Five Ways Compensation Planning Can Improve Healthcare Employee Retention
December 09, 2015
For most healthcare organizations, their greatest expense—and greatest differentiator—is their employees. Numerous studies have shown that a competent, tenured workforce is key to achieving positive outcomes and providing a superior patient experience. Conversely, performance can be jeopardized when employee turnover is high. Yet, turnover rates in the healthcare industry continue to rise, fueling increasing anxiety about the quality of care that is being provided. In this paper, we look at the role compensation can play in supporting employee retention and suggest ways healthcare organizations can use a strong compensation strategy to reduce employee turnover.
The Rising Cost of Employee Turnover
Healthcare turnover rates have increased steadily over the past five years. The current rate is now 17.2%, up from 13.5% in 2011. Moreover, the average time to recruit an experienced RN ranges from 53 to 110 days, up dramatically from 36 to 97 days in 2014. With the average cost of turnover for a bedside RN ranging from $36,900 - $57,300, the typical hospital is losing $4.9M - $7.6M annually. These staggering numbers cost the industry billions in hard costs every year in lost productivity, hiring costs, and training costs—not to mention the indirect effects on quality of care, employee morale, patient experience, increased workloads, etc.
Compensation Can Influence Turnover
The good news is that there are actions healthcare organizations can take to improve employee turnover, and the incentive to improve is high. At current rates, each percentage drop in RN turnover will save the average hospital $379,500. According to a 2015 survey conducted by NSI Nursing Solutions, Inc., salary is mentioned as one of the Top 5 Reasons healthcare workers voluntarily resign. It is ranked fourth, along with:
• Personal reasons
• Career advancement
This finding is corroborated by a recent study of healthcare workers conducted by CareerBuilder which shows that “poor salary” is tied with “work overload” as the second biggest challenge employees face in their current healthcare organization.
A Strong Compensation Strategy Can Help
In today’s environment, compensation planning is no longer just about making sure everyone is paid correctly (although that is still important); it is a tool that can be used to dramatically improve retention using many of the systems your organization may already have in place. In this report, we’ll share 5 ways healthcare providers can better utilize their compensation planning to improve employee retention, including:
1. Define Your Compensation Strategy
2. Identify Your Critical Healthcare Talent
3. Build a Pay for Performance Model
4. Pay Competitively. Pay Appropriately. Pay Accurately.
5. Create a Compensation Communication Plan