Part of a quarterly pulse survey series, Gallagher's data from 174 healthcare organizations show that employers are taking dramatic steps to compete for talent, from highly trained caregivers to employees at the lowest end of the pay scale

Author: Kelly Taylor


Healthcare employers have endured a veritable rollercoaster of conditions over the past two years of the COVID-19 pandemic. Staffing shortages and other market pressures seen in the last two quarters of 2021 have led to dramatic shifts in compensation trends, as organizations continue to pull multiple levers in efforts to preserve their labor forces during this time of intense volatility. In the first of Gallagher's series of quarterly healthcare compensation pulse surveys, we asked healthcare organizations about staffing shortages and turnover, agency costs, movement in wages and use of extra shift and retention bonuses.

Data from 174 healthcare organizations from across the country offer a glimpse into employer action the last year to support mission-critical jobs, such as registered nurses (RNs), respiratory therapists, admissions representatives, pharmacy technicians and environmental services technicians. Following are key takeaways from the survey.

Staffing shortages, turnover and agency costs on the rise

Healthcare organizations have been working non-stop to recruit, retain and staff their care sites appropriately throughout the COVID-19 pandemic. Unfortunately, there's little if any relief in sight. Results from Gallagher's National Healthcare Staff Compensation Survey conducted in early 2021 showed average RN vacancy rates — the percentage of employable positions presently vacant — at 9.6%, up more than 2% from the previous year. However, our recent pulse survey showed that RN vacancy rates as of September 1, 2021, averaged a staggering 19%, more than double pre-pandemic levels.

As a result of higher-than-usual turnover, about 16% of organizations report they are experiencing critical staffing shortages, according to daily reporting from the U.S. Department of Health & Human Services as of January 19. Meanwhile, 24% anticipate critical staffing shortages within the next few weeks. As organizations struggle to sufficiently staff and maintain high standards of patient care, many are forced to turn to more expensive staffing approaches, including additional overtime, elevating extra shift/critical staffing pay, expanded internal float pools and heavier reliance on external staffing.

Approximately 75% of organizations are turning to agency/travel RNs to meet critical staffing needs. At the same time, Gallagher's survey indicates roughly a 75% increase in average hourly rates for agency RNs, moving from approximately $75 pre-COVID-19 to more than $130 as of September 1, 2021. And while average rates have exploded over the past year, they continue to be a moving target, as rates in some areas jump to well over $200 per hour.

More than one-third of organizations (35%) report increased use and/or development of their own internal RN pools to mitigate external staffing, paying these RNs an average of about $61 per hour. This approach is increasingly common among larger health systems that serve a geographically dispersed market where RNs travel to different locations within the system. Also, just under one-third of organizations (31%) are "up-skilling" and "down-skilling" their staff, using licensed practical nurses, advanced practice nurses and others to provide care within licensure requirements, when not enough RNs are available.

Competing with other industries for talent at the bottom of the pay scale

As healthcare organizations are laser-focused on the fast-changing market for RNs and other key clinical positions, employers are simultaneously being forced to increase minimum starting rates for their lowest paid positions. The competition for non-clinical workers is just as fierce in the current economic climate. Many healthcare organizations are struggling to keep pace with increasing wages at companies such as Amazon and Walmart. Companies willing to hire remote-based workers, especially those residing in lower-cost-of-living/labor markets, now pose further competition for employees.

Gallagher's most recent National Healthcare Staff Compensation Survey indicated that nearly half (47%) of healthcare organizations have implemented some sort of minimum living or socially responsible wage for their employees, with a median rate of $14.00 in 2021. This median rose significantly from just $12.00 and $12.50 in 2019 and 2020, respectively. And, as organizations increase the bottom of their pay scales, they often are forced to make additional increases to avoid wage compression and pay equity issues.

Healthcare employers project significant wage increases across all job types

While healthcare leaders had become accustomed to projected wage increases hovering at 3.0% for more than a decade, our pulse survey confirms that level of wage increase is now untenable. Participants are projecting average wage increases of 4.5% for 2022 (an increase of 50%), with some organizations reporting even higher projected increases upwards of 6.0% or more across all employees.

Moreover, we know that many survey participants continually underestimated just how quickly wages are moving. Actual wage increases during just the first nine months of 2021 were much higher than anticipated. For example, wages for RNs in critical care units increased by 7.0%, on average, while increases in other units ranged from 4.7% to 5.4%. Likewise, respiratory therapists, another job significantly impacted by the pandemic, saw a similar 7.0% increase. These reported increases spanned just nine months, so increases for the full calendar year will climb even higher.

Of the remaining sample of jobs surveyed, those toward the lower end of the pay scale saw the largest increases, including environmental services technicians at 9.7%, patient care technicians at 7.6%, admissions representatives at 6.8% and phlebotomists at 6.1%.

Organizations hike use of special pay practices

In addition to implementing higher-than-usual salary increases, organizations are using special pay practices to help retain and attract talent. Gallagher's pulse survey shows that 61% of responding healthcare organizations are offering extra shift bonuses or differentials on top of regular extra shift premiums to further entice workers to fill vacant shifts.

Employers pay "critical need" premiums most often as a flat dollar differential, ranging from $10.00 to $15.00 per hour for respiratory therapists and RNs, or as lump sum bonuses averaging nearly $350 per shift. Just under one in five organizations (17%) offer additional unit-based/specialty pay on top of regular specialty pay. This added pay ranges from $8.50 to $13.50 per hour at median for respiratory therapists and RNs.

As a further step, healthcare organizations report dramatically increasing their use of retention bonuses to bolster staffing levels. Among organizations that reported providing retention bonuses to the positions included in Gallagher's pulse survey, nearly 70% added these programs since just the onset of the pandemic. Retention bonuses typically range from $1,500 to $10,000, varying by position. Retention bonuses for RNs routinely start at $10,000 and can exceed $20,000 in certain markets — often subject to multi-year agreements. Signing bonuses also have become more prevalent, with about 40% of responding organizations implementing them since the onset of the pandemic, using values similar to those for retention incentives.

Employers offer a mix of new benefits to retain staff

Gallagher's pulse survey showed that the prevalence of several benefit offerings have increased since the onset of the pandemic. Examples include mental health counseling, personal time off (PTO) donation programs, child care assistance, meals provided at work and to take home, and housing assistance. Some organizations take a step further by offering concierge services, freezing medical plan premiums, offering additional PTO and reducing requirements for tuition assistance and reimbursement.

Compensation practices will continue evolving at a rapid pace as organizations across industries react to staffing shortages. The healthcare industry faces a particularly challenging task as it works to deliver care to a heavy caseload of patients using fewer resources than ever before. Gallagher will continue to monitor the state of compensation in the healthcare environment as we conduct additional quarterly pulse surveys throughout 2022.

Participate in Gallagher's Q1 2022 Wage Increase Update Survey now through March 18. Visit our website to learn more about participation in and accessing a variety of survey results.

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