Healthcare has a turnover problem. Nearly 30% of new hospital hires leave within their first year, and last year’s uptick in turnover alone added roughly $360,000 in costs to the average hospital. Registered nurse turnover is at 17.6%, the first year-over-year increase since the pandemic, and behavioral health settings run even higher, in the 22-23% range.
UKG’s research points to the cause: pay is the primary reason employees consider leaving their current job, with scheduling and career growth close behind.
Glizcel Ditto, executive director of client solutions at HRSoft, was recently joined by Matt Stensland, director of compensation at Acadia Healthcare, and Erika Sandoval, global senior partner, Human Insights, at UKG, to discuss solutions to this issue in the HR.com hosted webinar, “Smarter Compensation for Healthcare.” Here are five takeaways from that event.
1. Annual market reviews are no longer enough to keep up.
The traditional rhythm is familiar. Run a competitive review once a year, size the budget, fund a slate of market adjustments, and hold the line until the next review.
Mr. Stensland described something faster. Leadership now asks for current market data and pay adjustments almost daily, driven by what they see in job postings and by which requisitions won’t close. Rates for specialized clinical roles move inside the year, so a range that was accurate in January can be behind by April.
The practical answer is a just-in-time posture: the ability to price a role, model the cost, and act off-cycle in days rather than waiting for the next annual pass. That requires a governed process for off-cycle changes, not a series of one-off exceptions negotiated over email.
2. Standardized base pay generally works. Premium pay is where things break down.
A unit that can’t fill its evening shift usually doesn’t have a base pay problem. It has a problem calculating shift differentials, evening and night premiums, on-call pay, and PRN rates. Raising base pay in that situation costs more and fixes less.
Licensing adds more complexity: Talent shortages for licensed RNs are pushing organizations to redesign staffing models, including shifting appropriate work to licensed vocational nurses.
When two roles perform overlapping functions at different license levels and different rates, pay equity questions are bound to follow.
Geography is the other place broad rules fail. A flat 10% premium for a metro area is clean on a spreadsheet, but unreliable in the field. Regional averages describe a population of employers. They don’t describe the specific competitor who just hired your psychiatric nurse leader.
The panel’s approach: widen the recruiting pool for hard-to-fill specialized roles, then price against the organizations you’re actually losing candidates to. That’s a more defensible basis for an exception than a regional index, and it’s easier to explain to a hiring leader.
3. One payroll error damages trust. Two breaks it completely.
Ms. Sandoval made a point that compensation teams sometimes leave to payroll. Pay is a personal, recurring touchpoint, and for a clinician working rotating shifts, overtime, and differentials, the calculation is complicated enough that errors are plausible. Her figure: two payroll errors are enough to destroy an employee’s trust in their employer.
The upside is that frontline employees aren’t resistant to fixing this with technology. More than 70% said they trust AI-assisted decisions to improve payroll accuracy and efficiency, according to UKG’s research. The appetite is there when the outcome is a correct paycheck.
4. Managers are the messenger of your comp philosophy. Train them accordingly.
An employee experiences their compensation policy in a conversation between themselves and their charge nurse or department manager. When that manager can’t explain how a range was set, or why an increase came in where it did, the default answer is that HR decided it.
Acadia Healthcare’s response, as Mr. Stensland described it, is to pair compensation analysts with internal communications and talent management colleagues so that plan documents get translated into plain language before they reach a manager. Complexity in design is sometimes unavoidable. Complexity in explanation is a choice.
The same logic applies to incentives. If an employee can’t calculate their own incentive payout, the plan isn’t changing behavior no matter how elegant the design.
5. 2 percent merit increases aren’t a performance strategy.
Pay-for-performance was the mos Splitting a tight merit budget into 2 percent and 2.5 percent increases produces a distinction too small to feel like recognition and large enough to feel arbitrary. The high performer notices the gap is trivial. The average performer notices there was a gap at all.
Better options exist, and they differ by population:
- Short-term incentives tied to a small number of clear, achievable goals, where the payout is visible enough to influence effort.
- Career ladders with defined criteria, so an employee can earn a base rate increase by acquiring a certification or scope rather than waiting for a rating.
- Long-term incentives and equity for director level and above, where the retention horizon is measured in years.
- Cash retention bonuses with defined service periods for frontline staff and first-line managers, where a multi-year vesting schedule has little pull.
Long-term incentive plans are a retention tool for a specific population. Applying them below that line usually spends money on an instrument the recipient doesn’t value.
What workforce leaders can do
- Map your hardest-to-fill roles. Rank positions by turnover and time-to-fill, then determine whether pay, workload, or career growth is the real driver. Solve for the actual cause.
- Move from lagging data to predictive data. Overtime concentration and absenteeism patterns tell you which departments are at risk now. Exit surveys tell you which ones you already lost.
Healthcare compensation has outgrown the annual cycle. The organizations handling it well are the ones that can price quickly, adjust a differential without a special project, explain the result in language a manager can repeat, and keep all of it consistent across dozens of facilities.
HRSoft is the unified, purpose-built platform for the entire compensation lifecycle, and it connects with the HRIS and payroll systems health systems already run, including UKG, so market adjustments, differentials, and statements stay aligned instead of drifting apart in separate spreadsheets.
For the full insights from the webinar, including how Acadia Healthcare structures its off-cycle requests and what UKG’s frontline data says about scheduling as a retention lever, access the on-demandrecording below:
Watch the full “Smarter Compensation for Healthcare” webcast here.
