NASHVILLE, TN — Skilled nursing facilities have a complicated relationship with the volatile talent market. Today, providers will have to be creative in structuring their compensation philosophies to attract and retain the highly qualified leaders they so desperately need.

For 84% of operators For those who review their incentive offers annually and the 12% who review them twice a year, one compensation expert says there are three ways a package can be constructed so that it is competitive and reflects the organization’s goals.

Getting the base salary right is the foundation of everything.

“If your base salary is low, it will be low compared to everything else,” said Matt Leach, senior consultant at Total Compensation Solutions, during his LeadingAge session on Tuesday. “During COVID, we saw much lower raises for executives, because the money was going to staff. “I think there has been a recovery at the executive and senior management level.”

Most operators (70%) start base salaries at the 50th percentile mark, a great strategy for taking on the outside market, Leach said. But those starting here almost always offer additional incentives, such as total annual cash (30%) and solid benefits (65%).

One of the fastest growing reward elements in LTC is what providers use to retain great leaders for the long term.

“Most of the time, a deferred compensation plan is not offered from day one. When the board says we want to move forward with the CEO and we want to make sure we retain him, that’s when customizing (this) plan comes into play,” Leach said.

It is a two-way street. Seasoned executives are often attracted to one of two types of deferred compensation plans, as they are more likely to have their sights set on retirement.

“457(b) and 457(f) plans are excellent vehicles to take advantage of. “If the CEO can’t take full advantage of (his) defined contribution retirement plan because of the IRS limit, the first thing he can do is offer that (additional) amount as part of deferred compensation,” Leach said.

But some high-level executives with outstanding financial obligations or young children, for example, seek faster results on payments, Leach said.

To this end, traditional short-term incentives and bonuses are an attractive performance-based approach where suppliers can protect themselves while letting executives share in the success.

Short-term incentives are divided into four metrics.

“There are financial and operational metrics, although sometimes there is a little bit of crossover between the two on things like resident count,” Leach said. “Then, there are expansion metrics for those who are in the process of adding a new facility or wing. Finally, there are the division/individual metrics, which we don’t see as much.”

Ninety-three percent of suppliers use operational metrics as a determinant of short-term rewards, while 86% use financials. Split/individual metrics and expansion metrics have not caught up, being used by only 29% and 21% of traders, respectively.