Welcome to the Winner’s Circle! Trends in Healthcare Compensation Arkansas Healthcare Human Resources Association April 1, 2016

2 Overview The Secret to Making Compensation Plans: Quick and easy to update Easy to administer Internally equitable Externally competitive Affordable for your hospital

3 Amazing Secrets The Secret to Losing 10 Pounds this Week Without Diet or Exercise!

4 Amazing Secrets The Secret to Feeling Totally Rested & Alert On 3 Hours Sleep a Night!

5 Amazing Secrets The Secret to Leading a Perfectly Organized Life!

6 The Simple Truth There Is No One Secret! No Easy Way!

7 The Simple Truth No Secret Lets You Avoid The Work

8 Simple Truth Takes HARD Work to Be A Winner

9 Compensation Programs Are No Different The Satisfying Work of HR Champions Analyzing Compensation Structures Determining Best Data to Utilize Dissecting Causes of High Turnover

10 Analyzing Compensation Structures Issues That Surface Pay compression Internal Equity Market competitiveness Complexity of compensation programs Perception by employees Turnover

11 Issues Are Not Unique Many healthcare organizations have seen very low pay increases in the last seven years – now we’re seeing some rather aggressively catching up. ACA requiring substantial time from HR departments. Other issues are coming down the road: o FLSA changes ($23,660 threshold to $50, 440) o Minimum wage increases (1/1/17 AR to $8.50)

12 What Can Be Done? A top to bottom review of your compensation program every 3 to 4 years. Market price at least 70 – 75% of your jobs Update pay structure(s) based on market analysis Analyze each employees placement in a pay grade and their position in it

13 Monitor Between Reviews Between comprehensive reviews, actively monitor and take appropriate action in these areas: Hire-On Rates Market Competitiveness Internal Equity Compensation Program Complexity Pay Administration Pay Increases Leadership Communication Transparency Perceptions

14 Hire-On Rates Years of experience How does it fit with current employees? Typically, pay compression is the biggest problem with hiring. Even in a pay freeze, organizations tend to hire at competitive rates. Current employees fall behind.

15 Market Competitiveness Is your organization ahead of the market? Sometimes organizations are paying more competitively than the market Is your organization falling behind? How far? Pay now or pay later

16 Employees Not As Patient “I’ll gladly pay you Tuesday for a hamburger today.” –Wimpy Wellington

17 External Competitiveness Market Median 75th Percentile of Market 25th Percentile of Market Current Salaries

18 External Competitiveness Market Median 75th Percentile of Market 25th Percentile of Market

19 AHA Survey Data Let’s look at the data points and what they mean.

20 AHA Survey Data All of these numbers come from actual pay.

21 AHA Survey Data

22 AHA Survey Data These numbers are guidelines, NOT pay rates.

23 Market Competitiveness Market adjustments Monitoring hot jobs Word on the street Metrics Turnover rates Compa-ratios

24 Turnover Rates Comes from different places: It’s not always market competitiveness. Can see years of experience affect things. It can be the speed at which employees move through the ranges. It can actually be the design or the administration of the plan.

25 Compa-Ratio Overall Compa-Ratio for the position is 102.4% Job TitleCompa-Ratio Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist % Radiology Technologist %

26 Complexity of Compensation Program Quick Fixes Create Long-Term Issues Creating a new job level (Pharmacy Tech 1 – 3) Adding a new pay grade Developing a new pay structure for a job family or facility Job offers Fixing trouble-spots on a regular basis creates a reactionary system

27 Pay Administration How quickly are employees moving through the ranges? Are experienced, fully proficient employees close to the range midpoint? How are you handling employees above the range maximum? Are you adjusting your ranges for market movement on annual basis between comprehensive compensation program updates?

28 Typical Range Placement Employee A, hired 2 years ago with 0 years of relevant experience when hired, solid performer Employee B, hired 8 years ago with 0 years of relevant experience when hired, solid performer Employee C, hired 20 years ago with 0 years of relevant experience when hired, solid performer Range MinimumRange Maximum Range Midpoint (Market Median) 95% 100%105% 120% 80% Employee B Base Pay Employee A Base Pay 85% 90% 110% 115% Employee C Base Pay

29 Pay Increases How are they awarded? Across the board Based on years of experience Merit matrix

30 Leadership Communication What you need to be communicating: Market competitiveness of organization Entire organization Potential trouble areas Employees perception of compensation Business case for pay increase budget, market adjustments

31 Transparency How well do your managers and employees understand your compensation program? They do not need to understand all of the details. Employees need to know enough to believe it is fair.

32 Perception Even market competitive salaries are looked at negatively without an annual pay increase. Employees begin to feel like the organization does not value their contribution.

33 Staying on Top of Compensation Difficulties will come and tough decisions will need to be made. Strategically positioning your compensation program will mean your organization is better prepared when difficulties occur and you will not be in a reactionary mode.

34 Questions If you have questions or need to discuss your compensation programs, contact: Theresa M. Worman