Healthcare employees will see a modest base salary bump in 2012, according to the recent Healthcare Compensation Study from management consulting firm Hay Group.
The study shows planned median base salary increases of 2.9 percent in 2012 for employees of large integrated health systems (IHS'). This is a slight decrease from 2011 when providers reported a planned 3.0 percent median base salary increase for healthcare employees. Conversely, hospitals reported median base salary increases of 2.4 percent in 2012, a slight increase from 2.3 percent in 2011.
The uncertain economy and the presidential election are among the reasons healthcare organizations cautiously approached base salary adjustments in 2012, said Jim Otto, senior principal in Hay Group’s Healthcare Practice.
However, the need to retain talented employees led to a modest bump in base salary compensation, he added.
“Top-performing employees will always be in high demand,” said Otto. “Providers must continue to design pay plans that motivate and retain the talent needed to help them navigate the increasingly complex healthcare environment.”
According to Otto, there has been a “certain amount of pressure to increase adjustments compared to recent prior years. There was an acknowledgement that salary increases were minimal or zero in the last few years for everybody. There has been some pressure to loosen things up.”
“There was an acknowledgement that if organizations didn’t do something more, people were going to start looking elsewhere because the economy is improving,” he added.
When looking at actual changes to base pay increases between 2011 and 2012, CEOs experienced the most significant shift. CEOs at not-for-profit IHS' received a median 3.2 percent increase in base salary for 2012, compared to a 4.0 percent increase in 2011. Similarly, hospital CEOs received a 3.0 percent increase in 2012, compared to a 5.0 percent increase in 2011.
The study notes that executive benefits and perquisites were significantly more prevalent in IHS' than in the general market. Nearly three-fourths (74 percent) of IHS' offered executive long-term disability benefits, compared to only 33 percent of the general market. Other common forms of supplemental benefits offered were executive group life (offered by 65 percent of IHS', compared to 32 percent of the general market), executive short-term disability (offered by 65 percent of IHS', compared to 19 percent of the general market) and executive severance pay (offered by 76 percent of IHS', compared to 41 percent of the general market).
“Compared to just five years ago, there has been a significant uptick in the importance that healthcare executives place on supplemental benefits and, in particular, retirement benefits,” said Otto. “Other supplemental benefits like life insurance and disability benefits that are over and above what the general employee population gets – those aren’t going to go away for named executives.”
Other key study findings include:
- Total cash compensation increases were mixed for CEOs. In IHS', CEOs saw a 3.6 percent increase in total cash compensation (base salary plus annual incentives), compared to 3.1 percent in 2011. On the other hand, hospital CEOs only saw a 2.0 percent increase, compared to a 6.0 increase in 2011.
- Nurses saw slight increases in total pay. Hospital nurses saw a 2.5 percent pay increase in both base salary and total cash in 2012. This is an increase compared to a 2.0 percent increase in base salary and total cash in 2011.
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Average rate of pay continues to increase. Hospitals increased total salaries at an average rate of 2.9 percent in 2012, compared to a 2.5 percent increase in 2011 and 2.4 percent in 2010.