What Should You Pay Staff?

That staff salaries in a medical practice must be competitive is a foregone conclusion. But for most managers, there’s a good deal of wiggle room in determining where your employees fall on the compensation scale. Our latest salary survey, for example, found that while nurse practitioners with a few years experience earn an average $80,237 a year nationwide, practices paid anywhere from $53,000 to $110,000.

Indeed, the process used to negotiate wages and benefits depends on a variety of factors, including experience, education, cost of living, job performance, and the financial health of your practice. There’s a subjective side to it as well, of course, which can skew the numbers in either direction depending on how highly administrators and physician owners value a particular skill - or how desperate they are to fill a vacant position. So how do you know how much to pay in a flip-flop economy that is forcing employers to work smarter, spend less, and hire staff that can help them succeed?

*(Wondering how your salaries stack up against our 2010 Staff Salary Survey regional data? Check out our comprehensive regional results (PDF).)

Some guidance from seasoned veterans may help. A good starting point, says Cindy Dunn, senior consultant for MGMA Health Care Consulting Group, is the national and regional salary surveys, like those conducted by Physicians Practice and many professional associations, which provide a benchmark for how your office stacks up in remuneration. Most break out wages by position, experience, and locale: However, numbers are not enough.

Maureen Waddle, senior consultant for BSM Consulting Group, a practice management consulting firm in Incline Village, Nev., says the best practices start by developing a compensation philosophy with their boards of directors. “It really is an individual decision,” she says. “Do you prefer to pay top dollar and hire only the most qualified candidates or focus on entry-level applicants because you wish to train them your way?” If you choose the latter, of course, you can set your hourly rates low, but be prepared to commit some of those savings toward training programs and continuing education. “The key is to establish your practice philosophy upfront so you’re consistent across the board,” says Waddle. “You can’t pay one person at a higher rate and someone else less for the same position because that always causes problems. They always find out.”

Hold the line

You should also set a cap for how much each position pays - and stick to it. “If we have a hard time recruiting, we’ll look back at our salaries to be sure our range is still reasonable, but if we determine that our pay is fair, we will not go above it,” says Dale Reigle, CEO for Rocky Mountain Orthopaedic Associates in Grand Junction, Colo. “That’s not fair to every other employee. If we’re going to start making exceptions, that tells us that our range was too low to begin with.”

Patti Bedlion, director of human resources for Integris Physicians Services, a 200-physician primary-care group in Oklahoma City, Okla., also holds the line on initial offers. For new recruits, her practice pays 3 percent to 5 percent above the starting salary for each year of experience and “never hires anyone” at more than 96 percent of the pay scale for any given position. “That gives them a little room for a raise until our rates get adjusted,” she says.

Making the process more scientific still, David Schlactus, CEO of Hope Orthopedics of Oregon, a 13-physician group in Salem, Ore., attempts to quantify relevant work experience. “If you’ve been a medical assistant for a dermatology practice for the last three years, that’s not exactly the same as being an MA for an orthopedic practice, so we might give you two years worth of credit,” he says. Likewise, if an applicant for a receptionist job previously held that position at Nordstrom or a law office, she’d fall on the low end of the seniority scale. “If a job pays $10 to $18 an hour, and we figure it would take eight years to reach that top range, we might give you $1 an hour for every year of relevant work experience,” says Schlactus.

When your wages miss the mark

For most medical practices, wages and benefits are the largest component of overhead costs. With reimbursement falling fast, you can ill-afford to come in too high. According to Waddle, all practices should review their pay scale annually. If you discover your support staff is overpaid relative to your market, the best option is to freeze salaries across the board - being open and honest with them about where they fall on the pay scale. Simply hold their salaries steady until the market catches up. “I recommend those practices state their wages so that staff members know very clearly that they’re already paid at the top of the market,” says Waddle. “They can’t expect to continue getting raises forever, unless they’ve taken on additional responsibility.”

The same is true for individual employees who earn more than their coworkers, perhaps because you inherited them as part of a merger or because their salary crept up over the years and your predecessor let it slide. But you can still reward for performance. “If they’re at the maximum or over the maximum grade for their position, they won’t get an increase in their hourly rate, but we do give them a lump sum bonus each year like the rest of the staff so we’re still recognizing them for their performance,” says Bedlion.

Underpaying your staff, on the other hand, is a far more serious offense - one your best and brightest won’t put up with for long. Failure to pay your staff what they deserve leads to costly turnover and an even more destructive morale crisis. Such a scenario must be rectified post haste. After discovering her salaries had fallen below par, Bedlion says her practice restructured their plan this year, bumping salaries for every position by 5 percent.

Bye-bye COLAs

In many cases, negotiating annual raises can be far more problematic than setting an initial offer, primarily because what your employees expect and what they deserve are often at odds. “You get people expecting a raise just because they’ve been here another year and that’s never felt right to me,” says Schlactus, noting his practice is drafting plans to eliminate cost of living adjustments (COLAs) altogether and move to a merit-based system. Under the proposal, the practice would authorize a maximum raise of up to 4 percent a year, creating performance categories that allow employees to earn up to 1 percent in each category for meeting specific goals. They will likely include: job competency, community service, teamwork, and education, which could be satisfied, for example, by taking classes or reading two trade articles a year and making a story board presentation. “The employees would have to meet with their manager and identify the categories they hope to focus on for the coming year and their manager would tell them what they need to do to reach that goal,” says Schlactus. “This way, you can say to the owners that you’re giving these increases because the employee has demonstrated value. It’s a win-win. I’d be tickled pink if everyone earned their full 4 percent.”

COLAs are also long gone at Integris Physicians Services, where existing employees who are up for an annual review are rewarded based strictly on their contribution to the team. Supervisors for each department can award between 0 percent and 4.5 percent a year for behavior, attendance, training, and job performance.

Benefits boost

It’s not all about the paycheck, though. Benefits are another great tool to set your practice apart, particularly if you fall at the low end of the pay scale. According to our survey, the vast majority of practices offer paid vacation and sick time (97 percent), retirement plans with an employer match (70 percent), and health insurance coverage (84 percent) to nonphysician employees. Roughly half also offer dental coverage, while a third offer health savings accounts, short-term disability, or long-term disability insurance. But there is no limit to the type of benefits at your disposal.

Flexible schedules, for example, are an easy perk to provide, and for those juggling family obligations or multiple jobs (if their spouses are unemployed), they can be worth more than money. If your business model allows, start by asking for volunteers to cover the early morning or late afternoon shifts, ensuring all seats are full during the busiest parts of the day. You might also permit certain staff members to put in longer hours Monday through Thursday and take Fridays off, or work shorter days during the week and put in extra time on Saturdays.

You can also offer free healthcare services to the immediate family members of your staff, profit sharing, staff training, and education reimbursement, which costs less than a pay raise, but benefits both the employee and practice. “When times are tight, training is often the first thing to go,” says Dunn, noting that’s a big mistake. “Training your staff puts your practice in a better position for success [when the market recovers] and shows your team that you value them.”

Tina Marie Stevenson, practice manager for Surgical Associates of Ithaca in Ithaca, N.Y., says her practice keeps its wages in the “middle of the road” for its market, but makes up for it with extra perks. “We’ve come to realize that compensation isn’t always the first reason people stay with us,” she says. “It’s the atmosphere that we create here as a team that means more to most of our employees.” Though the recession left her practice unable to distribute raises last year for the first time in 12 years, the practice did manage to distribute bonuses to each member of the staff - based on a percentage of revenue. “In addition to the bonuses, we also offset the fact that we were not giving raises by absorbing the 13 percent increase in health insurance costs for our employees and we let our staff know we had done that,” says Stevenson.

Just ask

Though salary surveys can help keep your compensation costs in check, one of the best ways to find out how your pay packages are actually perceived by your staff is to simply ask. “You really need to know how your staff feels about their salaries,” says Dunn. “I often work with practices and the staff will volunteer information that they’re the lowest paid in town, or that they haven’t had a raise in three years.” Her suggestion: Create an employee satisfaction survey (anonymous, of course) that asks your staff which benefits they value most, which would they like to see added, and how they believe they are paid relative to their market. Depending on the demographics of your support staff, you might find you’re wasting money on benefits they don’t really need. Younger employees, for example, would often rather see a fatter paycheck and opportunity for career advancement, than top-shelf health coverage or a 401(k) match. Likewise, offices with an older staff might value flexible hours and retirement benefits more.

Hire smart

Recruitment strategies inevitably begin with a bracket for how much you’re willing to pay, but those in the trenches say it’s equally important to consider the intangibles in the hiring process. You can’t overlook a candidate’s demeanor and approach to the position. After all, filling your seats with appropriately paid staff members does you no good if they can’t get along. “Attitude is the most important thing to me because you can teach someone with a great attitude anything they need to know,” says Schlactus. “If I have two RNs and one has great experience but a horrible attitude and the other is fresh off the boat with a great attitude, I’m going with the one with the great attitude. They’re going to work harder and become part of the team.”

Bedlion and Reigle concur that personality fit is their top priority in selecting job candidates. “When we interview, we look at overall professional appearance,” says Bedlion. “We listen for key indicators of customer service [skills] such as positive patient interaction, someone who smiles a lot, someone who knows the patient comes first. We listen for indicators of teamwork, like helpfulness to coworkers.”

In today’s challenging healthcare environment, it’s more important than ever to reevaluate your pay scale. While economic pressure has forced some practices to take the axe to salaries, Waddle urges managers to avoid such knee-jerk reactions wherever possible, noting they usually manifest as a short-term gain, long-term loss. Some 34 percent of you tell us that since the recession began, you’ve cut or frozen staff salaries, while 17 percent have reduced staff hours and/or reduced employee benefits. You’ll be far better served by cutting costs elsewhere, setting a cap for what you’re willing to pay and using benefits to help your practice maintain a competitive edge.

*(Wondering how your salaries stack up against our 2010 Staff Salary Survey regional data? Check out our comprehensive regional results .)

Shelly K. Schwartz, a freelance writer in Maplewood, N.J., has covered personal finance, technology, and healthcare for more than 12 years. Her work has appeared on CNNMoney.com, Bankrate.com, and Healthy Family magazine. She can be reached via physicianspractice@cmpmedica.com. Physicians Practice.

This article originally appeared in the July/August 2010 issue of