Faculty Compensation Policy

Scope

This policy applies to tenure and clinical track faculty members at Indiana University School of Medicine (IU School of Medicine).

Back to top

Policy Statement

Objective

IU School of Medicine comprises substantial heterogeneity across departments and regional campuses in terms of size, composition and responsibilities. For example, clinical departments differ from basic science departments in that they have practice plans that contribute to the overall compensation of faculty. Faculty should be productive and demonstrate quality in areas of the academic missions according to their faculty track. Expectations are defined through dialogue with their chair or regional campus dean or designee. Linking compensation to expectations of productivity and quality implies compensation can vary in both directions; specifically, overall compensation can increase and decrease.

General Principles

The first principle is that our compensation policy refers to all components of a faculty member’s salary, such as Indiana University, physician and advanced practice provider practice plan, Richard L. Roudebush Veterans Administration Medical Center, etc. A second principle is that a faculty member’s total compensation should be aligned with productivity and quality. This principle mandates a third principle that faculty are accountable for their time, which will be allocated among different academic missions. A fourth principle is that each department must define the expectations of individual faculty members. A fifth principle is that overall compensation should be determined by three factors: 1. External equity, 2. Internal equity, and 3. Merit.

1. External equity: Faculty at the IU School of Medicine should be paid comparably to their peers at other academic institutions in the Midwest and the nation. Department specific data therein are readily available through surveys such as those from the Association of American Medical Colleges (AAMC) and Medical Group Management Association (MGMA). Regional campuses will use as a frame of reference their “market,” which will usually be the institution of higher education with which they are affiliated; for example, the external market for a biochemist at the Muncie campus would be compensation data from Ball State as opposed to the AAMC. The external marketplace is dynamic and can move this frame of reference upwards or downwards. This means that an increase in the external market may require a substantial increase in compensation to remain competitive for top faculty. It also means that decreases in the external marketplace may result in decreases in compensation. External equity also means that compensation levels will differ among specialties; for example, the current marketplace and reimbursement system result in differential compensation levels for a cardiovascular surgeon compared to a primary care physician. We do not control these external forces, but we must be responsive to them.
2. Internal equity: Faculty of similar rank, seniority, and productivity should be compensated similarly. This does not mean that a surgeon and a biochemist of similar rank and seniority have the same compensation; such is precluded by the external equity frame of reference noted above. It also does not mean that a biochemist at one campus is paid the same as at another.
3. Merit: Merit links productivity and quality to compensation. Faculty who are productive and demonstrate quality in their work should be rewarded appropriately. This policy aims to assure faculty that there is an opportunity to advance and be rewarded for being productive. As noted above, productivity needs to be evaluated in multiple academic missions. This means that productivity in one area can be amplified by productivity and quality in another; the converse is that productivity in one area can be neutralized by a lack of productivity in another. This also means that poor productivity and quality can result in decreases in compensation. It also means that highly productive faculty will have greater increases in compensation than less productive faculty. Over time, the cumulative effect of differences in productivity can result in substantial differences in pay among faculty of the same rank in the same department. The vital importance of merit in determining compensation also mandates that each department abide by the fourth principle, which is that each department and regional campus must define expectations of individual faculty members. These expectations will then become components of faculty annual reviews that translate to compensation. Determinants of merit may and probably will differ among departments and campuses. This fact emphasizes the importance of each department articulating expectations so faculty members know what is expected of them.

In defining merit/productivity/quality expectations, the following are elements (not inclusive) that should be considered for each academic mission:

1. Education:
   1. Quantity
      1. Lectures/didactics/small group learning
      2. Clinical Attending
      3. Student, resident and postdoctoral trainee advising
      4. Graduate student dissertation committees
   2. Quality/awards
   3. Mentoring
   4. Program development
   5. Leadership

2. Research
   1. Extramural support (success but also attempts)
   2. Publications
   3. Program development
   4. Mentoring
   5. Collaboration and team play
   6. Leadership-local, national, and international
3. Service
   1. Clinical
      1. Patient satisfaction
      2. Referring physician satisfaction
      3. Co-worker/staff satisfaction
      4. Team play
      5. Program development
      6. Leadership
      7. Mentoring
      8. Resource utilization
      9. Clinical productivity at all sites of practice
   2. Institutional
      1. Committees
      2. Administrative responsibilities
      3. Leadership
   3. Professional organizations
   4. Community: local, national and international

Another issue particularly germane to clinical departments is the distribution of overall compensation among different salary sources. A compensation policy should focus on overall compensation, not just one component. Importantly, distribution among multiple compensation sources may vary over time.

Back to top

Reason for Policy

Indiana University requires each department/regional campus to articulate compensation guidelines as specifically described in the Faculty Handbook. To ensure equity within rank and missions, there needs to be a consistent compensation policy within the IU School of Medicine (as opposed to multiple departmental policies). This document defines the principles and policy that drive compensation decisions throughout the school. Department chairs and regional campus deans determine whether a faculty member has met expectations and, with the faculty member, set goals and expectations for the coming year(s). That being said, oversight still remains with the school to ensure consistency of application across IU School of Medicine.

Back to top

Procedures

This salary policy applies to the percentage of academic effort for faculty members with both academic and clinical effort. For example, if a professor in Medicine has 40% academic effort and 60% clinical effort, this salary policy applies to the 40% academic effort and the compensation received for that 40% effort. Compensation for clinical effort should adhere to the same principles articulated here; the specific policy will be according to Indiana University Health Medical Group (IUHMG).

Independent of salary source and distribution (one check, two checks, etc), compensation for tenure and clinical track faculty members at IU School of Medicine will have four components (note some departments may not have a bonus component):

IU School of Medicine Institutional Base Salary

The IU School of Medicine institutional base salary consists of components 1 and 2. The base salary is determined by the principles discussed previously, and in particular, external and internal equity. For example, if the AAMC data indicate the 50^th percentile compensation for an assistant professor in biochemistry is $80K and no other factors might influence the compensation setting, an individual’s yearly salary may be set at this amount. This compensation would be guaranteed for at least 1 year (longer if in the start-up phase of faculty appointment). This guarantee enables the sum of these two components to be used as the value for salary in applications to the National Institutes of Health (NIH) and other granting agencies. The base salary level for the academic effort will be set by considering available funds within the department or regional campus, the qualifications of the individual faculty member, internal equity within the department or regional campus, and external equity as described previously. Towards the end of the academic year, the chair or regional campus dean and faculty member will discuss whether expectations were met and hopefully exceeded. If exceeded, the base salary may increase for the next year, which is in the variable component of salary as discussed below. If expectations were met but not exceeded, compensation would be adjusted according to university guidelines for faculty for the coming year (assuming sufficient resources in the department or campus). If expectations were not met, the variable portion of the individual’s compensation may decrease with limits to be described subsequently.

At the time of hire of a faculty member with clinical effort, a clinical employment agreement will be provided to the faculty member from IUHMG. The employment agreement will describe the expectations of the percentage of the individual’s effort in clinical responsibilities and the compensation methodology therein. Note, for such faculty members, there will be two compensation plans: one for education, research and non-clinical service and one for clinical service.

Component 1 - Core

IU School of Medicine core salary component depends on academic rank: $50K, $65K, and $80K for full-time assistant, associate, and full professorial ranks, respectively. This amount may be altered over time according to a number of factors, such as the overall financial environment that can be influenced by federal funding for research, state support, university policy, etc. The intent is that these values represent a core commitment below which compensation would not fall. Whether that intent can be met will be greatly influenced by external forces over which IU School of Medicine has little if any control. These values are also meant to provide academic freedom for teaching and research and reasonable economic security.

Component 2 - Variable

This component is the difference between the base salary and the core component. In the example above of an assistant professor of biochemistry, the variable component is $30K ($80K less the defined core component of $50K).

Adjustments to the Base Salary

At the end of an academic year, the base salary can be adjusted based on productivity, quality, and university compensation guidelines. A downward change in the base salary will be no greater than 10% per year ($8K in the current example). The intent is that the base salary will not be less than the core described above. Upward adjustments may exceed 10%, subject to review and approval.

Application of Base Salary

At the time of hire, a letter of employment in the form of a Memorandum of Understanding (MOU) will be provided to the faculty member. The letter/MOU will provide the IU School of Medicine Faculty Compensation Policy and the IU School of Medicine Faculty Effort Policy (as appendices), the latter of which describes expectations of a faculty member. The MOU will also include the specific effort assignment for the new faculty member (for example, 80% research effort, 15% educational effort, and 5% non-clinical service). The chair or regional campus dean and the new faculty member will determine a start-up period, as appropriate for the assigned effort. At the end of the start-up period or for current faculty beyond their start-up, the department chair or regional campus dean shall set the variable compensation component annually. It will be based upon the faculty member’s attainment of expectations. As noted above, the variable component may increase, decrease, or remain the same in subsequent years depending on the faculty member’s productivity regarding assigned duties and responsibilities as defined by the fourth principle, above, which refers to specific departmental expectations determined for each faculty member. The variable component for each faculty member will be reviewed and approved annually by the chair or regional campus dean, and is set for the fiscal year.

Component 3 - Administrative Supplement

For faculty members with assigned administrative responsibilities who receive an administrative supplement, the associated compensation is discretionary and can change according to the availability of resources, the need for the administrative task, and the reassignment of the administrative function elsewhere. Administrative supplements do not have fringe benefits and are not counted as base salary for federal granting agencies.

Component 4 - Bonus

Faculty members may be eligible for additional compensation through bonus payments. These payments are non-recurring one-time supplemental payments. Bonus payments do not have fringe benefits and are not counted as base salary for federal granting agencies. Each department or regional campus will define in writing its own plan, if any, for calculating and distributing bonus payments, and all such plans are subject to review and approval. Bonus plans should be performance-based and have defined criteria and metrics that allow compensation for outstanding activity in all missions of the IU School of Medicine: research, teaching, and service. Bonus payments shall be funded from department or regional campus margins or earnings from reserves. Bonus payments that subtract from the corpus of reserves may be appropriate in unusual circumstances, but require approval by the dean. 

Examples

Base assumptions:  Assistant Professor in Biochemistry – base salary set at AAMC 50^th percentile of $80,000.

            Component 1 - Core:  $50,000

            Component 2 – Variable:  $30,000 (Base minus Core)

End of Year – Excellent Performance: The chair evaluates the Assistant Professor as highly productive and producing quality work, exceeding expectations for the year. The chair approves a 15% increase in base, which is $92,000.

            Component 1- Core:  $50,000

            Component 2 –Variable:  $42,000

End of Year – Average Performance: The chair evaluates the Assistant Professor as having been average in production and quality of work and as such as having met expectations for the year. The chair approves the base salary at the current rate of $80,000 plus the university salary recommendation of up to a 2% increase in compensation for faculty for a new base salary of $81,600.

            Component 1 – Core: $50,000

            Component 2 – Variable:  $31,600

End-of-Year—Unproductive Performance: The chair evaluates the Assistant Professor as unproductive, not producing quality work, and not meeting expectations to a substantial degree. The chair requests a 10% decrease in the base salary. The new base is $72,000.

            Component 1 – Core:  $50,000

            Component 2 – Variable:  $22,000

Back to top

History

1. fap-adm-0015, 14 April 2001, first approved policy.
2. Policy revised and approved by IU School of Medicine Executive Committee on 13 May 2013.
3. Policy updated to reflect policy template and change in administrative titles on 26 August 2025.

Back to top