May 16, 2001 

President Harold T. Shapiro
One Nassau Hall
Princeton University
Princeton, New Jersey 08544

Dear President Shapiro:

The accompanying annual report of the Priorities Committee presents our recommendations concerning compensation, which follow from the recently completed set of spring 2001 meetings. The Committee has had two regular meetings and one open public meeting. In addition, as is its custom, it made two presentations to the CPUC, one an interim report, on April 9, 2001, and one, a final report, will be made on May 16, 2001. We presented, for information, to the Trustee Finance Committee a preliminary progress report on April 20, 2001.

Following discussions on campus among many interested individuals and groups, we analyzed, in greater than usual detail, our current compensation program, concentrating attention on less highly compensated bi-weekly staff. We started by re-examining the expected budgetary situation for the AY 2000-2001 and AY 2001-2002 years, learning that, while the current year is expected to end in rough balance, the upcoming year offers very little prospect for ending in a surplus and, in fact, will present a challenge to end in balance. Our survey of wages (excluding vacation and other benefits) led us to the following conclusions concerning the factual situation of our bi-weekly staff:

  • On average, the bi-weekly A staff is paid (excluding benefits) at slightly above local market rates and the bi-weekly B staff somewhat below local market rates. We do not yet have an analysis of total compensation -- including benefits -- to provide a more accurate and complete comparison.
  • Within these broad categories, there are several groups which are receiving annual pay below market levels, whose pay, in recent years, has grown at rates that were both less than the growth rate for their peers outside the University and below the nominal inflation rates. Once again we note that analysis of the growth of total compensation has not yet been performed.
  • The current procedures for distributing salary increases among certain groups had produced some concern with regard to the quality of the pay-for-performance system.

Overall, after analyzing these facts and perceptions, and in full cognizance that any recommendations for an increase in the compensation of any group must lead either to corresponding higher than planned increases in income (e.g. tuition rates) or less than planned expenditures (e.g. other compensation rates), we recommend the following policies:

  • Future Priorities Committees should be provided with a more detailed breakdown than has become customary of compensation rates for the administrative staff -- either annually or less frequently -- so that it will have more accurate and timely information on which to base its recommendations.
  • The University should adopt as a stated goal a policy that the total compensation of its bi-weekly staff be at rates which are at or slightly above those of their peer groups outside the University.
  • We should, as a community, try to reach this goal, resources permitting, over the period of the next several years.
  • This calendar year, Princeton should try, if one-time resources can be found, to close approximately one-third of the gap (including funds allocated by the Priorities Committee in January, 2001) between the current situation and our stated goal, and to recommend that next year's Committee include the annual implementation of this increase in its regular budget allocation.
  • We recommend that the Department of Human Resources examine the desirability (working with, where appropriate, relevant representation of the staffs in question) of a compensation allocation process similar to that utilized for faculty and senior administrative staff: two salary pools -- one a base pool that would go to all employees whose performance was satisfactory and another pool distributed on the basis of exceptional merit.

The Committee wishes to thank all of those who assisted in and contributed to its work this year, particularly Dan Scheiner, Joan Doig, Christopher McCrudden and Steven Gill, whose detailed knowledge of the University administrative compensation programs and whose willingness to share their expertise with the Committee were invaluable.

For the Committee, 

Jeremiah P. Ostriker, Provost
Joann Mitchell, Associate Provost

I. Introduction

Last fall some members of the campus community, particularly students, began a series of conversations with senior administrators at the University regarding a number of issues related to compensation for Princeton's lowest-paid employees. Issues raised included the use and compensation of casual workers and the compensation of particular categories of staff. With respect to casual workers, the University has begun implementing a plan that will substantially reduce the number of casual worker positions by converting them to regular positions. In addition, the wage rates of the remaining casual workers will be reviewed.

In March, the Priorities Committee was asked to consider the question of the current compensation of the faculty and staff in the overall context of its charge, which is to recommend a balanced operating budget for the succeeding year. The Priorities Committee agreed to meet during the spring semester and make recommendations using its normal procedures. (See the January 2001 Priorities Committee Report for a fuller description of those procedures and the Committee's charge.)

The Committee held several meetings, beginning in late March, which included receiving updated information regarding the University's operating budget and hearing presentations from the Vice President for Human Resources and the Dean of the Faculty regarding the salaries of the faculty, professional research, technical and librarian staffs and the administrative and support staffs of the University. The Committee also received information from the Workers' Rights Organizing Committee, the Princeton University Library Assistants Union, and those who participated in the meeting of the Council of the Princeton University Community on April 9, 2001, and in a public meeting held by the Priorities Committee on April 24, 2001.

II. Faculty & Staff Salaries

In setting the salary increase pools for fiscal year 2001-02 during our regular process last fall, the Priorities Committee reviewed aggregate data regarding the current salaries of faculty and staff and comparisons of those salaries to relevant markets. During their presentations to the Priorities Committee in November, the Vice President for Human Resources and the Dean of the Faculty expressed concern regarding the competitiveness of Princeton's salaries for various staffs and urged the Priorities Committee to allocate additional resources to their respective salary pools to ensure that Princeton's compensation remains competitive. The Committee recommended, and the President and Board of Trustees approved, the higher salary increase pools requested for the coming fiscal year, including additional special resources for two categories of staff that lagged significantly behind market averages -- technical support staff and entry-level professional librarians. These higher salary pools and special increments for entry-level professional librarians and technical support staff will be made available as previously scheduled through the July 1, 2001, salary increase programs for faculty and staff.

When the Priorities Committee reconvened this spring to review the University's salary program, it examined the policies on which the salary and total compensation plans are based in order to evaluate whether Princeton's practices were consistent with those policies. The stated principles of the University's staff salary programs are to reward excellence and to try to maintain a competitive market position for faculty and staff. The Priorities Committee endorses that policy. Moreover, the Committee believes that the University should set compensation rates that are at or slightly higher than market rates to ensure that Princeton is able to recruit, hire and retain the very best staff members and to reward excellence in performance. Further the Committee believes that all of the University's salary programs should be moved closer to the practices utilized in the faculty program -- that is, to provide a base adjustment to all staff members whose performance is at least satisfactory, and then to provide an additional merit increase to strong performers. The Committee was keenly aware that, in times when the overall salary pool is small, a staff member who only receives the base increase for several years could lag behind both the market and inflation, as was the case for most faculty and staff members during the late 1970's and early 1980's when inflation rates were higher than salary pools for a number of years. At the same time, the Committee believes that staff members whose performance exceeds the standards and expectations that have been set for satisfactory performance should be rewarded appropriately, and it supports the University's goal of "paying-for-performance."

The Committee acknowledges that there is a great deal of anxiety regarding the performance evaluation process and the explicit link that is made between salary increases and performance. It is essential that the performance evaluation process and the merit increase program be monitored and assessed on a regular basis to ensure that they are administered in an equitable and nondiscriminatory manner. Also, managers and staff must be educated regarding the performance evaluation process and the proper way to carry it out. It is imperative that an effective system be in place to monitor the compensation of faculty and staff members on an on-going basis in view of the University's objective that they remain at or a little higher than the market. The Committee looks forward to hearing about the University's progress with respect to these goals in the near future.

The Committee spent much of its spring session reviewing information that would permit it to determine whether the University's practices were consistent with these policies. The Dean of the Faculty and the Vice President for Human Resources were asked to provide updated information regarding the salaries of faculty, professional staffs and the administrative and support staffs. The Committee requested and received information that allowed for more refined market comparisons of the faculty and staff salaries than had been undertaken last fall. The Committee reviewed data that showed salary versus market trends over time and information regarding inflation during that time period, and paid particular attention to the differences between the salaries of colleagues who earn the lowest wages and those of their peers in the appropriate markets. To the extent possible, future analyses should include a review of salaries and benefits to facilitate assessments of whether the University's total compensation is at or above market rates. After reviewing the salaries of bi-weekly staff members as compared to market, we concluded that Princeton's salaries are on average at, or close to, the market. However, when looking at particular job categories, it is clear that some categories of bi-weekly staff positions lag behind the market rates paid by peer institutions. Thus, the Committee decided to focus its review on the salaries paid to bi-weekly staff members.

In our review of the salaries of bi-weekly staff colleagues, we found the following discrepancies that were of concern to us. Despite the special incremental adjustment provided to technical support staff by the Priorities Committee last fall, this group continues to lag behind the market. Similarly, the salaries paid to office and clerical workers lag behind the market, as do the salaries of some ranks of library assistants. We do not yet have information concerning relative total compensation rates and we will seek more detailed information for future Priorities Committees. The salaries of some entry-level staff members in maintenance and service categories also lag behind the market slightly.

The Committee fully recognizes that the determination of market compensation rates is not an exact science. However, the fact that several categories of bi-weekly staff have salaries that seem to be below market rates is a serious matter that the Committee believes could impede the University's ability to hire and retain staff members and to reward excellence. Thus, in our view this issue needs to be addressed as expeditiously as possible. It is estimated that the cost of bringing all bi-weekly staff members to 100% of the market could exceed $1,500,000. Nevertheless, it is the Committee's strong recommendation that steps be taken expeditiously to ensure that, on average, all University staff members receive compensation that is at or slightly above market rates.

Information regarding the operating budget for fiscal year 2000-01 and the current projections for 2001-02 indicate that it is unlikely that any additional funds will be available in the operating budget that could be allocated to increase the salaries of bi-weekly staff members in categories that are being paid at or below market rates. (In fact, current projections indicate that there may be a slight deficit as a result of higher than anticipated energy costs and a modest shortfall in sponsored research and other income.) Even so, the Committee believes that ensuring that staff members are appropriately compensated relative to market rates is a very high priority. If special resources could be identified to begin making these salary adjustments in 2001-02, the Committee would recommend an allocation of approximately $400, 000 (over and above the $130,000 already allocated for the technical support staff increment). This would represent a significant first step in a strategic effort to bring all support staff salaries to at least 100% of market. Specifically, the Committee would propose that any such additional resources be allocated in proportion to the difference between the salaries being paid and market rates, with those staff categories that are the furthest behind the market receiving the largest percentage adjustments. The Committee believes that such a recommendation would be sustainable in future years and that additional steps should be taken to allow the University to achieve the goal of ensuring that the total compensation for all of its staff is at, or slightly above, market rates within a reasonable period of time. The Committee strongly urges that next year's Priorities Committee -- in addition to providing the resources necessary to continue the funding which was provided on a special one-time basis -- allocate additional resources that would continue to close any gap between the compensation of the University's bi-weekly staff members and relevant market rates, with the hope that this goal can be achieved in the next several years.