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Is Senior Pay in universities broken?

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Posted by James Bigus on 26 February 2019

Is Senior Pay in universities broken?

Corporate Governance | Executive Compensation | HR Reward | Pay Transparency | Reward Consultancy | Pay Fairness | Gender Pay | Measuring pay | Global reward

Pay for university senior staff is a sensitive subject. Like any large and complex organisation, Higher Education Institutes need to attract and retain the best talent in a competitive global marketplace. However, since HEIs receive 45% of their income from public funding (1), they are rightly subject to public scrutiny and pay arrangements should reflect their wider obligations. 

However, in recent years we’ve seen a lot of negative press attention related to reward practices for senior staff, with a particular focus on the pay of vice-chancellors. Given the marked pay gap between average university salaries and senior staff, as well as mounting debts for students, the question seems to be whether the public is getting real value for money. 

A few weeks ago, we learned that six universities in England paid their vice-chancellors £500,000 or more in salary, bonuses and benefits last year, while nearly half of all VCs received more than £300,000 (1). These details came from the first survey of senior staff pay from the Office for Students (OfS); the higher education watchdog launched last year in an effort to increase regulation in the sector. 

Against this backdrop, the need has never been greater for HEIs to demonstrate that their remuneration decisions are evidence-based, proportionate and necessary to deliver continued success. 

The sector has responded with the Committee of University Chairs drawing up a code of ‘best practice’ for senior staff remuneration. Whilst voluntary, those institutions not complying with the code are expected to provide explanations for non-compliance and how their alternative arrangements meet the principles of the code.

Universities wishing to avoid controversy on senior pay and effectively communicate their considered pay position should start by establishing the facts - and then be prepared to show their working.

As with Gender Pay reporting, the key is to dig down into the salary data and really understand what it reveals about pay practices at your organisation. Once you’ve interrogated the data, it’s vital to craft a strong narrative which explains the rationale behind levels of remuneration for senior members of staff and how decisions regarding pay are made within the principles of the CUC’s code. 

Establishing the facts

The first step should be to conduct a thorough pay benchmarking exercise, to gain an understanding of the market and to identify those areas where employees are under- or over-paid, as this will inform the wider context of the institution’s pay strategy. 

Once you’ve established market position, it’s time to build the narrative to explain the reasons why and how pay is set at this level.

Telling your story

Given the wider context, you may wish to focus in particular on those roles where salary levels are towards the market upper quartile/upper decile. There are many reasons why pay might be set at a particular level. These include the organisation’s long-term strategy, and the part the role plays in shaping and delivering the strategy; particular niche skills, knowledge and experience required of the role; and for academic roles prestige/reputation may play a part.

It is then important to link this back to a concrete measure against which success can be measured over time. Examples could include the institution’s level of income, their Research Excellence Framework ranking, or their rank in the university league tables. 

This last measure is something of a blunt tool but there is a strong correlation between levels of base pay for vice-chancellors and league table position. While we would not advise using such metrics as a basis for setting pay, they can provide invaluable context. 

Use the most relevant metrics to the role in question, but always try to link back to the overarching strategy of the institution when justifying the remuneration of a role – e.g. if the institution has a stated aim of improving their Research Excellence Framework Ranking and potentially sees a large proportion of income from research grants/funding, then they may have a strong case for paying a role such as Dean of Research in excess of the established market rate.

As I alluded to earlier, I believe the spirit of the code is to encourage greater transparency around university pay and to introduce a level of rigour and governance around pay in the sector which has been previously lacking, rather than to punish those institutions that do not comply.

As with Gender Pay, by putting Senior Pay on the agenda, institutions will be able to identify and highlight potential areas of concern and take action to address these – providing a level of reassurance and confidence to stakeholders that they are getting value for money.

(1.) Source: The Guardian, Tue 12 Feb 2019. Accessed at https://www.theguardian.com/education/2019/feb/12/vice-chancellors-pay-universities-england-2017-18?CMP=share_btn_tw 

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