Compensation and Benefits in Healthcare Organizations

Compensation and benefits are part of the best practices of the Human Resources department regardless of the type of organization (Bledsoe, 1995). Healthcare organizations are supposed to be at the forefront in ensuring that healthcare personnel are well compensated and receive their benefits because of the crucial role they play (Bledsoe, 1995). The management of healthcare personnel determines whether the organization realizes its goals and objectives or not. The best practices of HR have been changing with time and many organizations are putting much emphasis on the issue of compensation and benefits (Bledsoe, 1995). The performance of employees in the healthcare sector can be enhanced if the organizations take into account the total compensation of employees together with their benefits. Healthcare employees who are paid well feel valued and are always motivated to perform better (Bledsoe, 1995). Benefits and compensation packages are crucial strategies used by the HR department in retaining and attracting employees in the healthcare sector.

Leveraging labor relations within an organization is essential for a healthcare organization that wants to provide quality healthcare (Neuhauser, 2002). The HR department should be able to allow healthcare providers to join labor unions as a way of leveraging labor relations (Neuhauser, 2002). The quality of healthcare can not be improved if the healthcare personnel are not allowed to join labor unions that give them bargaining power to negotiate for better terms (Neuhauser, 2002). Labor unions are meant to leverage the relationship between the healthcare personnel and their employers. The grievances of healthcare employees are sometimes not taken seriously unless they are channeled through labor unions (Neuhauser, 2002). The labor relations between healthcare employees and management have a direct effect on the quality of healthcare provided by the healthcare personnel (Neuhauser, 2002). The burdens of litigation together with the risk of litigation are some of the things covered by labor unions (Hansen, 2003). It is difficult for the management of healthcare organizations to file a law suit against a complaining employee if the concerned employee belongs to a labor union. This kind of leverage can only be sustained through organized labor (Hansen, 2003).

The contribution of healthcare personnel is in most cases undervalued by the management of many healthcare organizations and it is therefore the responsibility of labor unions to lobby for better terms and conditions when in comes to payment (Hansen, 2003). Labor unions fight for their members to have better health benefits, wages and retirement benefits. Unionized healthcare employees receive better benefits and compensation compared to non-unionized healthcare employees (Hansen, 2003). The economic, psychological and sociological state of healthcare personnel depends on how the management deals with their interests and needs. Leveraging labor relations is very important in enhancing quality healthcare because the needs and interests of healthcare personnel are considered by the healthcare organization (Hansen, 2003). The HR department of a healthcare organization should therefore allow employees to join labor unions for the benefit of the organizations (Hansen, 2003).

Healthcare providers play a significant role in healthcare delivery and therefore deserve a compensation plan that caters for their needs and interests (Shi, 2010). The compensation of healthcare providers should be based on their performance, experience and tenure (Shi, 2010). The compensation strategy should also consider shift differentials and emergency cases (Shi, 2010). Advanced practice physicians and other clinical professionals should also be provided with compensation packages that take care of their tuition expenses. Hospitals and clinics are supposed to cater for the tuition expenses of physicians together with certification and licensing fees (Shi, 2010). Incentives should form part of a compensation strategy for healthcare employees. Incentives include gain sharing plans, team incentives and other incentives based on personal performance. The salary levels of healthcare employees should be structured according to the practice setting (Shi, 2010).

There are certain factors that should be considered when structuring the salary of healthcare employees (Shi, 2010). High stress environments require higher compensation than working environments that are less stressing. Primary care specialties require special skills that should be put into consideration when preparing cash compensation (Shi, 2010). Modern compensation programs for healthcare personnel should involve physician integration and alignment. The quality of patient care and improved financial performance should be able to guide the incentives given to physicians. A good compensation strategy should be able to regulate the economic relationship between healthcare organizations and physicians (Shi, 2010). A compensation strategy in healthcare organizations should be designed with modern market changes and government policy. Regulatory compliance is critical in designing and implementing a compensation program for healthcare employees (Shi, 2010).

Variable pay and benefits should be well managed by the HR department in order to bear the expected results (Buchbinder, 2008). There are certain guidelines that should be strictly followed when managing benefits and variable pay in healthcare organizations. Payment based on performance is what is referred to as variable pay while benefits are other payments that an employee receives apart from the regular salary (Buchbinder, 2008). It is the responsibility of the HR department to provide all the relevant information about employees to be used in the determination of their benefits and variable pay by management. Variable pay and benefits should be managed according to market trends (Buchbinder, 2008). The management of variable pay and benefits should allow flexibility in the pay structure. Benefits and variable pay should be paid according to the pay band of healthcare employees (Buchbinder, 2008).

It is important for managers in healthcare organizations to always consult with HR when making management decisions regarding employee benefits and variable pay (Buchbinder, 2008). It is important for management to consider budget constrains, equity within the unit and employee skills and experience when managing benefits and variable pay for the healthcare organization’s employees (Buchbinder, 2008). The total amount of money used to fund variable pay should be based on overall budget of the organization. It is important to note that variable pay and benefits are not an entitlement but are only based on the performance of employees (Buchbinder, 2008). The management should thoroughly assess the performance of employees before deciding whether a particular employee deserves to receive variable pay and other benefits (Buchbinder, 2008). Staff performance assessment models should be used in managing benefits and variable pay. Shift differentials are also instrumental in determining the amount of variable pay. It is important for healthcare organizations to involve employees in setting benefits and variable pay goals (Buchbinder, 2008).

It is important for management to communicate the intentions of benefits and variable pay programs in order for them to clearly understand what it takes to earn a variable pay and receive benefits (Buchbinder, 2008). The effectiveness of benefits and variable pay systems should be evaluated after implementation to determine whether they meet the desired goals and objectives (Buchbinder, 2008). Healthcare employees should be eligible in order to enjoy benefits and variable pay. Variable pay can only be determined after the management has assessed the performance of employees (Buchbinder, 2008). The value and magnitude of performance are very crucial in determining the award size. The management in healthcare organization should set a minimum award to guide its performance–based programs (Buchbinder, 2008). The management of healthcare organization should include benefits and variable pay funds in their overall budget. Although variable pay can be awarded at the departmental level, it is important to note that the awards should be approved by the financial managers (Buchbinder, 2008). Managers should set expectations and priorities when it comes to benefits and variable pay for healthcare employees (Buchbinder, 2008).

A stronger and effective healthcare workforce can be achieved through proper management of the merit pay (Buchbinder, 2008). Merit pay is very important in helping healthcare employees progress in their careers (Shi, 2010). Merit pay should be within the salary range of an employee and should not in any way include market adjustments and other promotional pay increases. The philosophy of merit pay should support performance-based pay (Shi, 2010). Merit pay should be aligned with other payment programs based on performance. The amount of merit pay should reflect the external conditions in order for it to be competitive (Shi, 2010). The decisions regarding financial incentives such as merit pay should always be communicated to healthcare employees. It is important to leverage the merit program to demonstrate the fact that only those who perform better are the ones to benefit from the merit pay program (Shi, 2010). A merit pay program should be able to assess the effect of merit pay on the performance of healthcare employees (Shi, 2010). The program should include other forms of compensation such as education scholarships apart from the usual salary increases. Technology can be used to enforce merit pay guidelines by providing an enhanced level of reporting (Shi, 2010). The modern employment market is very heated and therefore requires compensation programs such as merit pay that are very useful in motivating healthcare personnel. The guidelines of merit pay should be designed by management in coordination with the HR department (Shi, 2010).


Bledsoe, D. (1995). Tying physician incentive pay to performance. Health care Financial, 49(12), 40-44.

Buchbinder, S. (2008). Introduction to health care management. New York, NY: Jones & Bartlett Publishers.

Hansen, F. (2003). Currents in compensation and benefits. Compensation & Benefits Review, 35(2), 6-20.

Neuhauser, P. (2002). Building a high retention culture in health care: Fifteen ways to get people to stay. Journal of Nursing Administration, 32(9), 470-478.

Shi, L. (2010). Managing human resources in health care organizations. New York, NY: Jones & Bartlett Learning.

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