Paying your employees fairly is one of the most important roles you have as a practice manager. There are a number of payment options to choose from, including both base pay and performance pay methods. While most will decide to utilize a variation of both, it is important to understand what each method values and compensates for.
Below are the four basic methods of compensation.
Paying for the job
This is the most traditional method of payment. Basically, each position is evaluated based on the education and experience the job requires and assigned an amount; this amount is then given to the person in the position. Pay raises on this system are scheduled and easily estimated. While simple, this method can inflate your operating costs and compromises the honesty of job descriptions, as employees quickly figure out that more line items in their job descriptions leads to more money.
Paying the person
Instead of paying your employees based on the exact job they hold, this method involves compensating them for their skills in the market, known as competency-based pay. This method helps motivate employees to continue gaining knowledge and skills, especially in areas that your practice needs. While this encourages a culture of improvement, it does lead to higher pay raises and requires a large investment in training.
This compensation method is linked to the idea that money will motivate employees to perform better and increase practice effectiveness. While this may work in theory, it is often harder to create a perceived relationship between pay and performance so it may fall short of delivering the desired results. It can also decrease teamwork and cause distrust among staff members.
This method combines both fixed and variable compensation plans. A base salary is set and a practice-wide bonus structure is put into place. This breaks down hierarchy, as either everyone in the practice receives a bonus or no one does. It also helps control the operating costs and reinforces teamwork.
As you can see, there are a number of options; what might be right for one practice may not be right for yours. Taking a good look at the problems you experience from your current system will help you determine what changes to make going forward.