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How Should Hospitals Pay Non-Clinical Staff?

Topics: Comp Strategy
Managing compensation for a hospital can be particularly challenging, because there’s such a diverse set of jobs necessary to keep a hospital running.

A hospital employs not only clinical staff such as doctors, nurses and medical technicians, but also a wide variety of non-clinical staff such as custodians, food service workers and HR professionals. Compounding this challenge is that hospitals have to compete both with other hospitals and non-healthcare orgs for their non-clinical staff.

As a comp pro, you may have a long list of questions: Should we pay our data analysts the same as the tech company across the street? What about our cafeteria workers? How should we define our competitive set? Should we benchmark our positions against other hospitals or our local market as a whole?

In this piece, we’ll share some new research from PayScale that reveals just how hard it can be to get pay right in a hospital setting. Then, we’ll share some tips to help you avoid underpaying or overpaying your staff.  

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hospitals are overpaying certain common positions and underpaying others

We identified 22 non-clinical jobs that were common in both hospitals and for-profit companies. Then, we used our proprietary compensation model to estimate the pay difference for people with the same job working in a hospital versus those working for a for-profit company. Unlike conventional summary statistics, the model allows us to control for all other factors (such as skills and experience) to zero in on the effect working in a hospital has on pay.

We found that some non-clinical workers face a “hospital penalty,” meaning they are paid less than what they could make in other industries. However, other non-clinical workers actually get a “hospital premium,” meaning that they make more at a hospital than they would elsewhere.

While this may seem contradictory, we hypothesize that there are two competing factors at play. On the one hand, non-clinical hospital workers may be willing to take lower wages because they are doing meaningful work. On the other hand, working in a hospital role may require specialized skills, which means non-clinical workers should be paid more than what they would make outside of the hospital. Which effect wins depends on the job in question.

Good Will Versus Good Pay

We found that, on average, non-clinical hospital workers earn a mere 0.2 percent less than comparable workers at for-profit companies overall. In other words, working in a hospital instead of at a for-profit company reduces a worker’s salary by only one-fifth of a percent.

However, this effect varies widely by job title. Of the 22 jobs we selected, data analysts experienced the strongest effect: a 12.2 percent decrease in pay for those working at a hospital.

We cannot say for sure why we observed such a large difference; it could be a case where intrinsic motivation makes up for lower pay. Alternatively, many data analysis jobs in healthcare might require less experience or fewer technical skills than similar jobs in other industries. For example, a quick search for “Healthcare Data Analyst” job postings shows that report generation, which might be considered too rote a task for data analysts at tech companies, is a central responsibility of data analysts employed by hospitals.

Systems administrators sit at the opposite end of the spectrum, earning 10.5 percent more at hospitals than at for-profit companies. Given the sensitivity of data stored on hospitals’ servers, this level of pay difference makes sense. To be a sysadmin in a hospital setting, one has to understand and comply with the HIPAA Security Rule, which defines a set of electronic security standards healthcare providers must implement to ensure that their patients’ data is secure. This additional industry-specific knowledge is almost certainly a major factor in the substantial pay boost experienced by hospital sysadmins.

Additionally, we found that both custodian janitors and food service workers earn substantially more at hospitals than at for-profit companies. Given the particular difficulties of performing of these roles in a healthcare setting, such large boosts are not surprising. We would expect that a custodian with training in both hazardous waste disposal and housekeeping would earn more than a custodian without those skills.

How to avoid underpaying or overpaying

Our analysis found that while there was only a tiny difference in pay between hospital and for-profit company workers at the aggregate level, there were much bigger differences in pay when we examined specific jobs.

These findings underscore some things you should pay attention to, to avoid either overpaying or underpaying your hospital’s non-clinical staff.

1. Create segmented compensation strategies for different worker personas

First, it may be useful to re-evaluate your definition of “competitive pay.” In reality, you’re facing different degrees of competition for different roles. And some workers are more willing than others to take a pay cut to work on a mission they care about. It’s important to know which roles fall into each of these categories.

2. Use additional competitive sets

Second, you may consider building out additional competitive sets in order to determine the correct ranges for all of your positions. Our findings suggest that hospitals know that they’re competing with both nearby hospitals and for-profit companies, and they seem to compensate accordingly. Using market data to price hospital jobs is critical to securing top notch talent. However, it is equally important to understand exactly who you are competing with, and what motivates workers in specific roles.

3. Use skills data to further define your jobs

For broad job titles like data analysts or system administrators, it’s the skills they have that define their compensation. Here at PayScale, we collect skills data as part of our online salary survey. We’ve found that on average, a data analyst who knows Python, R and Tableau makes $22,000 more per year than a data analyst who knows data entry, data processing and Microsoft Access.

When you benchmark a position that has a broad job title, make sure you know which skills are essential to the role and which skills are useful to the role. Essential skills and useful skills should be factored into the pricing of a position. On the other hand, you don’t need to pay for skills that are assumed (e.g. data entry for a database administrator) or skills that are interesting but irrelevant for the position.

There are two ways to compensate skills. First, you could include skills in the market benchmark. Alternately, you could work with the hiring manager to determine a plan for how someone can move through their range. For example, a data analyst would receive a bump in pay once she learns a relevant programming language. 

All in all, diversifying your approach to pay (including segmenting your workforce, re-evaluating your competitive set) and your data sources can help you be more precise in setting pay for all of your roles. In turn, your organization will become better equipped and more competitive in the hiring process.

Notes

To identify jobs common to both hospitals and for-profit companies, we found the share of workers in each job at both employer types and took the geometric mean of the job-specific shares. We took the 20 jobs with the highest geometric means. We specifically added “Custodian Janitor” and “Food Service Worker” to the list as these were jobs of particular interest. Our 22 jobs gave us a sample more than 100,000 observations from the past year (July 2017-July 2018).


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