How to move from playing defense in compensation discussions to playing offense
As a physician-owner or leader in an ophthalmology practice, are you having difficulty managing employee wages? If your answer is yes, you are not alone. Staffing issues are a significant problem in the health-care industry. These issues have led to high employee turnover rates, with hospital turnover hitting an all-time high of 100.5% in the past 5 years.1 The staffing crisis has created critical shortages in clinical positions, affecting patient access and efficiency in our ophthalmic practices. Furthermore, with a low unemployment rate of 3.9% and a 12-month inflation rate of 3.2% in all cost categories,2 fewer qualified candidates are willing to work in health care.
Considering these challenges, BSM Consulting has updated its staffing cost benchmarks. For instance, our payroll ratio shows that employee gross wages have increased to 25%–30% of net collections (up 5% respectively).3 If you want to understand the total employee costs, including benefits such as health insurance, 401Ks, and PTO, we typically see 30%–37% of net collections for total employee compensation.3
With a decrease in reimbursement for professional fees, how can practices move from playing “defense” in wage discussions to playing “offense” in the compensation war? It’s time to start thinking more strategically about wages. Here are our top five considerations for designing your strategy.
1. Focus on culture
It’s important to remember that having a positive practice culture is crucial in retaining employees, no matter their salary. Employee satisfaction data consistently shows that poor morale, stressful working conditions, lack of motivation and low wages are the top reasons for disengagement. While compensation may not seem directly related to culture, research by the Queen’s School of Business and the Gallup organization has found that businesses with low employee engagement are more likely to have 37% higher absenteeism, 18% lower productivity and 16% lower profitability.4
In other words, offering high pay is not enough to retain employees. Most staff members want to work in an environment where they know their purpose, feel positive about their work and have clear communication with physicians and managers.
2. Consult industry wage data
When addressing salary questions or demands from current and potential employees, consult industry wage data. It can be overwhelming to negotiate salaries, but it is essential to understand historical benchmarks and to have a baseline for where the wages in your practices should be. Ophthalmology has enjoyed ophthalmic-specific wage ranges through a free salary survey published by AAO and the Outpatient Ophthalmic Surgery Society (OOSS).5
Additionally, the Healthcare Group also publishes ophthalmic wage data for purchase.6 The American Society of Ophthalmic Administrators is launching a new staff salary survey in May 2024.7 There is concern that some legacy salary surveys could be discontinued due to a lack of participation. Participating in salary surveys is crucial to ensure the entire industry has baseline data to compare within practices.
When reviewing salary data, match job descriptions and select the employee’s experience. If an employee works in multiple positions, choose the position that would be the most difficult for you to replace. Once you select those data sets, review the number or count of practices reporting information and look at the range from the 10th to the 90th percentiles (Figures 1 and 2).
3. Consider regional adjustments and inflation
When analyzing wage scales or industry benchmarks, remember that the wage data is usually published retrospectively. Consequently, some businesses may require assistance to keep up with the current inflation rate and adjust to the cost of living in their region (Figure 3). For instance, the cost of living in a central metropolitan area could be higher than the national wages, while the expenses in a rural town could be lower than the national average.
Additionally, some states and cities have increased their minimum wage, such as California, which has set the minimum wage at $16.00 for all employers starting Jan. 1, 2024. California fast-food restaurant employers must pay a higher minimum wage of $20.00 per hour, effective April 1, 2024, and health-care facility employees working in organizations with fewer than 10,000 employees will earn $21.00 on June 1, 2024, with scheduled increases through 2028.8
Incorporating regional adjustments and inflation into employee wages can be challenging, especially when competing for top talent in your area. However, it’s fundamental to consider these factors to ensure your employees are paid fairly. When possible, consult wage changes through the Department of Labor and inflation trends for your geography. Use an inflation modifier across your wage scales if you need to adjust salaries to align with housing and grocery expenses (eg, raise wages by 5%).
4. Evaluate pay transparency
Determining whether to publish employee wage scales is a complex decision that requires careful consideration of several factors. While some practices choose to publish salary data, believing that “Employees are going to talk anyway, so why not put it out there?” it is key first to establish a wage scale, clarify how the wage ranges were set and determine how wages will be communicated to employees.
Additionally, it is crucial to ensure the pay scale is fair and equitable across different positions, with a clearly defined pathway for advancement and promotions. Sharing salary ranges can foster a culture of clear communication, increase employee satisfaction and improve retention rates. However, it is necessary to be sensitive to how staff may react to this information and to follow up directly with employees, gathering feedback about their perceptions of pay fairness and adjusting the program as needed.
5. Align performance with pay
Many organizations base pay increases on seniority or length of service. However, a strategic approach that rewards high performers based on their core competencies is worth considering. A performance-based approach can attract and retain employees who prioritize excellence, maintain a positive attitude and actively seek ways to support their patients and colleagues. To achieve this, it is essential to define and publish the core values that your organization rewards.
Also, implementing an employee incentive plan that aligns a bonus with the success and profitability of the organization can be an effective way to enhance pay while improving overall performance. High-performing employees can then enjoy a higher return from the bonus program, further incentivizing them to continue their exceptional work.
But culture comes first
To succeed in the long run, employers must focus on more than just salaries. It’s crucial to place a greater emphasis on creating a positive company culture. Once a positive culture is established, employers can then determine how to structure their wage scales, set salary ranges appropriate for their region, decide whether to publish those ranges, and develop bonuses and merit increases for their top performers. By creating a happy and productive team, employers will be better positioned to achieve success and retain employees. OM
References
1. NSI National Health Care Retention Report. NSI Nursing Solutions. Accessed April 19, 2024.
2. Bureau of Labor Statistics. https://www.bls.gov/opub/ted/2024/unemploy
ment-rate-at-3-9-percent-in-february-
2024.htm. Accessed April 19, 2024.
3. BSM Consulting, which works with ophthalmic practices throughout the US, developed the benchmark range amounts. The healthy ranges are based on results between the 25th and 75th percentile rankings. Please note that practices vary in the nature of services provided; we encourage practices to view the report results and benchmark comparisons as directional in nature.
4. Harvard Business Review. Proof That Positive Work Cultures Are More Productive. December 2015. https://tinyurl.com/256786sj. Accessed April 11, 2024.
5. Ophthalmology Practice Salary Survey 2021. BSM Consulting. https://aao-ooss-salarysurvey.bsmconsulting.com/login?next=%2F. Accessed April 11, 2024.
6. Healthcare Group. 2023 Ophthalmology Staff Salary Survey Summary Report. www.healthcaregroup.com. Accessed April 19, 2024.
7. ASOA Compensation Survey. https://asoa.org/membership/asoa-compensation-survey. Accessed May 30, 2024.
8. New California law pushes health care workers’ minimum wage to $25 per hour. Human Resources Director. Oct. 16, 2023. https://tinyurl.com/4b47p8ez. Accessed April 19, 2024.
