Q: Our College is researching a change in how we pay instructors…moving from a flat rate to giving the managers more flexibility in negotiating with instructors based on the instructional/content area. I am very excited about more flexibility. Does LERN have any articles or resources I could use as we move through the development of the new policy?
A: The main recommendation from LERN is that instructor compensation not strain your budget. LERN recommends that you follow the financial format that we have established for self-sufficient programs. Here it is:
Promotion costs should be between 10% and 15% of your income.
Production costs, most of which are teacher compensation should be between 35% and 40% of your income.
This means that once you have paid all your promotion and production costs, you have between 45% and 55% of your income remaining to pay general and administrative costs and contribute to any surplus you may have budgeted. This is called your operating margin. Using this formula allows you to adequately compensate your instructors while maintaining a healthy financial picture.
You may find that in some cases, you will be paying more than 40% of a course's income and in some cases less than 35% of in individual course's income to the instructor. Some of your courses will generate a much greater amount of income than others. The OVERALL figure you should be paying for your teachers is 35 to 40%. Of course, to be most profitable or financially successful, you would want to eliminate those programs that are using too high a percentage of your resources without creating any financial benefit to you. Keeping your operating margin in the 45 to 55% range will allow you to evaluate which courses you should keep and build upon, and which ones you should let go.