Registered nurses are increasingly challenged by the pace and scope of change in the health care industry. Cost cutting and consolidation continue as RN employers seek to improve financial performance and remain competitive in their markets. For nurses, this can translate into pay-for-performance programs which their employers see as a way of reducing labor costs while increasing productivity and quality of care by motivating nurses with financial incentives. The purpose of this pamphlet is to briefly describe the main features of these compensation programs and suggest questions you should ask and steps you should take if your employer implements or proposes such a pay system.
What Are Pay-for-Performance Programs?
Pay-for-performance programs go under a variety of names: contingent or "at-risk " pay, variable pay, profit sharing, gainsharing, to mention only a few. Their common denominator is the linking of financial rewards for employees to improvements in the performance of the group.
Gainsharing, for example, emphasizes three key features: participation, achievement, and rewards. Gainsharing presupposes that all employees of an organization, if given the chance, can participate and contribute beyond the minimum or standard level of performance. Achievement emphasizes reducing costs and increasing profits and focuses on group rather than individual performance to improve productivity. Rewards are usually in the form of cash, paid at regular intervals.
Pay-for-performance programs for non-management hospital-employed registered nurses are relatively new. Nonetheless, employers nationwide are considering such programs, and one major HMO has recently instituted a "performance outcome program" designed to provide monetary incentives to registered nurses in exchange for reduced costs and increased patient satisfaction. Registered nurses must now seriously consider the appropriateness of incentive pay programs.
