South Florida Hospital News
Thursday October 1, 2020

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December 2006 - Volume 3 - Issue 6

Business Muse - Reflections on the Business of Healthcare Delivery

Dear Business Muse:

With year-end approaching, we are reviewing salaries and bonus compensation for our practiceís employees. In the past we have increased salaries by either a dollar amount or a percentage for all employees. Is there a preferred method for evaluating and deciding on salary increases and bonus compensation? Provider Ė Palm Beach Gardens, FL

Dear Reader:

With year-end reviews coinciding with holidays, no one wants to appear as a "Scrooge". The reality though demands that a thoughtful review go into the decision making process when determining raises and bonuses. Just like a personal holiday gift no "one size fits all".

Your question implies that you give the same dollar amount or percentage to all employees (or at least all at the same staff level). This is neither appropriate nor good business management. Personnel who perform at a level greater than your expectations should be rewarded in a manner that reflects your appreciation. They will note your approval. Without these differences there is no additional incentive for recognition of a job well done. The worst reason for giving anyone a raise is that a person has been there yet another year. Donít believe that the way you reward personnel does not become common knowledge in your office. Fruit ripens quickly on the office grapevine.

All offices should have personnel files that contain regular performance reviews conducted throughout the year. These files can be established without too much effort. Once established and, with a system in place to assure proper maintenance, they are an important management tool. Like a medical record they illuminate and document the decision making process. Goals should regularly be set, discussed with each member of the staff and documented in their file. Addressing problems, noting praise and critiquing performance should be incorporated into the file. Recommendations as to the amount to raise each individualís compensation should be made by the Office Manager, incorporated into the file, and be reviewed with you. Based on these reviews a decision can be made, and if need be defended, as to how much and why a particular raise was decided upon. The same process should be used for bonuses as well.

Not all practices give bonus compensation. A survey (2004) conducted by PAHCOM (Professional Association of Health Care Office Management) reported that 82% of practices give bonus compensation. If you decide that this is appropriate for your practice, the award should be on an individual basis and based on merit. It certainly should not be the same amount (either dollar or percentage) for all employees. Bonuses may vary from year to year and therefore like other benefits should not be considered a part of salary. To avoid any misunderstanding this should be documented and explained to personnel when hired. Bonuses should be earned and not expected.

When deciding the appropriate amounts for either raises or bonuses, it is our belief that under most circumstances it is better to use an individual dollar amount for each employee. Utilizing a percentage may result in exceeding your budget, or scaled down may result in inadequate amounts to good employees. Given the same percentages, higher salaried employees may receive an amount disproportionate to their performance. The use of a percentage may also cause the undesired result of a lower salaried employee who exceeded expectations not being adequately rewarded.

Utilizing and maintaining this system of personnel oversight will decrease the time and uncertainty that you may now be experiencing in deciding on appropriate compensation for each employee.

We at PHC wish to take this opportunity to wish you and yours a Merry Christmas, a Happy Holiday Season and a Joyous and Prosperous New Year.

J. Steven Kaufman, M.D., is Principal at PHC Practice Development Advisors.

PHC solicits and appreciates questions of a business nature relating to the health services industry to address in future columns. Please address your questions to PHC Practice Development Advisors at or fax (561) 799-4092.

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