Nurse Salary Benchmarking: 5 Tips

Nurse salary benchmarking is a data-driven strategy that leverages market insights to determine pay ranges. Compensation is a key factor that affects a nurse’s willingness to join an organization and stay with them over the years. Benchmarking gives organizations a way to determine an appropriate market rate salary that will attract qualified staff and encourage retention.

Unfortunately, benchmarking for nursing roles can be challenging. HR teams and facility leaders must account for complexities that other industries don’t have to worry about — like whether an internal pay structure can compete against the pay offered for travel nursing gigs. Analysis also has to account for the different levels of nursing, such as years of experience and educational background.

In his article, we’ll explain how to use the benchmarking process to inform your nurse salary ranges. We’ll also review the importance of considering fair market value when calculating employee compensation, and list five best practices for establishing fair pay for nurses in your organization.

What Is Salary Benchmarking?

Salary benchmarking, also called compensation benchmarking, is the process of determining a professional’s pay range based on market rates for comparable positions. Market rates aren’t set by individual companies. Instead, they’re composite figures that fluctuate based on economic changes and industry trends. In nursing, market rate salaries are determined by the:

• Cost of living in the area.
• Supply and demand of nursing professionals in the region.
• Role title.
• Experience and skill set required.
• Licensure and degree necessary for the role.

Why Is Compensation Benchmarking Important in Nursing?

Benchmarking helps organizations avoid underpaying staff. This is crucial in healthcare, an industry with notoriously high turnover rates — especially for nurses. Establishing fair pay for nurses is one way companies can directly improve retention efforts.

The Impact of Below-Market Rate Nurse Salaries

Non-benchmarked pay rates may be well below what other organizations are paying staff. In healthcare, this can result in recruitment challenges, high turnover rates, and less-than-optimal patient care.

Recruitment Challenges

When nurses search for jobs, they can easily compare salary ranges. Compensation packages that fall below the market rates attract fewer applications than those that are competitive within the job market.

Costly Nursing Staff Turnover

Nurses who don’t feel appreciated by their employers often experience higher rates of burnout and job dissatisfaction. When employees feel undervalued and underpaid, they often leave their position or even the profession entirely. Hospitals spend an average of $61,110 on recruitment, onboarding, training, and temporary staffing expenses each time a nurse leaves their organization.

Sub-Optimal Patient Care

Staff discontent can also negatively impact patient care efforts. Organizations with significant nurse turnover experience lower patient satisfaction, higher mortality, and worsened brand image.

How Establishing Fair Pay for Nurses Can Help

Healthcare organizations that consider the market value of a job can:

• Recruit competitive and experienced nurses.
• Build trust among healthcare executives, providers, and patients.
• Experience higher nurse retention rates and satisfaction scores.
• Save on expensive travel nursing costs.
• Improve patient safety and care quality.

Using Benchmarking to Determine Nursing Salary: 5 Best Practices for Facilities

Once you understand the importance of offering a market rate salary in healthcare, you’ll want to ensure your organization offers a fair nursing wage to current and prospective employees. Here are five best practices for using salary benchmarking processes in healthcare.

1. Research Salary Rates by Occupation

Before you decide on an appropriate salary to offer your nursing employees, you’ll want to conduct background research on nursing market rate salaries. The following wage data is provided by the Bureau of Labor Statistics:

• Salary by occupation
• Salary by job characteristics
• Salary by industry
• Salary by gender
• Salary by geographic region (federal, state and local)

Consider purchasing a salary benchmarking tool to facilitate this data-gathering process. Once you’ve noted the salary figures that are relevant to your nursing employees, you can start developing or updating your nursing compensation package.

2. Compare Salary Offerings in Local Job Postings

Next, you’ll want to figure out what local facilities are offering for similar positions and nursing roles. Browse local job postings to ensure the salary you offer stands out among the competition. Generally, salaries are attractive if the pay is market rate or higher.

It’s also a good idea to gather data about travel nurse pay rates. This will help your team understand how demand for nurses affects salaries. High demand for staff (due to a public health crisis, as seen during the pandemic, or chronic shortages) can generate temporary, high-paying travel nurse opportunities and wage disparities with other roles.

Benchmarking compares similar roles, so a permanent RN position would not be compared with a temporary travel contract. Nonetheless, this is helpful information to be aware of because it will influence the nursing workforce’s perception of your offered compensation.

3. Study the Demographics of Your Labor Market

When calculating your organization’s nursing compensation, you’ll want to consider the type of employee you’re looking for. Does your organization require RNs to have their BSN or is an ADN sufficient? Are you looking to hire nurses with years of experience or do you also hire new graduates? Nurses with additional qualifications can add value to an organization but will also require a higher salary. It’s important to keep this in mind when developing your nursing pay scale.

It’s also important to consider whether nurses in your organization are protected by a nursing union. Unions specify minimum salaries, set overtime rates, and establish certification pay differentials. Be sure to reference your organization’s union contract to ensure you stay compliant with mandated standards.

4. Consider Benefits Trends

Over 72% of individuals looking for a new job prioritize a job with a strong benefits package over a higher salary. When determining your organization’s nursing wage, bear in mind the current costs of benefits like health insurance, 401(k) plans, paid time off, and professional development opportunities. Offering these incentives can help your position stand out among the rest, even if your salary offering isn’t as high as other local facilities.

5. Periodically Reassess Market Value

Salary adjustments are made for a variety of reasons, including inflation rate changes, talent shortages, and cost of living increases. While there is no set time frame for how often this should be done, most companies perform market adjustment raises annually. It’s important to periodically review your organization’s compensation packages to ensure the pay is market rate and competitive within your local hiring scene.

Level-Up Your Nurse Recruitment Strategy Today

Now that you understand how salary benchmarking affects healthcare hiring and recruitment, you’re ready to attract top talent to your organization. Reach over 1 million qualified professionals looking for work on our job board.