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Best Practices: Compensation

Pay increases have been shown to have a dramatic impact on recruitment and retention. Nurses are working under such stress and are so underpaid that many of them keep a constant eye out for better opportunities and have little loyalty to their current employer. Any significant changes in conditions can lead to dramatic and immediate movements in staff. One such example is the case of Sherwood Hospital.163 In January 1999, competing area hospitals raised their wage rates for RNs. By March 1999, just two months later, Sherwood's monthly turnover went from 3 percent to 18 percent. In July 1999, Sherwood raised its own wages, and by October 1999, its monthly turnover rate was back to 1 percent.

Nurses not only leave one hospital to go to another that pays better, if compensation is good, they stay where they are. The Nursing Executive Center has singled out six hospitals as national models of effective recruitment and retention; four of these made dramatic inroads in RN turnover, and the other two are "consistent performers." Among the notable facts that made these model hospitals, four of the six were commended for "compensation recalibration" for RNs.164

Specific Proposals for Compensation

The most important proposal for compensation is also the simplest: pay more. The magnet hospitals — from the original cohort certified by the American Academy of Nursing to the most recent class surveyed by LERC faculty — have consistently paid wages at or above the level of area competitors. Other hospitals have adopted innovative practices to facilitate wage increases, such as an agreement negotiated by United Nurses of Pennsylvania (affiliated with AFSCME), which provides a 33 percent wage increase in return for foregone benefits from nurses who receive health insurance through their spouses.165 For individual hospitals, pay increases have proven an effective strategy. However, to solve the nursing shortage as a whole, it is not enough for one hospital to lure nurses away from another. The critical question is whether wages can be raised high enough to draw non-practicing RNs back into the industry, enlarging the overall labor pool rather than simply benefiting one hospital at the expense of others.

Apart from the general level of wages and benefits, hospitals have instituted a variety of bonus and incentive payments. In some cases, these incentive payments do no more than lure nurses from one place to another — and often not for very long. In others, however, incentive pay is designed for longer-term goals of improving ongoing working conditions and creating a financial incentive for managers to avoid the types of practice most likely to drive nurses away, such as excessive overtime. One northwest hospital reported instituting a policy that if the overall vacancy rate for RNs in any particular unit rose to 15 percent for three months, everyone in that unit would receive double pay for their overtime.166 Several of the magnet hospitals surveyed by LERC have instituted even more generous incentive pay for units with vacancy rates above a certain trigger level — not only compensating nurses for extra work, but encouraging management to fill vacancies.

One of the most potentially important wage strategies allows older nurses to work fewer hours and still receive full-time pay. In a number of Belgian hospitals, nurses aged 45 and older work 36 hours per week, and those aged 55 and older work 32 hours per week, all for a full 40-hour salary. While hospital administrators might balk at such a proposal, this system has been effective at retaining experienced nurses while accommodating the needs of aging employees.167

Here at home, Baylor University Medical Center pioneered a practice that became widespread during the 1970s and 1980s, in which nurses received 40 hours of pay for working two 12-hour shifts each weekend.168 During the downsizing of the 1990s, this practice was largely abandoned. Given the rapidly aging RN workforce, however, approaches similar to the Belgian or Baylor plans may again prove critical in the United States.

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