2004 Salary Survey

As anyone in the home medical equipment business soon learns, while the equipment is a critical part of the HME package, it has a companion. The industry also delivers service that requires both specialized skills and a customer-oriented culture at all levels of the work force, from billing and delivery to therapy and pharmacy.

People are the heart of the business — and, fittingly, the biggest item on the budget.

“With all due respect to product, physical plant, technology and other capital investments,” says author and consultant Vince Crew, “without a highly dependable, well-trained and courteous staff, nothing else would be possible. Every function — unloading the truck, answering the phones, repairing equipment, managing the referral network, delivering the product — goes directly to sales, cash flow and profitability.”

With so much of a company’s performance riding on even the lower-paid workers, the best employees can be worth every penny they’re paid. But how many pennies are enough to hire and retain them? How much is too much?

Every year, HomeCare helps readers answer such questions with its salary survey, a provider poll that gauges the HME industry’s pay and benefit practices. If a business owner wants to know what peers are paying customer service reps, billing clerks, pharmacists and other employees, the survey has the numbers, based this year on data from more than 300 home care firms.

The 2004 survey offers mixed news for employees. Pay in the industry appears to be rising at least as fast as wages in the overall economy. Benefits, however, show signs of eroding among smaller HME companies. From the employer’s perspective, the survey suggests that cost pressures remain strong in both pay and benefits, especially in health coverage. In some categories, however, salaries are up more than the average — a sign that the supply of qualified people may be falling short of demand.

Following are the key trends that show up in this year’s survey.

Pay is up, for most

As in 2003, nearly all firms responding to the HomeCare survey are giving raises to at least some of their employees. At 42 percent of the companies, pay hikes apply staff-wide. Another 12 percent of the firms say they are giving raises to at least 90 percent of their employees; another 9 percent said they’re giving raises to at least 75 percent.

At the other end of the scale, just under 17 percent of the participating companies said they are giving raises to less than half their staff. All told, the 2004 results indicate that at least two-thirds of all employees in the surveyed firms are getting raises (not counting those in firms that didn’t reveal salary data to the survey).

For those who saw their pay go up, the raises were above national averages as indicated by economy-wide surveys. Again, 2004 looks much like the year before. Nationally, raises were modest. One survey by Mercer Consulting puts budgeted 2004 pay increases at 3.4 percent, excluding companies with no raises planned. Another, by the Conference Board, estimates that raises this year are averaging 3.5 percent, virtually the same as in 2003. And, just as in 2003, HME raises are slightly higher. In the HomeCare survey, the average raise was 5.4 percent, down from 6.4 percent in 2003. The median raise was the same in both years, at 4.0 percent.

Another pattern from 2003 also carries on into this year: a slight small-company advantage, at least for the workers who received raises. Employees at HME firms with revenue under $1 million had an average raise of 6.4 percent and a median raise of 5 percent. Those at companies in the $1.0-$2.9 million range did nearly as well, with an average of 6 percent and a median of 5 percent. At firms with sales of $3 million or more, however, raises averaged just 4.4 percent, with the median salary increase at 4 percent.

But while it might be slightly lower, HME employees’ chances of getting a raise are better at the larger firms, where 92 percent doled out increases compared to only 62 percent of smaller companies.

Some jobs lead, others lag

Raises vary by job category, with some positions racking up handsome gains and others staying static or even losing ground. Categories showing the biggest percentage gains, based on median (midpoint) annual salaries, are delivery technicians (up 16 percent to $29,000), operations/warehouse managers (up 14 percent to $40,000), pharmacists (up 13 percent to $85,000), store/branch managers (up 11 percent to $50,000) and controllers and finance vice presidents (up 9 percent to $71,000).

Other jobs fared less well. Outside sales/marketing representatives saw their median annual pay fall 5 percent to $40,000. Median salaries for respiratory therapists stayed flat at $40,000; CEOs were stuck at $75,000 and sales managers/VP sales stayed at $60,000. Billing clerks’ pay remained at $25,000 a year and $11 an hour. The picture was mixed for bookkeepers and assistant controllers, who saw their median annual pay rise 17 percent to $35,000 but their hourly rate fell from $13 to $12. Customer service positions were flat or had below-average salary hikes.

Some categories did better on the basis of salary averages, which were skewed by a few high numbers. The average hourly rate for pharmacists, for example, rose from $30 reported by the companies participating in the 2003 survey to $42 this year.

What do these numbers say about the market for people with HME-related skills? For one, they seem to confirm the widespread impression that pharmacists are much in demand and can name their price (especially, it seems, if they work by the hour).

Another trend, the stagnant pay of customer service managers and reps, may be the cause of problems more than a symptom.

Miriam Lieber, an operations management consultant based in Sherman Oaks, Calif., says retention tends to be toughest in customer-service jobs, which are “chaotic by nature.” It’s difficult, she says, “to find people who are capable of handling chaos and multitasking.” Yet these demanding positions are near the low end of the HME pay scale. “People think [customer service] is a low-skill job when it’s actually a high-skill job,” Lieber says. “We don’t give it the priority level that is commensurate with the task at hand.”

The shrinking salaries of outside sales/marketing reps may be due in part to a gradual shift toward commission-based pay. The HomeCare survey has not tracked the salary-commission breakdown until this year, but Louis Feuer, a marketing consultant and trainer based in Pembroke Pines, Fla., says he has seen a trend toward commission-based compensation over the years in HME. “I would say 75 percent of salespeople are now on commission; I would say 25 years ago no one was on commission,” Feuer reports.

Among responding companies in 2004, commission compensation is most common at larger firms with $3 million or more in sales. Just over half (51 percent) say they pay sales staff through some combination of commission and salary, while 2.8 percent pay through commission only. But commission-based pay is still not the usual practice among small firms (under $1 million), where 50 percent of these companies pay by straight salary, while only 21 percent base pay on a combination of salary and commission. Even among the larger companies, more than a third (36 percent) take the all-salary route.

Health coverage is under pressure, especially at small firms

HME employers are not immune to economy-wide trends, and one of the most unmistakable of those is the sharply rising cost of health coverage. According to a recent report by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust, health insurance premiums paid by U.S. employers have risen 11.2 percent in 2004, reaching an average of $9,950 for families and $3,695 for individuals. Since 2001, the report said, premiums have soared 59 percent.

Health coverage is by far the most costly employee benefit, and its rising cost may be taking a toll on HME companies and their workers. In this year’s survey, as in 2003, HomeCare asked HMEs about which benefits they provided to employees, either fully or partly paid by the company. The results show that the percentage of companies offering medical insurance has slipped, from 78.7 percent in 2003 to 75.5 percent in 2004. The survey did not ask if employers were also asking workers to pay a larger share of premiums, but this has become a widespread practice at many U.S. companies in various industry sectors.

The drop-off in coverage was sharpest at small firms. Among those under $1 million in revenue, only 46 percent said they are providing medical insurance in 2004, compared to 61 percent in 2003. The decrease was much less at firms in the $1 million to $2.9 million range, where the number offering coverage fell from 85.4 percent to 83.5 percent. Among firms with sales of $3.0 million and up, the percentage offering coverage actually rose a bit, from 94.9 percent to 95.3 percent.

The message in these numbers is that large firms are managing to keep coverage, even though they may be asking employees to shoulder more of the cost. But small firms seem to be losing ground fast. When fewer than half of them can offer health insurance while most larger firms can, they are in danger of facing a widening competitive gap when it comes to attracting employees.

What’s a small HME to do? One thing not to do, says Feuer, is to drop health coverage. He says the rising cost of insurance should be goading companies to cut costs and tighten operations, as well as asking employees what benefits they actually want. It’s possible, he says, that a company may be offering a fringe benefit that most workers would be willing to give up in favor of health coverage. Asking employees for cost-cutting ideas could be a eye-opener, he adds: “Before you say you can’t afford something, there’s probably some employee in your office who could be your best consultant.”

Beyond that, HME providers should be ready to do what most employers do these days — stay on top of the insurance market and shift more of the cost to workers. As Crew explains, the health insurance challenge in HME “is no different than in another independent business owner’s life, and the alternatives are threefold: Constantly shop plans, increase co-pays or lessen coverage.”

But don’t expect gratitude, Crew adds. “As I constantly advise owners, no matter what you decide, you’re wrong, so the sooner you realize that, the better off you’ll be … The reality is that employees feel they ‘deserve’ everything for ‘free’ — and owners don’t. Somehow a dialog between owners, managers and staff has to occur explaining the situation.”

About the Respondents

In July, HomeCare mailed survey questionnaires to 1,500 randomly selected domestic subscribers asking about salaries, benefits, raises and more. Of 302 companies that returned completed surveys, the majority (72 percent) indicated their organization is a home medical equipment/service provider. The remaining participants said they worked in specialty home care, retail pharmacy/drugstore or hospital-based HME.

Respondents operate in a number of different areas and represent a wide range of company sizes. While 21 percent of respondents are located in metropolitan areas with populations of a million or more, 48 percent said their companies are located in areas with a population of less than 100,000.

Nearly half of the respondents (49 percent), or 149 companies, said they operate only one location, though the survey also includes 26 firms that operate 100 locations or more. Thirty-two percent reported revenue of less than $1 million, while 13 percent had revenue of $10 million or more.

For the Record: Survey methodology conforms to accepted marketing research methods, practices and procedures and the guidelines set forth by American Business Media. Data was collected July 15, 2004, through Aug. 18, 2004. Percentages are based on responses from 302 companies. Not all respondents answered every question, and some totals may add to more than 100 percent due to multiple responses. Results in HomeCare’s full research report are tabulated by revenue, number of locations and area of operation, revealing the ways home medical equipment providers in various circumstances approach employee compensation. For a complete copy of the 2004 Salary Survey, visit our Web site at www.homecaremag.com and click on the button titled “Purchase Exclusive HomeCare Research.”

RESPONDENT PROFILE

SALARIES & BONUSES

RAISES

Survey Fast Stats

About Benefits

• Providers responding to the survey spend an average of 18 percent of salary on employee benefits.
• Eighty-eight percent of respondents offer vacation time, while 76 percent offer medical insurance and 74 percent offer bonuses.
• Over half of responding companies that offer bonuses do so to all employees (52 percent). An additional 30 percent of companies offering bonuses do so for sales staff. Twenty-seven percent offer bonuses to managers, 14 percent to billing/back office employees and 12 percent to customer service reps.
• Of responding companies that offer bonuses, 59 percent indicate the bonuses are linked to revenue goals, while 48 percent say they are liked to performance goals.
• Forty-four percent of respondents pay their sales staff straight salary, while 37 percent pay on a salary-plus-commission basis. Four percent of respondents pay their sales staff commission only.
• Of surveyed companies that pay salary-plus-commission, the average guaranteed base salary on a percentage basis is 55 percent.
• Only 17 percent of respondents offer their employees a pension plan. Fourteen percent offer a profit-sharing plan.

About Salaries

• More than half of respondents (52 percent) link salary increases to performance goals, while 30 percent link salary increases to revenue goals.
• Seventy-three percent of respondents use performance appraisals as an employee management tool.
• Of responding HME companies, 81 percent indicate that at least some employees received a raise in the past 12 months.
• The average salary increase given by responding companies was 5.4 percent.

RAISES

Survey Fast Stats

About Benefits

• Providers responding to the survey spend an average of 18 percent of salary on employee benefits.
• Eighty-eight percent of respondents offer vacation time, while 76 percent offer medical insurance and 74 percent offer bonuses.
• Over half of responding companies that offer bonuses do so to all employees (52 percent). An additional 30 percent of companies offering bonuses do so for sales staff. Twenty-seven percent offer bonuses to managers, 14 percent to billing/back office employees and 12 percent to customer service reps.
• Of responding companies that offer bonuses, 59 percent indicate the bonuses are linked to revenue goals, while 48 percent say they are liked to performance goals.
• Forty-four percent of respondents pay their sales staff straight salary, while 37 percent pay on a salary-plus-commission basis. Four percent of respondents pay their sales staff commission only.
• Of surveyed companies that pay salary-plus-commission, the average guaranteed base salary on a percentage basis is 55 percent.
• Only 17 percent of respondents offer their employees a pension plan. Fourteen percent offer a profit-sharing plan.

About Salaries

• More than half of respondents (52 percent) link salary increases to performance goals, while 30 percent link salary increases to revenue goals.
• Seventy-three percent of respondents use performance appraisals as an employee management tool.
• Of responding HME companies, 81 percent indicate that at least some employees received a raise in the past 12 months.
• The average salary increase given by responding companies was 5.4 percent.