What is Compensation?

Nankervis, Compton, and Baird (2005) argued that employees currently in the workforce are becoming more concerned with the quality of their work life and with the associated rewards. Their expectation of a compensation system is that it is fair and equitable, in which it provides them with tangible rewards adequate to their knowledge and skills and provides recognition and a livelihood. The most visible reward in the workplace according to Marquis and Hustom (2003) is monetary compensation. Not surprisingly, employees put much emphasis on issues related to their compensation/remuneration such as ‘am I being paid fairly', ‘how does my pay compare to that of others in my organization', ‘ what should I do to get a pay increase', and ‘ what benefits and incentives can I achieve'. Payments, therefore, are considered a major consideration in HRM and how it is allocated conveys a message to all employees about what the organization believes to be important and worth encouraging (Tappan, Weiss, & Whitehead, 2007).

Compensation at Tawam Hospital

Compensation according to the Center for Health Program Development and Management (2003) is an essential element of the employment contract. As such, Tawam Hospital contracts with employees that are able to perform specific healthcare functions and can produce an output. This output or what it actually called services is rendered for money, and this money is once again given to employees to make them able to purchase their goods and services. Furthermore, compensation is considered one of the highest costs that might exceed 60% of the total costs in health care organizations such as Tawam Hospital (Gomez-Mejia, Balkin, & Cardy, 2007). Accordingly, an effective compensation system can make a significant difference in gaining or even loosing competitive edge and ability to retain qualified healthcare workers. Noting here that retaining staff in hospitals is a major struggle, so it is very important and even crucial for Tawam to strategize it's compen­sation and benefits plans in order to attract professionals that are talented and have an excellent expertise in order to acquire a competitive advantage, maximize return on human capital, and improve its overall financial status (Marquis & Hustom, 2003).

The compensation system in Tawam hospital is divided into direct and indirect categories. Direct compensation is the actual money that is given to employees and it consists of base payments, merit payments, and incentive payments such as transportation allowance, water & electricity allowance, tickets allowance, education allowance, mobile allowance, remote allowance, and mission allowance. Calculating the appropriate salaries and payments of various types for every position in the hospital is time consuming and takes a lot of effort than most human resource professionals can afford (Nankervis, Compton, & Baird, 2005). However, Tawams' salaries and benefits are structures based on a pay ranges for different groups that takes into consideration several factors such as job title, years of experience, and educational background. This well-designed salary and benefits structure is set by SAHA which is the governing authority of all public healthcare sectors in Abu Dhabi. This structure is designed in a way to preserve a competitive advantage not only with the other Emirates in the UAE, but also among the GCC region. SAHA has taken the responsibility of structuring compensation systems for the purpose of unifying all payments in all sectors so that each sector can retain its staff and stop the movements from the lower payments hospital to the higher ones as it was the condition a couples of years before.

The indirect compensation in Tawam Hospital is associated with monetary value. It includes health insurance, housing contract under a housing unit, and pay for time not worked, disability and pension

Structure of Total Compensation System

According to the Center for Health Program Development and Management (2003), the total compensation is composed of value, process, security, efforts and activities, and results. A Value is the payment received when the employees work. This payment is market-based and competitive, and there is a scale that has been set by SAHA that takes into consideration the position, education, and experience. Besides, a Process is the action of modifying the pay scale through, for example, increases for cost living. This is also abides and follows SAHA rules and regulations. The third item of total compensation in Tawam is Security that represents items that provide protection and improve employee's quality of lives, such as paid leaves, educational allowance, transportation allowance, tickets allowance, housing, water and electricity, ect. The fourth item is Results, which represent incentives associated with high performance, productivity, and other beneficial actions by employees. These payments are determined mainly by the annual performance appraisal results of employees, for example, a 4 % increase on basic salary for those who get 80% and above on their annual appraisal. The last component is Efforts and Activities that represent recognition of contributions and appreciation such as mission allowances.

Benefits of Incentive Compensation

According to Thilmany and Tranel (2008) the main rationality for an incentive pay is the expected increase in productivity. Healthcare organizations offer employees incentives to remunerate ‘above and beyond' a set standard performance. The set standard may pertain to quantity of services, quality (following high standards), and other productivity related achievements such as operation efficiency and employees activity (minimal absenteeism).

Accordingly, a proper and structured incentives and benefits at Tawam Hospital will help to increase productivity throughout the various operations, encourage better recordkeeping and analysis of service performance, improve employee morales, improve perceived equity between employees and management, reduce employee turnover, give workers a vested interest in success and this improves satisfaction, develop a positive workplace environment, facilitate easier recruitment of talented employees, and finally encourage voluntary employee education and development of future managers (Thilmany & Tranel, 2008)

To insure the success of incentive scheme, employee's commitment at Tawam Hospital must be boosted by various measures (Stalker & Hackworth, 2006). First, thorough explanation and agreement on strategy, list of objectives, performance indicators, incentive pay calculation, and discussion of employee's individual responsibilities and goals can instill a sense of scheme ownership. Second, providing regular performance feedback and listening to employee suggestions are efficient measure to best manage the employees. Third, analyze the success and amend the pay scheme regularly. In addition, to ensure the economic benefit from such incentive system, Tawam has to ascertain accurate recordkeeping (Thilmany & Tranel, 2008).

Although pay incentive and benefit systems have become a common practice at Tawam and most hospitals in the region, certain issues continue to cause some concerns. Among these concerns is the large impact of the systems on the work quantity and quality, its dependence on a precise recordkeeping, perceived favoritism and low employees morale, unintentional effects, legal matters and argument over standards modification (Thilmany& Tranel, 2008).

Preventive Measures for Pay Incentives Shortcomings

Shortcomings of Pay Incentives

Preventive Measures

1. Biased standards towards one type of effort (quantity vs. quality).

Ø Compensate employees based on both criteria, or

Ø Monitor other plan outcomes and consequently adapt the program

2. Perceived inequity among employees

Ø Set realistic performance standards

Ø Allow for a range of performance improvement, and

Ø Encourage communication

3. Unintended effects(increase in injury incidents and compensation claims)

Ø Conform to all labor law standards punctiliously to avoid legal liability, and

Ø Promote proactive workplace safety measures

Adopted from:

Thilmany and Tranel (2008)


Stalker, L. & Hackworth, F. (2006). Incentive pay. Directors' Briefing. Human Resources Management. London: BHP Information Solutions Ltd.

Thilmany, D. & Tranel, J. (2008, August). Labor Management: Issues and Strategies for Incentive Pay Programs. Agriculture & Business Management. U.S. Department of Agriculture and Colorado counties cooperating Extension programs. Colorado: Colorado State University.

Allen, S.(2005).Factors influencing effectiveness of pay incentives. MBA Program. North Carolina: NC State University. Retrieved December12, 2009 , from

Center for Health Program Development and Management. (2003). Compensation as a Function of Retention of Nurses. Baltimore County: University of Maryland.

Tappan, Weiss, & Whitehead (2007). Essentials of Nursing Leadership and Management, 4th edition, F. A. Davis Company, Philadelphia.

Marquis & Hustom (2003). Leadership Roles and Management Functions in Nursing: Theory & Application, 4th edition, Lippincott, Philadelphia.

Sullivan & Decker (2001). Effective Leadership and Management in Nursing, 5th edition, Prentice Hall, New Jersey.

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