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Good afternoon,

The 2022 North Carolina State Budget provided an opportunity for UNC System campuses to implement Labor Market Adjustment Reserve increases for SHRA and EHRA Non-Faculty employees and discretionary, one-time bonuses for EHRA employees based on the 2021-2022 performance cycle. This memo outlines the implementation instructions for each provision.

This opportunity allows us to consider two compensation options for our permanent employees:

  1. Recurring base salary adjustment
    This adjustment is available for both SHRA and EHRA Non-Faculty employees but is based on market rates and is limited in scope. It comes with funding, but full implementation may also require departments to invest additional funds for positions funded fully or partially by non-state funds. We have done the initial analysis for eligibility and projected costs, and now units have some decisions to make:

    1. Will your unit implement the recommended increases we have calculated using the allocated funds?
    2. Will your unit subsidize these increases for non-state funded positions?
    3. How much is your unit able to subsidize?


  2. One-time bonus
    This option is for EHRA (faculty and non-faculty) employees only and is not funded. There are rules associated with implementation, but the key consideration is that the bonus is performance-based, relying on the 2021-2022 performance cycle.

As you consider the utility of both tools, you must evaluate your capacity to support these compensation options within your existing budget. You will not be provided with additional resources beyond what has been allocated by the legislature from the center to support any adjustments, nor will new funds from the center be added to your future budget to support any recurring commitments made as part of this process.

Basic Eligibility Requirements
The basic eligibility requirements for the LMAR and the EHRA discretionary one-time bonuses are as follows:

  • Eligible employees must have been in a permanent, benefits-eligible part- or full-time position as of June 30, 2022.
  • EHRA employees subject to special compensation plans are excluded from the compensation options and instead are subject to the provisions of these plans with respect to annual compensation adjustments.
  • Temporary, student, and graduate student employees are excluded from the compensation options.
  • For employees who have received a 2021-2022 performance review, the rating must be “Meets Expectations” or greater to qualify for either compensation option.
  • If an employee was not eligible to receive a 2021-2022 performance review due to start date (SHRA or EHRA Non-Faculty) or is an EHRA faculty or EHRA Non-Faculty employee exempt from Section 300.2.18[R] of the UNC Policy Manual, the employee must be deemed in “good standing” by their Department Head to participate in either compensation option.
    • “Good standing” means that an employee is not suspended with or without pay, does not have an active SHRA disciplinary action, is not in receipt of or planned to receive a notice of termination for cause, is not in receipt of an EHRA Non-Faculty performance improvement plan or written counseling memorandum.
    • In the case of faculty eligibility for the EHRA discretionary one-time bonuses, “good standing” means the faculty member has not received an unsatisfactory post-tenure review as of their latest review cycle.
  • Any employee who has received notice of an EHRA end of at-will appointment or EHRA notice of non-reappointment is not eligible for either compensation option.

Labor Market Adjustment Reserve (LMAR)

Criteria & Instructions
Section 39.2 of the 2022 Appropriations Act (S.L. 2022-74) funded a Labor Market Adjustment Reserve (LMAR) equal to one percent (1%) of each institution’s state-appropriated salaries and associated benefits.

LMAR adjustments are intended to address salary compression and other critical labor market needs to equip the institution to better retain talent among our SHRA and EHRA Non-Faculty workforce, including to address:

  • Increasing salaries that are below the minimum of the assigned salary range.
  • Increasing salaries that are below the midpoint or market rate of the salary range.
  • Increasing salaries to address salary compression or salary inequity issues.
  • Increasing salaries to address classifications with higher turnover or vacancy rates.
  • Other market-related reasons for salary increases.

Eligible Positions: LMAR funding will provide base salary increases for permanent employees, including time-limited positions. Funds also may be allocated to currently vacant budgeted permanent positions. LMAR actions for employees currently on leave without pay cannot be processed until the employee has returned from leave.

Limits on LMAR Increases: LMAR increases:

  • Are intended to target employees whose annual base salary is $125,000 or less.
  • Cannot exceed the greater of fifteen thousand dollars ($15,000) or fifteen percent (15%) of base salary as of the effective date of the adjustment.
  • Cannot result in a salary exceeding the maximum of the salary range associated with the position or, for SHRA employees, the market rate of the next-higher competency level.
  • Cannot be used for non-salary actions, such as sign-on bonuses, retention bonuses, or supplemental pay, in accordance with the 2022 Appropriations Act states that institutions must use LMAR funds for “salary adjustments.”

Effective Date: LMAR increases will be implemented using a current effective date in the December 2022 payrolls.

Additional Approvals: We must still obtain pre-approval for any LMAR adjustment amount that requires higher-level UNC System pre-approval under regular salary administration procedures from the Board of Trustees, the President, or the Board of Governors.

Funding Requirements: The state funds allocated to each institution for the LMAR increases can only be applied to employee salaries or position vacancies based on the proportion of that salary that was state funded as of July 1, 2022. The application of an LMAR increase cannot change the proportion of the salary that is paid by state funds, so an LMAR increase for a split-funded salary or vacancy must include a correspondingly proportional increase from non-state funds.

Although employees not on state funds cannot receive the LMAR allocation of state funds, campus units may provide comparable increases under this program for positions on non-state funds. This is also true for vacant positions not on state funds. This functions similarly to budget allocations for legislative salary increases.

Additionally, any increases provided through this exercise for employees in positions that are funded in full or in part by non-state funds, the non-state portion must be funded from your area’s current budget. No additional central funds will be provided.

LMAR Action Items: The Office of Human Resources will be sending each campus unit a spreadsheet that identifies which employees or positions will receive LMAR-related adjustments based on identified labor market needs. Spreadsheets will be sorted by job classification and competency level or job category.

We have generally established a market index floor of 90% for both SHRA and EHRA Non-Faculty employees and have indicated the increase amount required to bring employees in your area up to that floor. We are also including a list of your area’s currently vacant positions along with the planned budget and last incumbent salary listed in ConnectCarolina, if present. We are asking you to:

  1. Review the spreadsheet to assess the potential cost to your budgets for employees and positions that are partially, or fully non-state funded. For each eligible employee, the spreadsheet will indicate the amounts required from state funds provided through the LMAR funding and non-state funds provided from your unit’s budget.
  2. Work with your executive leadership to determine what job classifications (to the competency level) and job categories by group your budget will allow you to address.
  3. Indicate on the “Decision” tab of the spreadsheet which groups you wish increases to be implemented for by selecting the “YES” indicator on the row for each group.
  4. If you have a particular job group where you have experienced higher than normal levels of turnover or difficulty in recruiting that may warrant consideration of a higher market index target, please contact your Class & Comp Analyst or EHRA HR Analyst as appropriate no later than Friday, Nov. 11, to discuss.
  5. Return the spreadsheets to by Nov. 28, 2022.

Due to potential equity concerns and compression that may be created as a result, you may not pick individual employees from within groups of similarly classified jobs to receive an increase. Increases will need to be provided to similarly classified groups in order maintain equity amongst that group within your area.

Non-Base Salary One-Time Bonus Opportunity for EHRA Employees

Criteria & Instructions
Departments may consider non-base salary one-time bonuses for EHRA employees as part of the ARP process for fiscal year 2022-23. Bonuses should be based on the overall performance rating assigned during the 2021-2022 performance cycle. As such, eligible EHRA employees may be considered for a one-time bonus opportunity not to exceed 5% of their June 30, 2022 base salary. This bonus opportunity is not supported by additional central funds and must be funded by existing campus unit funding sources.

The bonus opportunity is calculated against the June 30 base salary within the above noted limit and will not change recurring base salary. These non-base salary one-time bonuses for EHRA employees are subject to retirement contributions to either the Teachers’ and State Employee’s Retirement System or the UNC Optional Retirement Program.

The purpose of the bonus program is to recognize meritorious performance and to maximize the retention of high-performing talent. There is no automatic employee entitlement to this bonus opportunity, and it is granted at the discretion of management. Employees who receive an LMAR increase may also be considered for a bonus under this provision.

While this bonus opportunity for EHRA employees is limited to the upcoming ARP, note that we anticipate that we will be launching an ongoing non-base salary bonus program for EHRA employees that will be similar to the currently available SHRA bonus program. This program is still in development and is based on newly granted authorities by the Board of Governors and our Board of Trustees. More details to come.

EHRA Bonus Action Items:

  1. On the “Bonus” tab of the spreadsheets, please indicate the bonus amount you wish to provide for any EHRA employees. The spreadsheet will calculate the percentage to ensure the 5% cap is not exceeded.
  2. As you determine bonus amounts, it is important to remain consistent in your approach to determining which employees will receive bonuses and in what amounts.
  3. Return the spreadsheet to by Nov. 21, 2022.

Payment Schedule

For biweekly paid employees, LMAR salary adjustments will be included in the Dec. 16, 2022 paycheck. For monthly paid employees, this will occur in the Dec. 23, 2022 paycheck. Additionally, EHRA employees receiving discretionary one-time bonus payments will be paid in the Dec. 23, 2022 check.


Please note that Rich Arnold will host office hours over Zoom during the following times to answer questions about how to complete the spreadsheets. Click the date below to access the Zoom link for each meeting. Please note that separate calendar invites will not be sent for these sessions.
Tuesday, Nov. 8 | 1 – 2 p.m.
Thursday, Nov. 10 | 10 – 11 a.m.

Additionally, we will devote time in Monday’s (Nov. 14) HR Council meeting to review these compensation options and answer questions.

For questions concerning specific scenarios/employee groups, please contact your assigned Classification and Compensation Analyst or your assigned EHRA HR Consultant.

Thank you,

Becci Menghini
Vice Chancellor of Human Resources and Equal Opportunity and Compliance


Categories: HRO
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