Tips for setting salaries and dealing with raise requests at your practice

February 24, 2014

Staff salaries are among a practice’s largest expenses. These tips will help practice managers fine-tune their pay scales and build merit into their compensation plans.

 

Keith Borglum, CHBCIt is often difficult to determine how much to pay a particular staff person, and how much to pay them in relation to other staff in the office. This difficulty can be compounded by many factors.

Both employers and employees sometimes confuse salary and wages. Salaries are fixed amounts of pay per month. A wage is an hourly dollar amount. Most full-time staff work 2,000-2,200 hours per year. When paying a salary, you would think that you have a dependable, fixed amount for your budget, but that’s often not the case depending on the job description and the laws of your state. And job descriptions and laws are commonly in flux.

Many states have laws about which staff can be on a fixed salary. Often, salaried staff have to be either licensed personnel using their licensed skills more than 50% of the time on their job, or managers supervising at least five persons whose jobs the manager does not perform.

It can be tricky. Is your RN actually doing tasks requiring an RN license, or is s/he acting primarily in the role of a unlicensed medical assistant more than half time? Or do they spend time as a manager? If your office manager is managing five other staff, and you do a “reduction in force” by one person, what do you do? In both of these cases, you might need to be paying overtime wages, whether or not these persons are salaried.

Salaried-staff are often due overtime wages by law if overtime is worked. Just putting them on a fixed salary does not circumvent the labor laws of your state. These are questions best answered by a labor attorney in your state, or more cost-effectively by just reading the employer guides provided free by your state Labor Board, Chamber of Commerce, or private vendors.

Factors affecting pay

Practices in high cost of living and urban locations often need to pay more to attract good staff than do practices in suburban locations.

 

Practices in rural locations may pay more or less depending on the availability of staff; since in some locations there is a commuting population that may accept less pay for a local job. In other rural locations a practice may need to pay more to attract staff from urban or suburban centers due to a lack of local qualified staff. Local or regional unemployment can be a big factor in any setting, as can the closure of a hospital.

The skills of individual team members can also affect compensation. Of course licensure has an effect but so does experience and on-the-job skills. “Time-in-grade”-or how long the person has been employed in the practice-also has some impact, even though it often shouldn’t; since doing a job badly for a long time rarely results in decreasing pay.

Dealing with raise requests

Staff often have unrealistic expectations about earning capacity and wages. 

A staff member might have heard others bragging about their wages. Your worker mentally converts that top decile into a belief that it represents the median. Then the person comes to you and says: “Dr. Newguy’s medical assistants are getting $18 per hour, and I’m only getting $12 per hour, so I deserve a raise or I quit.”

Do you give it? What if Newguy is a cosmetic dermatologist and you are a primary care practice? Budgets differ. What if Newguy is the biggest jerk in town, and the only way he can keep staff is to grossly overpay? Do you still try to compete on pay with Newguy?

Rather than just acquiescing to the raise, or denying it outright, the following response might be more fruitful: “I’m willing to consider a raise if I am underpaying. Lets try to find some statistically relevant data on compensation and benefits over the next week or so, and meet again next Wednesday to discuss it.”

Then go find the data. This is highly educational for both staff and the boss. Maybe you are underpaying, and if you don’t come up to market rates, you’ll lose good team members.

There are a number of free resources online to help find the pay rates in your community, or you can refer to local studies or purchased reports. I prefer Salary.com because it graphically displays data by zip code, and as a curve, and is easily understood. Some of the medical-specialist accounting and consulting firms whose members belong to the National Society of Certified Healthcare Business Consultants perform annual local studies in their communities that are available to clients or for a fee. Those studies also often  provide detailed job descriptions to which you can compare. Don’t make the mistake, though, of misapplying the data. A registered nurse working as a medical assistant should be paid as an MA, not as an RN.

Merit and productivity

If a raise is indicated, try to tie it to a merit or productivity bonus rather than a wage.

A merit bonus might be, “If you become a certified medical assistant, I’ll pay for half the schooling and give you a $5,000 per year raise when you graduate.” Note that $5,000 per year sounds like a lot more than the $2.50 per hour it represents.

 

A productivity bonus might be, if you are seeing 18-20 patients a day, and have capacity for 22 patients per day, tell your staff that every day the practice sees 22 patients, each staff person gets a $10 bonus. Like magic, you will be seeing 22 patients per day, paying some bonuses, but your productivity and profitability will increase.

Staff happiness and raises

The issue may not really be about dollars.

The primary way workers express their unhappiness is through requests for raises. Studies have found that employees who threaten quitting as a tactic to get a raise often end up quitting within 6 months anyway. Happy staff stay on the job, often even at lower pay. If you have lots of turnovers or raise requests, try finding out what might be making your staff unhappy, and fix it.

You might then save a few dollars, and end up with a happier place to work.

Three steps to controlling staff costs:

 

1. Establish a budget

The first step is to look at benchmark data for practices that are similar to yours. According to the National Society of Certified Healthcare Business Consultants, median staffing for solo and small primary care practices is three to four full-time equivalent support staff per doctor, presuming no nonphysician providers or ancillary services and approximately 20 to 25 patient office visits per day. The budget for this level of staffing typically is about 20% to 24% of gross collections.

2. Adjust for your practice

Determine the proper staff size for your practice by adjusting the benchmarks you find for staff count and costs to account for any special circumstances related to your practice, such as staff productivity, payer mix, capitation payments, use of quality measures, and local wage levels. Once you have tailored the benchmarks to suit your circumstances, you will have a custom benchmark that you can use to evaluate staff costs and easily can update it annually to compare with the national surveys.

3. Obtain staff input

Discuss your findings with your staff members and solicit their input for staying within budget, then review the data monthly. The benefit of investing in the effort of budgeting, just as it is in investing in other good practice-management behavior, is a flowing, more profitable, and less stressful practice.

x