C236 Task 1 Pay Structure and Benefits Analysis Example

Paid Twelve Percent Below the Hospital Down the Road: A Pay Structure and Benefits Analysis for a Composite Community Health Center Losing Medical Assistants and Nurses

Student Name

School of Business, Western Governors University

C236: Compensation and Benefits, Task 1

Course Instructor

Month Day, Year

Paid Twelve Percent Below the Hospital Down the Road: A Pay Structure and Benefits Analysis for a Composite Community Health Center Losing Medical Assistants and Nurses

The Organization and the Problem

Riverbend Community Health, a composite federally funded health center, runs four clinics serving about 19,000 patients and employs 146 people. Over the past year, 11 of its 32 medical assistants and 6 of its 18 registered nurses left, most for two hospital systems that opened outpatient clinics nearby. Exit interviews named pay first and benefits second. The center's pay has grown by across-the-board raises of 2% to 3% a year, with no formal structure; new hires are paid whatever it takes to fill the job. The board has asked for a pay structure and benefits review within a budget increase of no more than $420,000 a year.

Market Comparison

Pay for five benchmark jobs was compared with the median of two regional salary surveys, aged to the coming year. The results show where Riverbend stands.

Medical assistants and nurses, the two groups leaving, are furthest below market, at 88% and 91%. Other jobs are near market. There is also internal compression: because new hires are paid near market to fill openings, nine medical assistants with more than four years of service earn less than the three most recent hires. Long-serving employees notice, and several exit interviews mention it.

A New Pay Structure

Jobs will be placed in six grades based on a point-factor job evaluation that weighs required knowledge, responsibility for patient care, problem solving and working conditions, checked against the market. Each grade will have a range with a midpoint set at the market median and a spread of 40% for clinical grades, from 83% to 117% of midpoint, so employees can progress within a job. For example, the medical assistant grade will have a midpoint of $19.80, a minimum of $16.50 and a maximum of $23.10; the registered nurse grade will have a midpoint of $40.90, a minimum of $34.00 and a maximum of $47.80.

Placement within a range will reflect experience and performance. Employees will move toward and past the midpoint through annual step increases tied to satisfactory performance, rather than across-the-board raises. A compa-ratio, pay divided by midpoint, will be reported for each employee so managers can see who is low in range.

Cost of the Changes

Bringing every employee to at least the new minimum costs little, because only four employees fall below minimums. The larger cost is correcting compression and moving the two at-risk groups toward market. Moving medical assistants from an average of 88% to 97% of midpoint and nurses from 91% to 98%, with the largest increases for long-serving employees, adds about $268,000 a year in wages and $41,000 in payroll taxes and retirement contributions, for a total of about $309,000. That leaves about $111,000 of the approved budget for benefit changes.

Benefits Evaluation

Riverbend's legally required benefits, Social Security and Medicare contributions, unemployment insurance and workers' compensation, are in place. Its voluntary benefits include health insurance with a high deductible, a 3% retirement match and 15 days of paid time off. Compared with the hospitals, its health plan deductible is twice as high and its paid time off is five days lower. Employees rated the deductible as their biggest benefits concern.

With the remaining budget, the most effective change is lowering the health plan deductible from $3,000 to $1,500 for employees earning under $50,000, which reaches most medical assistants and front desk staff, at an estimated cost of $84,000. The remaining $27,000 funds tuition help for medical assistants pursuing nursing degrees, which supports retention and builds the center's own nurse pipeline. Increasing paid time off is deferred to next year's budget. The benefits changes were chosen over a larger raise because a lower deductible is worth more to a lower-paid employee than the same dollars spread across everyone's hourly rate, and because tuition help ties the center's spending to a longer relationship with the employee who receives it.

Legal Considerations

The Equal Pay Act prohibits paying men and women differently for substantially equal work in the same establishment, unless the difference is explained by seniority, merit, a system measuring quantity or quality of production, or a factor other than sex (U.S. Equal Employment Opportunity Commission, n.d.). Before implementing the new structure, HR will review pay by sex within each job and document the job-related reasons for any differences. The Fair Labor Standards Act requires overtime pay for nonexempt employees working more than 40 hours in a workweek (U.S. Department of Labor, n.d.); medical assistants and front desk staff are nonexempt, and the new structure will not change their classification. Most registered nurses paid on a salary basis may qualify as exempt professionals, but Riverbend will keep hourly pay for nurses who work variable schedules to avoid misclassification risk.

Communication and Review

Pay decisions are more likely to be seen as fair when employees understand how they are made. Each employee will receive a letter showing their grade, range and new pay, and managers will be trained to explain the structure. Gerhart and Fang (2015) reviewed the long-running worry that money crowds out the satisfaction of the work itself and concluded that the evidence for it at work is weak, while well-built pay systems tend to help both performance and retention. Riverbend will review market data every year, adjust ranges and track turnover of medical assistants and nurses, with a goal of reducing it by half within 18 months.

Conclusion

Riverbend's turnover is concentrated in two jobs paid well below market and made worse by compression. A structure built on job evaluation and market data, with targeted adjustments for long-serving staff and a lower deductible for lower-paid employees, addresses the problem within the board's budget and complies with pay laws.

References

Gerhart, B., & Fang, M. (2015). Pay, intrinsic motivation, extrinsic motivation, performance, and creativity in the workplace: Revisiting long-held beliefs. Annual Review of Organizational Psychology and Organizational Behavior, 2, 489-521. https://doi.org/10.1146/annurev-orgpsych-032414-111418

U.S. Department of Labor. (n.d.). Fair Labor Standards Act. Wage and Hour Division. https://www.dol.gov/agencies/whd/flsa

U.S. Equal Employment Opportunity Commission. (n.d.). The Equal Pay Act of 1963. https://www.eeoc.gov/statutes/equal-pay-act-1963