Healthcare Compensation - More Politics?


It never ceases to amaze me that a hospital will not pay someone $2.00 per hour more in order to fill a vacancy that is costing them $80 per hour in contract labor. If the hospital CFO was making this decision, would this be the one he/she would make? Unfortunately, many times the person making the decision on what to pay has no skin in the game. Meaning, if HR does not agree to pay a Physical Therapist $35/hr instead of $33/hr, who's production does it affect? My guess is that the Physical Therapy Department will suffer from the decision. Therefore, shouldn't the Director of Physical Therapy or Rehab make the final call?

This frustration stems from countless examples of HR Departments not paying (or being unable to pay) the market rate for a candidate. Some positions remain vacant for months because many hospitals are not keeping pace with competing markets that drive up healthcare wages. By the way, when you look at adjusting wages, look at pay rates in ALL MARKETS, not just your state.

As a recruiter, we are faced with this situation daily. Human Resources tells us that they can only pay a certified healthcare professional $30/hr, even though the person has the experience to expect $35/hr. Yes, internal equity matters. But so does filling a position that's been vacant for 6 months and where you have a temp that's charging you twice the rate. Furthermore, what is it costing you NOT to fill the position? Please give me a straight answer. We all know $2.00 per hour annualized is $4,160 per year. But what is it costing you NOT to pay it? Funny, it seems no one wants to answer that question.

Now that I've gone on my rant, let me be clear. This should not be done when you have 15 qualified candidates applying for a job. However, some types of candidates are just hard to find. If you lose a Specialty RN, Physical Therapist or a triple modality Sonographer over 2 bucks an hour, your organization is on the wrong track. You may ruffle a feather or two by doing it, but that's only if someone finds out. If you're like me, you don't run around telling everyone in your department what you make in the first place.

It's simple economics... a calculator, pen and paper. If it makes sense, do it! And apologize later if necessary.

Dale Hannegan
www.radsciences.com
www.mymedport.com

12 comments:

August 12, 2009 at 12:56 PM Brandi Duncan said...

Dan,
Although I do not work in HR for a Hospital, I do work in HR for a Medical Device manufacturer. I feel I need to respond as, most companies I have worked for, the budget to pay a person does not come out of HR. How could a company actually function this way? In my experience, HR is the one who is, most times, frustrated that the hiring manager/department, will not raise the compensation to a market rate. Daily, I have battles with hiring managers regarding the experience they are looking for and the compensation. I tell them flat out, lower the requirements or raise the comp. level until then, I can't recruit for you. The key is to have a VP of HR who is willing to support you in this, and/or the nerve to actually say this to the hiring manager. If no one is willing to speak up, HR will always be sent down a rabbit hole, and then in turn, they will farm this out to a third party (you), because they know it's a waste of time, and then use a standard response like "internal equity".

Sounds like a case of either HR not acting like a strategic partner, or the organization not treating HR like a strategic partner. Either way, it is a tough situation in which to move forward.

Having been a recruiter on the agency side as well as the corporate side, I would just move on from this client. It's a waste of your time.

August 12, 2009 at 5:02 PM Anonymous said...

AMEN DALE!

August 12, 2009 at 5:14 PM Dale Hannegan said...

Brandi,

I guess there is a misunderstanding. The point you are making is exactly what I mean, and you're right it does not make sense. The new hire salary comes out of the departments budget. But HR tells the hiring manager of the department what he/she can pay the new hire. This is almost always the case in a not-for-profit hospital environment.

Dale

August 13, 2009 at 10:07 AM Tim K said...

I both, agree and disagree, with what you're saying.

I agree you have to be competitive with averages. However, I think (actually, I know) you don't have to pay the most.

I disagree you need to consider national wages. Yes, you must be competitive in market ranges for pay but you can be average *for your particular job type and market.*

Something you are overlooking is the impact of other factors. Studies tend to rank pay as 5-7 on a 1-10 scale of importance. The top 1-4 factors usually include non-compensation areas (communication, opportunities, EE-ER relations, etc.)

Creating a culture to be *above average* in those non-compensation areas (opportunity, environment, and duties) will make you an employer of choice while not being tops in pay.

Applied: I am not going to put our agency with 8-5, M-F jobs in competition with pay for graveyard weekend pay ranges. I am certainly not going to compete with CA or NY wages since we're in TX. I will be sure we are competitive in our arena for our type of jobs.

If someone wants to work 12 hour shifts, rotating weekends/holidays, and be treated like a slave for $2 per hour more that's okay. I understand and we'll lose those candidates.

If someone wants to work for a nurse run company that respects them, their skills and their knowledge, and allows them to see their family on weekends/holidays then we're their place. It is about choosing what's important.

If candidates want to live in NY or CA with high state taxes and high costs of living that's okay too. If they want to live in an expanding economy with lower cost of living/taxes then "y'all" come down!

My point: Given reasonable market averages, price is seldom the issue. Knowing what motivates your candidate pool and the benefits a particular place offers will help you place people more.

Places you describe with open jobs over $2 are either not paying market average, are doing a poor job with their non-comp culture or doing a poor job of getting the message out about how great they are to work for.

August 13, 2009 at 4:53 PM Dale Hannegan said...

Good stuff Tim, and I agree. The point I was trying to make was a little different. It's a question of "do you pay someone a little more to to fill a position that is costing you much more because it is vacant?" Absolute economics.. And, who should make that decision?

Otherwise you are right on all counts..

Dale

August 13, 2009 at 5:25 PM tim K said...

Sounds like we're on the same page. Good article in that it provokes a larger discussion.

The way you phrase the question the answer is an obvious "yes" on the surface. At the same time from an HR and financial standpoint I have to wonder:

a. Will this lead to greater upward pressure on overall wages, which may not ratchet back down?
b. Do savings/risks reductions(SUTA, WC, etc.) offset costs (admin fees?)
c. Are there reasons why having the 1099 contracted would be better (flexibility to gear up/gear down?)

IMO - Those questions and answers are best made in a strategic partnership between finance, operations and HR. A good HR partner will seek input from operations on needs, get input on goals from finance, and then discuss the impacts on human capital, the options, risks, and rewards. In the end fully supporting the decision of those with final say.

Again, I think the question presupposes that there is an issue with the wages to begin with. Hence, I agree with your points about fixing the wages but limited only to where they are competitive within the market as defined specifically to geographic area and specific duties.

Thanks again!

August 14, 2009 at 8:22 AM Jonathan Jones said...

$2hr vs $80hr is misleading.This comparision fails to take into account that the $80hr acontract company may charge includes professional liability, unemployment insurance, worker's compensation, benefits, taxes, salary, and sometime's lodging for that contract laborer. I feel both of you should be compairing apples to apples when it comes to cost of contract labor vs paying an internal candidate more to fill vacancies. It has been my experience that companies spend more money on print job postings than they do on contract labor help when trying to fill a position when you consider all these factors.

There is value to having contract labor in these hard to fill positions. It helps worker fatigue by reducing the amount of workload that would typically be shared by everyone else covering that vacancy, it affords the hiring manager time to find someone who is the best qualified, it allows an organization to "try before they buy", and professional recruiter's have the skills to find talent that others cannot.

By
Jonathan Jones Staffing Manager at Medrec, Inc
posted 23 hours ago | Delete

August 14, 2009 at 11:13 AM Dale Hannegan said...

Jonathan,

There is no doubt there is a place for contract staff. I guess maybe a scenario needs to be created before anyone can agree (or not). We also provide the occasional contract service, so I'm aware of the expenses that are incurred. But if a traveler fills a position for 6 months, there is no doubt that hiring an FTE would have been much cheaper. Even after paying the recruitment fee and relocation. As I said, economics. I do not deny the value of temp services, and that was not the point of the article if you re-read it.

Keep up the good work.

Dale

August 18, 2009 at 2:27 PM Jessica said...

I cant agree with you more on this Dale. It happens in Long Term Care as well. You have a Nursing or Therapy Department that is stacked with Agency and Traveling clinicians at double the hourly rate that would be paid to an FTE and no urgency to replace the contract labor with FTE. Some Companies make replacing contract labor such a priority that they give huge incentives to their recruiters to get it done. Then there are companies that see replacing contract labor as running the risk of loosing a great clinician.
I dont understand how they dont see that they can probably fully staff the departments with good LOYAL full time employees if they took those dollars and increased their full time pay to exceed what the rest of their market is offering. Wouldnt this decrease operating expenses significantly? I am pretty inept when it comes to finances but this seems pretty basic to me.

August 20, 2009 at 11:33 AM Dale Hannegan said...

Well at least you agree :) With so many things going on in the department, I see the need for contract labor, and I understand it. However, I just can't understand the decision to continue "bleeding" contract labor dollars when they can seal the deal with an FTE. It is what it is, but it makes all of our jobs more difficult.

Dale

August 21, 2009 at 11:46 AM Derek White said...

If a company could know the future, then it would be an easy decision. In other words, if I could see the future and know that paying an extra two dollers per hour would net me a stable, profitable employee who would be with me for at least 3 years I may just pay the extra money.

What I'm going to struggle with as an employer are these questions:

1) How are my actions going to affect the overall increase in employee compensation? I may be desperate to fill this position, but am I driving the prices up so high that all my subsequent hires are also going to be higher-priced?

2) I may rather want to pay exhorbitant temp rates for a short period than be saddled for a long time with an overpriced employee.

3) If I give in and pay my new hire more, will he/she tell the other employees and create a bad situation?

4) There may be a better deal on a good employee around the next corner.

In my experience recruiters tend to see only their perspective--and they want to make the hire. Afterall, 2 bucks just doesn't seem like too much. But in my company, with 150 employees, every dollar counts. I once had an Aide who was making $8 per hour who asked me for "just one dollar more" for a annual raise. She just couldn't get beyond the fact that all she wanted was a buck. Well, that buck meant she was asking for a 12.5% raise--when 3% to 4% is more standard. I didn't give it to her on principle.

Aferall, if I gave 12.5% raises to all my Aides, it would cost me thousands of dollars more per year.

Just some thoughts.

www.indrehab.com

August 25, 2009 at 10:25 AM Dale Hannegan said...

Good stuff Derek! All to the point.

I'm guessing you are not a recruiter. Nor would you want a recruiter or HR person making the decision on what to pay your staff. Which was my main point. As the department manager, you should be able to decide. If you want to pay a temp for 6-months, you should be able to decide that too. There may be a better employee around the corner, but after 6 month or a year, maybe there is not. If you would have paid the extra in the beginning, you may be way ahead of the game.

Again, you are correct on many points. However, I am talking about the "difficult/critical" position. Nothing else.

I did see a crystal ball for sale on ebay yesterday :) However, the seller said it was broken and was being sold "as is".

Take care, Dale

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