LEXINGTON, Ky. — Saying it is “the right thing to do,” University of Kentucky President Eli Capilouto announced Thursday that beginning July 1, 2020, the starting wage for regular employees will increase from $10.40 an hour to $12.50.
“We have a wonderful team of employees that makes possible an incredible dream,” Capilouto said. “And we want to be competitive and lead the market to attract the very best people.”
The pay increase will be the second time in the last four years that UK has raised starting wages. In 2015, UK moved from the federal minimum wage of $7.25 to $10 an hour. Because of incremental increases in line with pay raises, the current minimum wage at UK is $10.40 an hour.
Thursday’s announcement, however, was only one part of a comprehensive package of changes that Capilouto announced, designed to better support employees, increase their financial well-being and expand their capacity to care for their families away from the workplace.
Other changes include:
- Beginning in January 2020, UK staff employees will be able to use up to 12 weeks of accrued sick time for parental leave for childbirth, adoption or foster care (currently, employees can use six or eight weeks of sick time; additional leave must be from accrued vacation leave).
- Also beginning in January 2020, staff employees will be able to use up to two sick days per year for personal well-being (currently, such time can only be used for illness or injury, or to care for a family member). These changes apply only to staff. Faculty sick leave is managed differently.
- Beginning July 1, 2020, pending Board of Trustees approval, all new eligible employees will participate in the UK matching retirement savings plan. In that savings plan, employees contribute 5% of their salary, and UK matches with 10% (currently, employees under the age of 30 are eligible, but not required, to participate). By including all new eligible employees, individuals who join UK early in their careers and stay for a long period of time will have the opportunity to earn several hundred thousand dollars for the duration of their work at UK.
Starting pay increases
The starting wage increase will impact approximately 1,700 employees — nearly 920 in health care and more than 780 on the rest of campus.
At the same time, other employees, who currently make between $12.50 and $14.50 an hour, will see increases to adjust for what economists characterize as salary compression.
These investments were made possible through ongoing efforts to increase efficiency and generate new resources through UK’s Our Path Forward initiative.
A team, composed of administrators from UK’s budget office, human resources, health care and finance and administration, analyzed and made recommendations for the changes Capilouto rolled out Thursday.
Team members, for example, analyzed starting wages at other universities in the region, nationally and throughout the Southeastern Conference. Capilouto said the increase in starting wages is in keeping with that analysis and, as such, is an important retention and recruitment tool.
Living on campus, Capilouto said, he can hear “at 3 ‘o clock in the morning on a snow day, those machines churning” to ensure campus is open and safe. “Their work is just as important in making possible that school day as a faculty member who conducts a class,” he said. “It is one step indicating to all of our employees how much we care and appreciate what they do.”
Currently, UK employees must use vacation time for any additional leave beyond six or eight weeks for parental leave for childbirth, adoption or foster care. The change in policy to use sick time of up to 12 weeks means new parents, if they have sufficient time saved, will no longer have to use vacation leave when they’re away for these reasons.
It is the first step in examining university policies for new parents. Many employers are beginning to offer separate paid leave for new parents. In UK’s biennial employee engagement survey, the need for strengthened parental leave policies is a repeated priority.
Another update to UK policy will allow for additional uses of up to two days per year for personal well-being. Currently, the time may only be used for an employee’s own illness or injury, or to care for a family member with an illness or injury. Beginning Jan. 1, 2020, UK policy will allow an employee to use up to two days per fiscal year as personal well-being days.
“We have recognized from listening to our employees the realities they face in raising children,” Capilouto said. “It’s important to address opportunities in our benefit package that will strengthen our families, both in times of celebration and at times when you need to care for one another.”
Beginning July 1, 2020, pending Board of Trustees approval, all new eligible employees will be automatically enrolled in the UK matching retirement savings plan.
Currently, eligible UK employees are automatically enrolled in the matching retirement savings plan at age 30. Employees contribute 5% of their salary, and UK matches with an amount equal to 10% of their salary. About 70% of employees under the age of 30 participate in the program.
Consider one example of the power of starting retirement investing early: A UK employee, at age 25 with a starting salary of $35,000, begins immediately participating in the university’s retirement program, making a 5% contribution and receiving the 10% match. Assuming the employee retires at age 65 — with 8% annual returns and a 2% annual salary increase on average — retirement savings will total $1.8 million, or about $72,000 a year, assuming withdrawals of about 4% a year.
If the same employee waits until age 30, with the same basic assumptions, there is about $1.2 million in savings or about $48,000 year. Starting five years earlier equates to an increase in retirement savings of 50%, Capilouto said.
“Too many individuals, at a time when they should be looking forward to retirement, don’t have that option,” Capilouto said. “One of the most powerful things you can witness in this country is compounding interest. This, we hope, pays benefits to our employees and their families, 20, 30 and 40 years from now.”
With tight resources over the last several years, UK now receives about $50 million less annually from the state than it did about 10 years ago. Capilouto said the institution must be strategic in how it funds priorities.
“By making this a priority, we signal that our employees are our priority,” Capilouto said. “Building a strong UK family, we are the University of, for and with Kentucky. And it starts with our responsibilities to one another.”