Personnel experiences of the recently implemented salary system (often referred to as UPJ) were studied during spring 2007at two universities: Helsinki University of Technology and University of Joensuu. The report addresses three research questions: 1) How does the personnel perceive the new salary system? 2) What kind of benefits and challenges do the employees identify concerning the implementation of the salary system? 3) How could the salary system be applied to support leadership practices at universities?

The data were collected via an internet survey (n=247+248, response rate 50%) that was combined with records-based pay data, and interviews (n=20+20). The survey responses were compared with the data collected in 2005 from Helsinki University of Technology and six other governmental organizations. We summarized the major advantages and challenges experienced by the interviewees. Then, we categorized the suggestions provided by the survey respondents on how to improve the application of the system.

According to the surveyed university personnel, the bases for pay increases are on average clearer now than they were in the old system. However, the pay distribution procedures are perceived as less consistent now at universities than they were in the old system, and compared with the experiences of the governmental personnel from six organizations. The respondents were significantly more satisfied with the person-based pay established by performance appraisal than with the job-based pay which is based on job evaluation.

At universities, there have been several actors and factors that have had seminal influence on the pay decisions beyond the employee and his/her supervisor. The way the university has administered the pay system has demonstrated to have most influence. Aligned with that, the respondents experienced that the pay budget has influenced the decisions significantly. The standardization process carried out by the assessment groups (consisting of employee and employer representatives) has also been perceived as highly influential.

About half of the respondents from Helsinki University of Technology and University of Joensuu had an overall negative attitude towards the salary system. Respondents experienced that it has had a negative effect especially on the working climate.

The open-ended responses implied that one of the most central development areas is to increase objectivity and transparency in the pay decisions. The responses imply that the bases for decisions were to some degree unclear for the personnel as well as supervisors. However, also a degree of flexibility in the pay practice was hoped for. First, according to the respondents, exceptional skills and top performance could not be sufficiently recognized by the pay system. The other reason why flexibility is desired is the fact that the ability to pay employees varies between departments and is situation specific. Also recruitment markets vary between the departments, especially where the proportion of external funding is high.

The imperative to adhere to a certain mean in performance appraisal points has decreased the incentive effect, and perceived correspondence between pay and reality. The incentive effect is also decreased due to the fact that a large proportion of personnel receive so called guaranteed pay (depending on the system 20-33%).

The report discusses that the implementation of the new system has missed a salient alignment between the salary system and the leadership in the organizations, its objectives and personnel strategy. The pay reform can be considered as a "lead" system of the ongoing structural changes, and forthcoming changes to personnel strategy at the universities. One of the most central tasks remains to clarify what the organization wants to pay for. Accordingly, what are the criteria according to which the organization wants to attract and retain its employees?