government funding to universities represents a $24 million cut in Western's operating revenue in a single year. If we are to operate within these much-diminished fiscal circumstances, all expenditures need to be controlled.
Full-time faculty and staff salaries and benefits comprise roughly 70% of Western's operating expenditures. A 1% increase (or decrease) in the full-time faculty salary and benefits budget represents a cost (or saving) of over $0.9 million; the same changes to administrative support staff salaries have a value of over $0.7 million per year. A return to pre-Social Contract salary levels would result in approximately a $3 million increase in expenditures in 1996-97 relative to the current year.
c. Commitment to merit-based salary increments
The discussions leading to the development and approval of Western's Strategic Plan revealed a widespread desire for salary settlements that give the highest priority to merit-based increments. Many would like to see a merit-based salary model without delay. Although such a goal is difficult to achieve in the face of the need to reduce expenditures, it is not impossible. For example, the University of Toronto and McMaster University were able to make merit-based adjustments to faculty salaries during the Social Contact period using a salary-rollback mechanism agreed to by faculty.
Particular Issues Concerning Faculty Salaries
a. The unacceptable salary position of junior faculty
According to the most current available figures (1) (Statistics Canada, 1994-95), salaries for Assistant Professors at Western rank 10th among the ten largest Ontario universities (2) (see Table 1). On average, Assistant Professors at Western earn about $6,000 less than their counterparts at the University of Guelph, the institution highest in this category. This impairs Western's ability to pursue its goal of moving into the first rank of Canadian research-intensive universities because attracting and retaining the best young faculty is central to achieving this goal. The problem of relatively low junior faculty salaries is comp ounded by the fact that many of our best young scholars have joined Western just prior to and during the Social Contract period. Rather than the substantial annual increases that characterised the early careers of professors in the previous 10-20 years, these vital members of our community - indeed, the future of Western as an institution committed to first-rank teaching and research - have been faced with unpaid "days off" and frozen salary levels.
Failure to address these concerns in the immediate future could have a serious impact on morale and even lead to the departure of some of our most outstanding new faculty.
b. The need to maintain competitive faculty salary levels
Western must be able to offer competitive salaries and meaningful recognition of accomplishment to professors at all ranks if it is to attract and retain the quality of faculty necessary to advance its standing among Canada's research-intensive institutions. This competitive environment can only increase as the major wave of retirements sweeps all North American universities in the first decade of the new century.
Table 1: Average Faculty Salaries: 1994-95. ("Big 10" Ontario UniversitiesGiven this reality, the use of salary settlements as a principal and long-term response to the current budgetary crisis could substantially impair Western's ability to maintain and enhance the quality of its educational programs, research, and scholarship.
It is interesting to note that, although there is reason to be concerned about the level of salaries offered junior faculty at Western relative to other Ontario universities, Western's salaries at all ranks are competitive with those offered at universities in many other provinces. Table 2 places Western's faculty salaries in the context of 9 other major Canadian universities. All universities offering higher salaries than Western at any professorial rank are from within the province of Ontario. Note that 1994-95 salaries were not available for the University of British Columbia and Quebec institutions.
Table 2: Average Faculty Salaries: 1994-95. (Major Canadian Universities)
c. The Commitment to "5th Place"
Following a practice established in past faculty salary settlements, the Social Contract agreement included a commitment by the University to begin negotiations in 1996-97 at an average salary level of no less than 5th among the ten largest Ontario universities. It was agreed that the ranking would be assessed and any necessary adjustment made according to a mechanism used for past settlements.
1) Statistics Canada data for 1995-96 (3) is to be used to determine the ranking of the average salary for all members of faculty (in professorial ranks) at Western.
2) If this ranking is less than 5th, the dollar value necessary to raise the ranking to 5th overall is multiplied by the total number of full-time faculty (in professorial ranks); the product represents the total salary adjustment fund.
3) This adjustment fund is first used to adjust the average salary of the professorial groups that rank below 5th to the 5th place (based on 1994-95 data, this would affect Assistant and Associate Professors).
4) Any monies remaining in the total adjustment fund (see 2 above) are divided equally among all faculty in professorial ranks.
Although this mechanism seems reasonable, and may have been acceptable in the past to achieve the appropriate goal of ensuring that faculty salaries at Western rank at least 5th among Ontario universities, in 1996-97 it would result in an anoma lous outcome that seems entirely inconsistent with the spirit of the original agreement.
An understanding of this anomaly requires noting first that the salary rank of Western's most senior faculty is considerably higher than that of our most junior. As can be seen from Table 1, in contrast to the 10th place ranking of Assistant Prof es sors, Full Professors at Western rank 4th among the ten largest Ontario universities. The average salary of Full Professors is only 2% less than that of those at the University of Waterloo, who hold the second highest ranking for Full Professors in the province.
In addition (see again Table 1), the current Western faculty profile is characterized by a disproportionately large percent age of Assistant Professors (3rd of 10) and a disproportionately low percentage of Full Professors (8th of 10). The net impact of this distribution is to lower the overall average salary of all faculty at Western, irrespective of the relative salary levels within professorial groupings. Because salary levels are highly correlated with seniority and also vary substantially with professorial rank, a major contributor to the overall average ranking of Western is the relatively large number of Assistant Professors (less senior / lower salaries) and the relatively small percentage of Full Professors (more senior / higher paid).
As a result of this difference in demographics, application of the "5th place" formula originally agreed upon at the outset of the Social Contract would result in a movement of Assistant Professors from 10th to 2nd, Associates from 6th to 4th, and Full Professors from 4th to 2nd. These changes would result in a further increase of approximately $3.2 million in operating expenditures and would include a salary increase of about $2300 per year to Full Professors, who already rank 4th. In contrast, a ranking of at least 5th could be achieved within all professorial ranks by a targetted increased expenditure of approximately $0.9 million per year. The agreed-upon formula would thus result in expending $2.3 million per year more than would be required to raise salaries to 5th place in each rank.
The conundrum is perhaps best appreciated by considering the cost of fulfilling the "5th- place" commitment if the distribution of faculty across the three ranks at Western were the same as the distribution across ranks at the six Ontario universities with higher average salaries. This situation is simulated in Table 3. Note that only t he percentage of faculty at each rank has been altered in this table; the average salaries within each rank are the actual values used also in Table 1. If faculty at Western were distributed as shown in Table 3, the cost of bringing the average salary to 5th place would be approximately $425,000, as compared to the approximately $3.2 million cost increase that would be incurred if the same formula is applied given the existing distribution of faculty across ranks. Thus, by far the greatest portion of the cost of complying with the original 5th-place formula is a result of an anomalous distribution of Western's faculty across the three professorial ranks rather than a direct response to relatively lower salaries within each rank.
Table 3: Average Faculty Salaries: 1994-95. ("Big 10" Ontario Universities)
A number of quite distinct options are available to those contemplating the opening of formal salary negotiations in 1996-97. Because of the complexities of the coming year, these options do not easily or obviously sort themselves into "employee" and "employer" positions. The following list of options is not intended to include all possible reason able alternatives.
a. Basic salary structure
Leadership in Learning: Western's Strategic Plan, urges the University to make merit-based increments the larger part of future salary policy. In the past, the largest portion of salary settlements was directed at "scale" or PTR increases rather than selective, merit-based increments. In more recent agreements, merit funds have been somewhat greater for junior than more senior members of faculty, but the net effect of this differential has not been great. An alternative type of settlement, advocated by some, would ensure that the largest portion of any funds available for salary increases would be allocated differentially on the basis of merit and disproportionately to junior members of faculty. This approach could be particularly important in a period of stable or declining budgets. The assignment of a clear priority to merit-based salary increases would underscore the University's commitment to excellence and to the meaningful recognition of outstanding performance in teaching and research.
b. A return to pre-Social Contract salary levels and the achievement of the spirit of the "5th- place" commitment
As indicated in this discussion paper, the cost of returning to the pre-Social Contract salary levels and observing, to the letter and as written, the "5th place" agreement for faculty will likely be at least an additional $6 million of expenditure within the University operating budget for 1996-97. A large proportion of this cost is associated with increased salaries that would appear to go far beyond the original intentions or spirit of the "5th place" agreement. A settlement that would ensu re that salaries within each professorial rank were at 5th place or above for that rank would cost substantially less and yet address the spirit and intention of the original agreement.
c. A differential salary rollback
An across-the-board salary rollback, as advocated by some, would ignore the 10th place ranking of our junior faculty and seriously impede Western's ability to attract and retain these members of faculty. A rollback that reduced salaries in proportion to current salary levels, with greater salary reductions for those with higher earnings, and that was limited to those earning above some minimum level, might be a reasonable response to this concern.
d. Merit adjustments: investment in junior faculty
A portion of the savings associated with a differential rollback could be used to fund a merit allocation, with a substantially greater proportion of these funds directed at junior faculty. This mechanism would both speak to Western's commitment to recognizing outstanding achievement and address the relatively low salary levels of faculty at the Assistant Professor level.
Options for Administrative Support Staff Salaries in 1996-97
All of us are acutely aware that the annual budget reductions of the past many years have resulted in a dramatic reduction in the number of administrative support staff and have seriously burdened remaining employees, who strive to provide service at reasonable levels and far beyond. The current unprecedented reductions in funding have prompted the initiation of position eliminations and layoffs in administrative support units on a scale never before seen at Western. Deans also are reducing administrative staff complements to the absolute minimum, and mergers of administrative units are being pursued aggressive ly.
This situation calls for a careful examination of options to control costs and maximize effectiveness beyond simple position eliminations in the staff area. Options could include a salary rollback, a continuation of unpaid days off, pension and benefits premium reductions, etc. The differential application of any salary increase on the basis of performance and position within the salary range must also be considered. In a related initiative, current performance appraisal processes will be re viewed to ensure that they identify and acknowledge outstanding job performance.
Pensions and Benefits
The University's annual contribution to the Academic Staff Pension Plan and to the Administrative Staff Pension Plan totals $16 million. The cost of the University's portion of the annual premiums for the various health and group insurance benefits (group health insurance, vision care, employer health levy, group dental plan, etc.) totals in excess of $14 million. This cost has grown from $6.5 million in 1988-89. While modest efforts have been made in the past year or so to contain these costs, they continue to increase at a rate in excess of inflation.
Last year, the University announced two significant amendments to its group insurance plans. First, the University would no longer be responsible for any future off-loading of the cost of services previously funded by government. Second, a Preferred Provider Network (PPN) plan was introduced, in partnership with the University Students Council, Western's Affiliated Colleges, University Hospital, and St. Joseph's Hospital, whereby the cost of filling a prescription was set at $6.11 in comparison to the previous $8.50-$12.00 fee.
At the time of the discussions with representatives of the employee groups last year, the administration identified a number of additional changes which, if introduced, would result in substantial savings. These possibilities included the co -insurance of health and dental insurance premiums (80% paid by the University, 20% paid by the faculty or staff member), a modest change to the Long-Term Disability Insurance Plan, and the use of generic drugs in place of higher-priced brand name drugs. It is our intention to continue discussions in this area with the employee groups.
Western's academic and administrative pension plans are the only pure money-purchase pension plans at any Ontario university. Over the past several years, the combination of modest salary increases and reasonable investment returns has produced substantial pension surpluses at those universities featuring the more common "defined-benefit" pension plans. Indeed, many Ontario universities have used these funds to fully or partially offset reductions in their operating grants during the Social Contract period. Western had no access to such funds and was forced to manage the budget reductions through efficiencies, real reductions in expenditures, and unpaid leave days for employees. However, the value of staff and faculty pensions at Western have continued to rise throughout this period. Our pension benefits at the point of retirement are, we believe, the very best in the Ontario university system. The relative advantages of the University's pension justifies some discussion of the University's monetary contributions to the plans and perhaps consideration in the discussions concerning salary levels.
Western's benefits coverage for retired members of faculty and staff is considered by some to be the best available at Ontario universities, possibly the best in the country. Alterations to coverage for retirees could result in substantial savings to the University.
The Coming Year
Western faces very serious, potentially threatening challenges in 1996-97. The salary adjustment issue addressed here is only one of many factors that will determine our success in coping with the damaging cuts in government support to Ontario's universities. In all of these areas, we believe that the members of our community will best be able to contribute effectively to the changes taking place in the University if their discussions and decisions are informed as much as possible by a knowledge of the circumstances facing Western.
(1) These Statistics Canada data are for 1994-95. The "5th-place" agreement was to be implemented based on figures for
1995-96 that will likely not be available until well into the summer of 1996. Some Ontario universities with access to substan
tial pension fund surpluses were able to increase faculty salaries modestly during the period of the Social Contract. These
increases can only worsen Western's relative position, particularly as it applies to junior members of faculty.
(2) Carleton, Guelph, McMaster, Ottawa, Queen's, Toronto, Waterloo, Western, Windsor, and York.
(3) The unprecedented uncertainty that surrounds salary discussions at all Ontario universities adds a complexity to this
calculation that is undesirable in a time when delays in decision making could have serious implications for planning.