Practice pointers: Staff pay policies that work

July 25, 2003

A consultant offers practical advice on making tricky payroll decisions--including a pay scale RVU.

 

PRACTICE POINTERS

Staff pay policies that work

Jump to:Choose article section... How RVUs can help you calculate pay But how do you deal with raises? Hand out a year-end benefits statement

A consultant offers practical advice on making tricky payroll decisions— including a pay scale RVU.

By Jeffrey J. Denning

Paying employees fairly sometimes seems like a no-win proposition. If employees are underpaid, you won't keep the good ones for long. And if you err on the side of generosity, you waste money.

To get the best employees, you have to offer competitive pay, benefits, and working conditions. So, it's a good idea to survey your community to be sure you're offering a reasonable pay package. But you don't need to be the compensation leader if your office is considered a better-than-average place to work.

We generally recommend that practices aim to pay in the 75th to 90th percentile for like jobs. That means that 75 to 90 percent of workers with the same job in your community will be paid less than the ones in your office. Of course, that assumes two important stipulations: that working conditions are no worse than average in your office, and that your workers are B+ or better employees.

A wage survey of your community will tell you what others are paying for similar job titles. Be sure to compare like jobs, though. RNs in nursing homes earn more than RNs in medical practices. And a receptionist in an advertising agency is paid mostly for her appearance, not her skills on the phone. Also, beware of using wages from employers outside your immediate driving radius. Wage rates are very locality sensitive.

Don't know where to get reliable wage rate information? Try the Medical Group Management Association. State and local MGMA chapters compile this information from their members. (To find your state chapter, check www.mgma.com/about/stateweb.cfm.) Sometimes the medical staff liaison at your hospitals have the information or can point you to a good local source. It's also a good idea to try the county or state medical society. Employment and temporary help agencies are sometimes helpful, too.

But if you just can't find good wage and salary information, you may need to take the lead and compile it yourself. It's a way of doing something useful for the medical community, and it might generate some goodwill with referral sources—and potential new ones. Once you collect the information, distribute it to all who participated in your survey. You might even include practices that didn't participate in this first round of the project, to show them the value of helping you next time.

How RVUs can help you calculate pay

If you have trouble coming up with good survey data, though, you may be able to use a relative value scale approach. For years, we've compiled salary survey data from several regions around the country and dumped them in our great data processing maw to come up with this schedule of relative values for various job titles (see "Using RVUs to calculate wages").

This scale assumes the receptionist's job is worth 1.00 "compensation unit." A nurse practitioner is worth 2.88 units. This just means that NPs in medical practices are making nearly three times as much as receptionists.

To use this idea in your office, list your employees, their job titles and the corresponding relative values from our scale. Then compute your internal relative values by dividing each employee's hourly rate by your receptionist's hourly rate. If a full-time employee is paid a salary, convert to the hourly equivalent by dividing the annual salary by 2,080 hours (52 weeks x 40 hours). Prorate for salaried workers of less than 40 hours per week. Where your internally computed relative value is greater than ours for the same job title, there's a chance that your receptionist is paid too little or the other jobs are paid too much.

But how do you deal with raises?

Wage inflation has been fairly flat in recent years. Last year, for instance, the general Consumer Price Index went up only 2.4 percent and, in many areas, wages went up even less. So the raises your people earn should be mostly for improved value to the practice, not for cost of living.

That implies an organized way of deciding whether performance has improved. Employees who are good workers this year but who aren't materially more valuable than last year shouldn't be earning much more in 2003. And it may be necessary to bypass raises for workers who are being paid above the market rate for their jobs.

No matter how carefully you prepare for fair and reasonable pay raises for your staff, some of them may be disappointed. Most mature workers understand the ways of the business world. Others have an imperfect understanding of what their job is really worth. That's why educating employees about the economic realities of the workplace is so important for practice owners.

It's best to take the initiative in your compensation reviews, even if there are going to be no raises. You need to let every employee know how carefully you consider wages every year. Hold private interviews with each employee where you restate the main points of your prior performance reviews and how your worker's progress—or lack of it—influenced your thinking about the base pay rate for the next year.

This policy is far better than responding to employee requests for raises when you're unprepared. If workers come to you at some other time, remind them of your personnel policy, which tells them when pay reviews are done: "As you know, I do wage and salary reviews in December unless someone's job changes. I'll be happy to discuss this with you then."

Hand out a year-end benefits statement

We recommend that doctors provide employees with a summary of the total economic value of their jobs, especially if you provide costly benefits like generous time off with pay, a retirement plan, and health insurance.

Our recap sheet (below) breaks down the gross wage, showing pay for time not worked. That includes all types of paid time off like holidays, vacations, personal days, and sick leave. It's pretty easy to figure paid leave as a percentage of total pay by counting the days off and dividing by 260. (That's 52 five-day weeks. For half-time workers, prorate the year by dividing 260 in half.) Most employees don't appreciate the value of getting paid for not working. This can give them a sense of what this benefit costs you and is worth to them.

List all the other benefits, such as your share of the matching contributions to Social Security and Medicare, payroll taxes you pay for their benefit, and insurance premiums. If you provide parking at an extra cost, list it along with mileage reimbursements, uniform allowances, child care—anything that makes your job more appealing than other places your employee could work. And don't be bashful about listing workshops, seminars, books, tapes, and other training and self-improvement benefits. Sure, they benefit the practice. But the employee benefits from these new skills, too, becoming more versatile and valuable in the process.

 

Using RVUs to calculate wages

Job titleMedian hourly wage (2002)Relative value
Administrator$36.933.11
Physician assistant36.653.09
Nurse practitioner34.102.88
Ultrasound tech26.292.22
Office manager23.111.95
Registered nurse22.891.93
Business office manager22.261.88
Satellite manager22.191.87
Insurance supervisor18.471.56
X-ray tech (reg/cert)18.231.54
Lab tech—registered17.651.49
Admin. assistant /exec. secretary16.671.41
LVN/LPN16.421.38
Credit/collections supervisor16.091.36
Medical records supervisor15.451.30
Administrative secretary15.171.28
Bookkeeper15.091.27
Coder14.741.24
Medical transcriber14.181.20
Insurance claims clerk13.081.10
Credit/collections clerk13.051.10
Medical assistant12.791.08
Patient account representative12.771.08
Appointment clerk12.521.06
Front-desk combination12.221.03
Cashier12.131.02
Phlebotomist11.921.01
Receptionist11.861.00
Data entry clerk11.680.98
Registration clerk11.240.95
Switchboard operator11.080.93
Clerk9.980.84
Medical records clerk9.360.79
 

Year-end benefits statement

Annual employee compensation report

Time worked$24,547
Time not worked2,493
 $27,040
Employer's contribution to Social Security$1,676
Employer's contribution to Medicare392
State unemployment insurance premium66
Workers' compensation insurance premium196
Health insurance premium2,900
Free health care660
Pension plan contribution2,704
Profit sharing plan contribution4,056
Uniforms370
Training420
Parking650
Total benefits$14,090
Our total investment in you:$41,130

 

 
The author is a management consultant with the Practice Performance Group, a practice management consulting firm in La Jolla, CA. This article is adapted from the firm's newsletter, UnCommon Sense.

 

Jeffrey Denning. Practice pointers: Staff pay policies that work. Medical Economics Jul. 25, 2003;80:25.