Compensation strategy of an organization plays a pivotal role in determining the success of the company. Moreover, the compensation strategy of a healthcare organization forms the basis of achievement of the overall organization. Compensation includes monetary and non-monetary constituents such as basic salary, health insurance, retirement plans, and performance bonuses. An effective compensation strategy of an organization can make it successful and place it in a better position in the competitive market. Operating budgets of healthcare organization highly depend on total compensations such as cash compensation and other benefits. Human Resources (HR) play a critical role in designing compensation strategy of any organization. The complete process of considering five key elements while creating compensation strategy for health care organization include the forms of compensation offered, workforce demographics, business cycle, compensation philosophy, and legal/regulatory compliance.
HR administration focuses on these five elements for the compensation strategy of related service organizations. Also, job description and job specification are the drivers that Human Resources consider while developing compensation strategy. Internally equitable and externally competitive compensation strategies are designed. The strategic role of the human resource manager is to ensure a strong relationship between employer and employee that is achieved by designing a reliable compensation strategy. Human resources make sure that the workforce is regulated and make strategies that will make certain that organization is achieving organizational goals. A company’s reputation and the image are dependent on the compensation strategies that make an organization stand out in the market. Human resources administration devises strategies that have an impact on employee satisfaction and organization’s ability to recruit competitive employees. Human resources management makes compensation strategies based on factors such as job evaluation, labor market conditions, workforce shortages, and budget constraints (Zacher, Chan, Bakker, & Demerouti, 2015).
Nevertheless, Human resources management encounters numerous challenges while devising compensation strategy for health care organization. Healthcare organization’s Human resources management while planning compensation strategies have to consider the myriad of federal, state, and local regulations. Minimum wage standards and hours of work are considered by administration while formulating a compensation strategy for an organization. Several HR professionals have faced problems while considering fair labor standards act and FLSA requirements demand for accurate time records managed by health care employers. FLSA sets the minimum wage to be paid to the employees that are not entirely accepted by Human Resources and is considered as a hurdle. The 70-year-old laws of federal labor standards create problems for HR management while hiring clinicians, physicians, and other medical professionals. Living wage and minimum wage has been in debate for long among HR professionals of health care organization (Altarawneh, 2016).
Another challenge faced by HR professionals is the consideration of different forms of compensation while planning down the compensation strategy of the healthcare organization. There are two basic forms of compensation programs such as direct and indirect compensation. Direct compensation is defined as the sum of base pay and variable pay. Base pay is the minimum wage an employee receives whereas variable pay is related to the performance of an employee. Another form of compensation is indirect which can be defined as pay received by employees in the form of services such as health insurance, income replacement programs, paid time off, and pension plans. HR professionals have to consider all the laws and state regulations while planning the compensation of healthcare organization. The compensation strategy is determined by workforce demographics such as age ranges from the 20s up to 70’s of medical organizations (Bhattacharyya, 2009). Bonuses are given according to the experience and age which is another challenge faced by HR officials since they have to align the compensation strategy by state law and regulations. Work life balance has to be secure through compensation strategy since employees are finding it hard to cater the needs of the family (Bhattacharyya, 2009).
HR officials consider all components critically while devising compensation strategy for different demographics of health care organization. Healthcare organizations have different cultures such as entitlement based and performance based. Therefore, compensation strategies are designed keeping in mind which culture prevails in an organization (Sims, 2007). If an organization has entitlement based culture, compensation strategy is based on the increase in salary every year for service provided by employee since for the service of year employee is entitled to receive a raise (Sims, 2007). And incentive programs and increase in pay have to be constant regardless of the performance of that employee. Healthcare organizations have faced many drawbacks due to entitlement based culture approach. However, in performance-based culture, an employee receives a raise depending on the quality of service given by him.
HR officials are also trying to offer additional compensations as an anecdote to overcome the challenges due to failed compensation strategies. HR officials are now turning to alter the healthcare organizations and seek to change the entitlement-based culture due to the demerits of such culture. Market-based pay has to be considered while deciding salaries especially healthcare organizations that are willing to pay more pays to the senior physicians. Another tactic adopted by healthcare organizations is the competency-based salary that weighs the level of skills to retain senior and most experienced medical professionals.
References
Altarawneh, I. I. (2016). Strategic Human Resources Management and its Impact on Performance: The Case from Saudi Arabia. International Journal Of Business Management & Economic Research, 7(1), 486-503.
Bhattacharyya, D. K. (2009). Compensation Management. New Delhi: OUP India.
Sims, R. R. (2007). Human Resource Management: Contemporary Issues, Challenges, and Opportunities. Charlotte : IAP.
Zacher, H., Chan, F., Bakker, A. B., & Demerouti, E. (2015). Selection, optimization, and compensation strategies: Interactive effects on daily work engagement. Journal Of Vocational Behavior, 87(1), 101-107.
