Pay at Risk in Healthcare: Has This Compensation Approach Worked for You?

I am working for a healthcare organization. We have a proposal for implementing pay at risk, wherein a small percentage of base pay is withheld until the time of employee appraisal. If the performance of the employee is satisfactory, then the employee is given the amount deducted earlier from the base pay. Conversely, if the employee's performance is not satisfactory, then the employee loses the amount deducted from the base pay.

Can anyone tell me about the effectiveness of this compensation scheme, whether it has been a success, and the consequences, if any?

Hi Salman,

This concept used to work earlier in the late 90s in some of the IT companies in Bangalore. It's known as the Long Service Award. You need to add the withheld cost to the CTC and educate the candidate that the money will come back to him after a certain number of months. This is fine as long as the employee is happy, but then, there are organizations today that will buy out that amount and offer the candidate. I doubt whether it will work in today's dynamic job market.

Thanks, and those are my thoughts.

Giridhar

Hi Salman,

Sorry! I think I misunderstood the concept. Since the pay is performance-driven, the parameters for performance must be clearly defined and agreed upon. I really doubt if someone today would accept such pay withholding. Ideally, you could offer it as a performance bonus, which most organizations do.

Thanks,
Giridhar