Running head: COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE

Compensation and Benefits Plan for Chief Nurse Executive University of Phoenix HRM 531

March 5, 2012

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE Compensation and Benefits Plan for Chief Nurse Executive According to the Bureau of Labor Statistics worker wages, earnings, and benefits can be categorized in one or more of the following ways: Geographic Area (national, regional, state, metropolitan area, or county data) Occupation Demographics Industry

Additional categories such as age, sex, or union membership may be used in some cases. (Bureau of Labor Statistics, 2008). Wages can be defined as a payment received by an employee in exchange for labor. In a broad sense wages refers to what is received in any way for labor, but wages usually refer to payments that are paid by the hour, in contrast to salary, which implies a more fixed and permanent form of income (e.g. payment by the month rather than by the hour) (The Free Dictionary, 2007). Employee benefits typically refers to retirement plans, health insurance, life insurance, disability insurance, vacation, employee stock ownership plans, etc. (Business.com, 1999-2012). Such benefits are often overlooked, by many members of the workforce, in lieu of wages and salary, but as workers take on added individual and family responsibilities, resulting in increased personnel expenses, these benefits are becoming increasingly more important to the employee. Employee benefits are increasingly becoming more burdensome to employers and often counter their ability to make a profit. In fact, benefits are one of the biggest costs an employer faces, after payroll (Business.com, 1999-2012). With the constant rise of benefits costs and the subsequent negative effect on employer overhead and profits, employers are more and more looking for ways to share benefits costs with employees. They are also applying

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE innovative methods to distribute benefits across the workforce. Examples of this are the

implementation of employer and employee shared funded flexible spending accounts which offer reductions in health insurance premiums. Flexible spending accounts also offer taxable payroll deductions to both employees and employers, thus decreasing the amount of federal, and in some cases, state income taxes that must be paid. Employers are also implementing programs to encourage workforce health and lower health insurance premiums (B. Janell Grenier, 2009). Such programs also offer the added benefit of decreasing the amount of employee sick leave and other health related work absences. Compensation can be any form of wages, benefits or other means by which an employee is paid for work or services rendered. Compensation strategies are more and more manifesting not as pay or benefits but as rewards for greater effort and increased positive impact. Some examples of compensation are travel discounts, gym memberships, bonuses, merchandise discounts, etc. Of course, all forms of wages, pay, benefits and compensation place costs on the employer but compensation offers a means to encourage and obtain increased productivity which may often mitigates the actual compensation costs. This focus of this essay will be on the job position of a Chief Nursing Executive. Compensation, benefits and costs will be discussed in relation to this position. Job Description The Chief Nursing Executive is an experienced Registered Nurse whose practice is of an executive nature comprised of complex leadership, management and administrative components associated with issues and activities which influence the organizations mission, values, health care and organizational policy (Kaiser Permanente, 2011). The Chief Nursing Executive is the liaison and sole representative of nursing service employees with Human Resources and the

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE

Chief Executive Officer of the hospital organization. The Chief Nursing Executive is responsible for the administrative management of all nursing services personnel, as well as the facilitation and timely evaluation of clinical performance of the nursing services employees (Naval Medical Center San Diego Nursing Services). Executive Leadership Duties The Chief Nursing Executive represents nursing services interests to the other members of the executive team in support of an interdisciplinary team approach to the delivery of nursing care (Hader, 2009). As personnel advocate, the Chief Nursing Executive continually monitors community practice standards and performs salary surveys comparing organizational utilization of resources and compensation with others in the industry and assures equitable compensation for worked performed. Establishes a salary base competitive with surrounding hospitals. Improves the quality and effectiveness of the organization through leadership, coordination of nursing resources and facilitation of on-going evaluation processes. The Chief Nursing Executive directs nursing personnel in the identification and resolution of complex clinical and administrative issues and implementing solutions. Personnel Supervision/Management Duties Manages administrative affairs of over 225 nursing within the hospital organization and supervises the preparation of administrative records, maintains accurate and complete databases for timely accounting of all nursing services employees within the organization (Naval Medical Center San Diego Nursing Services).

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE Acts as a liaison between nursing services personnel and Advanced Practices Nurses, Clinical Nurse Leaders and Business Managers utilizing principles of Total Quality Leadership (TQL). Advises managers on issues that may result in union grievance if conflict not resolved

appropriately and monitors the progress of all grievances and complaints in collaboration with the Human Resources Office (Naval Medical Center San Diego Nursing Services). Clinical Duties Maintains nursing expertise and clinical readiness through direct association with patients and patient care areas across multiple service lines. Maintains current knowledge of the new developments within the nursing practice in all care areas and demonstrates knowledge of current nursing research and applies knowledge to improve the delivery of patient care (Naval Medical Center San Diego Nursing Services). Administrative Duties Reviews and revises job descriptions for all nursing services personnel, clerical and administrative positions based on the organizational needs. Responsible for reviewing and screening resumes of potential applicants, setting up initial interviews as well as team interviews in facilitating the interview process of all potential employees (Naval Medical Center San Diego Nursing Services). Basic Qualifications Current and Active Registered Nursing license Bachelors degree in nursing

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE Masters degree in nursing or related field required (Health Administration, Business, Public Health or Management) Seven (7) to ten (10) years of progressive clinical leadership Knowledge, initiative, leadership ability and organizational skill to plan and implement policies and procedures necessary to accomplish the mission of each area of care. Compensation Along with recruitment, selection, and promotions, compensation is a vital part of a companys action plan to increase their pool of qualified candidates applying for job openings. Compensation for a position can include both financial and nonfinancial rewards. The financial

rewards offered are salary and attractive employee benefits. Personal development, training, and a positive work environment are nonfinancial forms of compensation that an employer can offer to its employees (Cascio, 2010). Research indicates that a chief nursing executive position at Kaiser Permanente should be paid a salary of approximately $180,000 per year ("Salary.com Salary Wizard-Do You Know What You're Worth?", 2012). The qualified candidate must have seven to ten years of progressive executive leadership experience, a degree in nursing, and a masters in nursing or a field related to management (Kaiser Permanente, 2011). The chief nursing executive has executive leadership duties, supervisory duties, clinical duties, and administrative duties. Experience and a vast knowledge base is a competitive advantage for Kaiser Hospital. Therefore, a higher salary is used to attract and retain a qualified individual. Cascio (2010) stated, Salary.com is arguably the most popular provider of salary comparisons, for it provides detailed geographic information and matching job descriptions for more than 3,000 benchmark jobs (p. 429). The benchmarking research for a chief nurse executive, also known as the chief nursing

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE officer in the hospital, suggests that a chief nurse executive working in a hospital in San Diego, California, should earn on average, $180,000 per year. The compensation system is based upon three forms of equity- internal, external, and individual. Internal equity ensures the pay rate is fair within the organization whereas external equity ensures the wages are fair in the job market outside of the organization. A chief nurse executive in San Diego, California, makes on average $40,000 more per year than a chief nurse executive in San Diego, Texas ("Salary.com Salary Wizard-Do You Know What You're Worth?", 2012). With external equity, demographics play a role in determining the fair market pay rate for a position. Lastly, individual equity references fair pay relative to individuals

performing similar or the same job functions (Cascio, 2010). The chief nurse executive at Kaiser Permanente in San Diego has a larger staff and oversees a much larger facility than a chief nurse executive working in a nursing home in San Diego. Hence, the chief nurse executive at Kaiser warrants a higher salary even though the two are working in the same demographic performing similar job functions. Benefits Bonuses and Raises On top of traditional direct compensation in the form of salaried payments the Chief Nurse Executive can be offered an incentive based pay such as profit-sharing or bonuses at a rate of approximately 0.9% of base salary ("Salary.com Salary Wizard- Do You Know What You're Worth?", 2012). The bonuses will be distributed from a discretionary pool of funds used for employees contributing to business success (Mayhew, 2012). Most bonuses can be attributed to an increase in the bottom line or an increase in publicly owned shares. Combined with bonuses an annual evaluation based on positive performance can increase salaries by 5%

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE

(Mayhew, 2012). This management system can help drive a compensation plans salary increases based on ranking and ratings (Mayhew, 2012). Group Health Benefits The compensation plan will include group health-care benefits in the form of employersponsored premiums (Mayhew, 2012). Along with the health-care plan there will be options for a supplemental plan that includes coverage for vision and dental treatments. As an added incentive employers may often include coverage for disability insurance. For short-term disability insurance the employer may pay the total cost and offer coverage policies for longterm disability insurance. In terms of a workers compensation plan the employee may be given unemployment insurance (sick leave) of 10 days and supplemental unemployment insurance (maternity / paternity leave) of 30 days. Retirement Savings Added to the indirect compensation package the Chief Nurse Executive may be offered an employer-sponsored 401(k) plan. The Chief Nurse Executive can designate a pre-tax contribution to be deducted from each paycheck with a match of 10% of the contribution by the employer. There will be a five-year vesting period applied to the plan. Paid Leave During the year there will be a total of 10 days with qualifications as holidays which will be awarded full paid time off during these days. Added to the holidays will be a base number of 15 days paid time off to be taken by the employee. Cost of Benefits to Employer Employer costs for employee compensation in the United States averaged $30.11 per hour worked in 2011 as reported by the U.S. Bureau of Labor Statistics. Wages and salaries

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE averaged $20.91 per hour worked and accounted for 69.4% of those costs, while benefits averaged $9.21 and accounted for the remaining 30.6% (U.S. Bureau of Labor Statistics, U.S. Dept. of Labor, 2011). State and local government employers spent on average $40.76 per hour

worked for employee compensation in September 2011. Wages and salaries combined averaged $26.57 per hour and 65.2% of compensation costs, while benefits averaged $14.19 per hour worked and has accounted for the remaining 34.8%. The total compensation costs for management, professional, and other related occupations (i.e. head nurse) averaged $49.37 per hour worked. This represented half of all state and local government employment. Employer costs for insurance benefits were $4.89 per hour, or 12% of total compensation. Health Insurance costs were the largest insurance costs at an average of $4.74, or ll.6% of total compensation. For 2011, the average cost for retirement and savings benefits was $3.42 per hour worked in both state and government. (Hadzima, 2005)Included in the amount were employer costs for defined benefit plans, which averaged $3.10 per hour, and defined contribution plans, which averaged $0.33. Two Components of benefits costs were paid leave and legal required benefits. Paid leave includes vacation time, paid holidays, sick leave, and personal leave. The average cost for paid leave was $3.03 per hour worked for state and government employees. (U.S. Bureau of Labor Statistics, U.S. Dept. of Labor, 2011) Legally required benefits such as Social Security, Medicare, unemployment insurance, and workers compensation averaged $2.50 per hour worked. Management, Professional, and Related: Registered Nurse The following outline details employer cost per hour worked (across the United States) for employee compensation and costs as a percent of total compensation for health care and

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE social assistant workers, by industry and occupational group (U.S. Bureau of Labor Statistics, U.S. Dept. of Labor, 2011). Cost per hour worked o Total Compensation: $49.32 o Wages and Salaries: $33.75 Benefit Costs: o Total: $15.74 o Paid Leave: $4.32 o Supplemental Pay: $1.88 o Insurance: $3.87 o Retirement and Savings: $1.93 o Legally required Benefits: $3.57 Percentage of Total Compensation o Total Compensation: 100% o Wages and Salaries: 68.4% Benefit Costs in Percentages: o Total: 31.6% o Paid Leave: 8.8% o Supplemental Pay: 3.8% o Insurance: 7.8% o Retirement and Savings: 3.9% o Legally required Benefits: 7.2%

10

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE Conclusion As one can see, total employment compensation comprises many more aspects than wages alone. Weve discussed and compared total compensation in terms of wages, benefits, alternate compensation and employer costs. Per the percentages of the total compensation cost

11

breakdown outlined above, for the Chief Executive Nurse at Kaiser Permanente San Diego, CA, with a wage paying $180,000.00 per annum, benefits costs (31.6%) would total $56,880.00. This would make the total compensation package for the position $236,880.00. These figures and the details listed in this paper bring to light the numerous, sometimes overlooked, factors that contribute to an employers financial considerations.

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE References B. Janell Grenier, E. (2009, December 2). benefitsblog. Retrieved March 2, 2012, from benefitscounsel.com: (Business.com, 1999-2012). Bureau of Labor Statistics. (2008, July 19). Retrieved March 2, 2012, from www.bls.gov: http://www.bls.gov/bls/wages.htm Business.com. (1999-2012). Retrieved March 2, 2012, from business.com: http://www.business.com/human-resources/employee-benefits/

12

Cascio, W. F. (2010). Managing human resources. Productivity, quality of life, profits (8th ed.). : McGraw-Hill Company. Employee Compensation [Web log message]. Retrieved from http://www.bls.gov/news.release/pdf/ecec.pdf Hader, R. (2009). Is Being a Chief Nursing Officer in your Future. National Student Nurses Association , 33-39. Hadzima, J. (2005). How much does an employee cost? [Monthly column]. Boston Business Journal . Retrieved from http://web.mit.edu/e-club/hadzima/how-much-does-an Employee cost.html Kaiser Permanente. (2011, December 13). Search Jobs. Retrieved Feburary 25, 2012, from Kaiser Permanente: www.kp.taleo.net/careersection/external/jobdetail.ftl Mayhew, R. (2012). Example of an Employee Compensation Plan | Small BusinessChron.com. Retrieved from http://smallbusiness.chron.com/example-employeecompensation-plan-10068.html Naval Medical Center San Diego Nursing Services. (n.d.). Position Description: Nurse Consultant (Head of Civilian Nursing Affairs). San Diego, CA, USA.

COMPENSATION AND BENEFITS PLAN FOR CHIEF NURSE References Salary.com salary wizard-do you know what you're worth?. (2012). Retrieved from http://swz.salary.com/salarywizard/Head-of-Nursing-Salary-Details-San-Diego-

13

CA.aspx?&hdcbxbonuse=off&isshowpiechart=false&isshowjobchart=false&isshowsalar ydetailcharts=true&isshownextsteps=true&isshowcompanyfct=true&isshowaboutyou=tru e Salary.com Salary Wizard- Do you know what you're worth?. (2012). Retrieved from http://monster.salary.com/salarywizard/Nursing-Director-HRSalaryDetails.aspx?hdcbxbonuse=off&isshowpiechart=true&isshowjobchart=false&isshowsalar ydetailcharts=false&isshownextsteps=false&isshowcompanyfct=false&isshowaboutyou= false The Free Dictionary. (2007). Retrieved March 2, 2012, from encyclopedia2. thefreedictionary.com: http://encyclopedia2.thefreedictionary.com/wages U.S. Bureau of Labor Statistics, U.S. Dept. of Labor (2011, Dec 7). Employer Costs for