Salary Hikes for Healthcare Workers Expected to Lag Other Industries

Healthcare workers can expect an average base salary increase of 2.6% in 2011. That's up from the 2.3% base increase reported in 2010, but slightly below increases of 2.8% projected across all industries for 2011, according to a survey from Hay Group consultants. 

"The healthcare industry did not see salary budgets fall until 2009, while other industries felt the effects of the recession much sooner, lowering salary budgets as early as 2007," said Ron Seifert, executive compensation practice leader for Hay Group's healthcare practice. "So, while healthcare is still 0.2% behind other industries, it seems to be rebounding at a faster pace after taking a deeper dip in a much shorter timeframe."

The survey found that 18% of respondents in all industries said they will maintain a salary freeze across all levels in 2011 to reduce compensation costs, while 4% of respondents in healthcare reported an across-the-board freeze on salaries. 

"Healthcare providers have felt the pinch, but salary budgets are beginning to move upward, mirroring the slow ascent we are seeing in the broader economy," Seifert said. "Interestingly, healthcare salary trends are also starting to track those of other industries, which we haven't seen for at least a decade."

Fewer healthcare executives will see their salaries frozen in 2011, with 8% of organizations reporting a freeze of executive pay. That's compared to more than 20% of organizations that reported freezing executive pay in 2010.

Hay Group's survey also shows a parity of planned salary increases for healthcare employees in 2011 with both executives and all employees seeing a 2.6% increase. 

"With executive salary budgets rising at the same level as staff this year, it's clear that boards are concerned about public perception of executive pay," Seifert said.  "However, it's critical that compensation committees balance their concern of scrutiny with their need to attract and retain the best possible talent to lead their organizations."

Salary increases for physicians are still lagging at 2.3%, while nursing will see a 2.7% salary increase in 2011. High performers will see less than 1% more than all employees with 2.8% planned base salary increases for 2011. "With limited budgets, healthcare organizations are still resistant to differentiate pay for top and average performers," Seifert said. "However, if healthcare organizations want to retain high performers and high potentials, they need to treat them fairly – which does not always mean that everyone gets the same amount."

The survey uses data from more than 486 organizations in November 2010 in the general industry survey, and 90 hospitals and health systems of varying size, structure, and location in the healthcare survey. Respondents include compensation professionals in human resources departments. Hay Group's core compensation database represents compensation practices for almost 3,000 companies and more than 6 million employees.