Understanding How Merit Decisions are Made

By Staff
May 30, 2017

We’re in the final weeks of the annual performance review season, and by now supervisors have been thoughtfully considering performance, comparing it across the organization to ensure rating consistency, and making final rating decisions. Once ratings are decided by supervisors, then merit decisions will be considered.

The Pay for Performance program is intended to give maximum flexibility to each Dean and Vice Chancellor. Instructions for how to disperse pay increases will be given out by each individual school, college and division. If you haven’t received instructions, please check with your Human Resources Advisory Council representative.

This year, University of California President Janet Napolitano has once again authorized a merit program for all non-represented employees. Each Dean and Vice Chancellor has a budget for merit increases equal to 3 percent of eligible salaries.

For example, if a college spent $60 million on salaries for non-represented employees during May 1, 2016 through April 30, 2017, then its three-percent budget for this performance review period is $1.8 million. Based on the ratings given to employees, the Dean decides how to allocate merit pay increases within that $1.8 budget. (See illustration.)

Illustration. Title: Merit Decisions Example. Description: Depicts how funds are apportioned based on appraisal ratings; In the example, $60-million in budgeted salaries for 800 employees results in a $1.8-million budget for pay increases, which are then apportioned to staff depending on the ratings they received in their annual appraisals.

Example of merit pay allocation (view larger)

While every Dean and Vice Chancellor may handle the process differently, the outcomes have proven to be very similar. For example, last year the departments on the Davis campus gave out an average 4.4% pay increase for an Exceptional rating, 3.6% for an Exceeds Expectations rating, and 2.5% for Fully Achieved Expectations rating. On the Health campus, an Exceptional rating earned a 3.5% pay increase, Exceed Expectations 3% and Fully Achieved Expectations 2.5%.

Illustration: Title: 2016 Rating Allocations Summary. This year there is a four-point rating scale, but last year this is how the ratings were applied: 46% fully achieved expectations; 40% exceeds expectations; 13% exceptional.

2016 Rating Allocations Summary (view larger)

Illustration: Title: 2016 Merit Allocations Averages. Across the Davis campus, the ratings eligible for merit earned these average increases: 2.5% fully achieved expectation, 3.6% exceeds expectation, 4.4% exceptional.

2016 Merit Allocations Averages (view larger)

For a deeper explanation of the merit allocation process, please visit this webpage with frequently asked questions.