Introduction
The healthcare sector in the Kingdom of Saudi Arabia [KSA] is experiencing significant transformation, which is arising from the high population growth rate. Currently, the sector is estimated to serve over 26 million citizens. Demand for healthcare services is expected to increase due to the annual population growth rate, which is estimated to be 2.5% (Al-Homayan, Shamsudin, Subramaniam & Islam, 2013).
The country’s healthcare sector is organized into two main tiers, which include tier 1 and tier 2. Tier 1 is comprised of the primary healthcare clinics and centers that offer basic care services such as prenatal care, emergencies, and other basic services. Moreover, it also includes mobile clinics that offer healthcare services in the remote rural areas. Conversely, tier 2 is comprised of hospitals that offer specialized health care services (Helen Ziegler & Associates, 2010).
The key players within the sector include the Ministry of Health [MOH], the private sector, and other governmental organizations. The KSA government owns and operates over 60% of the hospitals via the MOH, while the private sector and other agencies cater for 40% of the country’s healthcare services.
The hospitals offer basic and specialized health care services. MOH facilities are mainly accessible to local Saudis. The restrictions on accessibility of the MOH facilities imply that expatriates are forced to seek health care services from the private sector. However, the government controls healthcare activities in both the private and public sectors.
The KSA government is focused on improving the country’s healthcare sector, which is evidenced by its annual budgetary allocation. Between 2008 and 2010, the annual budgetary allocation to the healthcare sector increased from SAR 30 billion to SAR 52 billion of the total national government budget (Al-Homayan et al., 2013. Additionally, the sector’s annual budgetary allocation has been increased to SAR 108 billion.
The allocation is intended to improve the sector’s infrastructure. For example, the number of hospitals has been increased from 74 in 1970 to 415 by the end of 2010. Conversely, the sectors bed capacity has been increased from 9,039 beds to 58,126 beds by 2010 (Al-Homayan et al., 2013)
Problem statement
The KSA government has adopted tremendous measures that have led to an improvement in the physical infrastructure within the healthcare sector as illustrated above. However, the country continues to experience significant challenges with regard to human capital. The healthcare sector mainly depends on human capital such as nurses, pharmacists, physicians, and allied health personnel from the international market (Al-Homayan et al., 2013).
Some of the markets from which the KSA outsources its healthcare workers include North America, India, the UK, South Africa, and Malaysia. In 2000, the KSA outsourced over 8,000 nurses from the international market (Middle East Health, 2009). It is estimated that 45.80% of the total healthcare workforce is comprised of foreign workers (Al-Homayan et al., 2013). The aggressive recruitment process is aimed at reducing the doctor-patient ratio to 1: 400 (Middle East Health, 2009).
The KSA government has invested heavily in the education sector such as nursing education in an effort to improve the quality of healthcare providers. However, the high population growth rate indicates that that the country’s healthcare sector will experience a substantial increment in demand for healthcare services.
It is estimated that the country’s population will amount to 45 million by 2025. Thus, the number of healthcare professionals might not be in a position to serve the increase in demand for healthcare services owing to the high population growth rate (Al-Homayan et al., 2013).
Therefore, it is imperative for the KSA government to implement additional measures that will foster sustainability of the KSA health sector. One of the measures that the KSA government undertook entails the standardization of pay scale to all healthcare staff working in the state-run healthcare centers and hospitals (Hartley, 2009).
Previously, the sector’s pay scale varied in which expatriates received attractive incentives such as higher salaries and wages and travel opportunities as compared to Saudi healthcare professionals (Al-Homayan et al., 2013). Additionally, the pay scale varied depending on the nationality of the expatriates. For example, Malaysian nurses received a different pay form that received by nurses from Western countries.
The government’s motive to adopt a varied pay scale was to foster the sector’s competitiveness in the international labor market (Al-Homayan et al., 2013). Considering the fact that the dynamics of attaining organizational success have changed from financial capital to labor, the success of the KSA healthcare sector in providing services will depend on the expertise, knowledge, and level of satisfaction amongst the healthcare professional.
Therefore, it is imperative for the KSA government to evaluate the impact of the new unified national pay scale on healthcare professionals working in the Saudi healthcare sector. Gaining such knowledge will provide the KSA government with sufficient intelligence on the effectiveness of the unified pay scale. Thus, the government will be in a position to enhance the performance and sustainability of the sector.
Important economic concepts
This report is based on a number of economic concepts, which are briefly outlined in this section.
Salary-setting and compensation management
According to OECD (2012), managing the employees’ pay and benefits is one of the critical components in sustaining the cost of labor. Salary setting entails the determination of the pay scale, which is applicable to a particular group of employees and it is concerned with determining the employees’ financial compensation.
Conversely, compensation management involves the diverse activities that are adopted in order to satisfy the array needs of employees. The objectives of compensation management are multifaceted. Thomas and Maurice (2012) argue that the compensation policy adopted determines the success of a public sector in attracting, motivating, and sustaining a productive workforce. Moreover, compensation management is also focused on ensuring equity in the employee remuneration process.
Pay unification
Pay unification is a salary setting strategy, which entails establishing the pay scale, which is applicable to employees based on their merit. The objective of pay unification is to ensure proportionality in the employees’ remuneration process.
Cibils, Giugale, and Somensatto (2008) further opine that pay unification “is aimed at eliminating a substantial number of monetary payments that distorts the common salary scale” (p. 364). Alternatively, OECD (2012) asserts that pay unification is achieved by incorporating job titles and a grading system.
Equity theory
According to Caruth and Handlogten (2001), the equity theory underscores the importance integrating fairness and equity in the process of designing the employees’ compensation plan. Firms in the private and the public sector must focus on developing positive perception amongst employees regarding their work.
Organizational leaders must balance between the rewards offered to employees and their job effort. Thus, organizational leaders must develop a mutual relationship with their workforce.
Expectancy theory
This theory asserts that the employees’ efforts and commitment in their job depends on their perception regarding the likelihood of attaining a positive outcome with reference to rewards. Subsequently, the level of employee motivation is dependent on three main factors, which include the effort, performance, and outcome.
Demand and supply
Demand refers to the consumers’ ability and willingness to purchase a particular property at the set price. According to the law of demand, the price of commodities increases as the quantity demanded increases. Alternatively, the price decreases as the price declines.
According to Arnold (2010), “the law of supply states that as the price of good rises, the quantity supplied increases and the as the price of goods falls, the quantity supplied declines” (p. 87).
Research hypothesis
In an attempt to assess the relationship between the new national unified pay scale on healthcare professionals working in hospitals and healthcare centers in Saudi Arabia, this paper will evaluate two main hypothesis, which include the null (H0) and the alternate (H1) hypotheses.
- H0; the new national unified pay scale will improve the level of commitment and productivity amongst the healthcare professionals.
- H1: the new national unified pay scale will not influence the performance of the healthcare professionals.
Literature review
Employee compensation is a critical aspect in improving the attractiveness of the public sector to potential employees. Compensation of public servants accounts for the largest proportion of governments’ expenditure. It is estimated that salaries and wages account for over 80% of the total government expenditure (OECD, 2012). However, the wage bill varies across countries.
Some governments base the salaries and wages of their public servants on performance and number of working hours. Governments should compare their public servant compensation levels in order to evaluate their competitiveness (OECD, 2012).
A survey conducted on a number of OECD countries shows that countries organize their pay structure differently. Some of the common compensation systems include grade and pay structures. O’Riordan (2008) defines grade and pay structure as “a medium through which an organization or government can communicate the career and pay opportunities available to employees” (p. 9).
O’Riordan (2008) further argues that the grade and pay structures provide governments with insight on the pay policies to implement. Furthermore, pay structures provide intelligence on the hierarchical structures to be adopted in designing the job (Albejaidi, 2010).
For example, the government is in a position to determine the pay levels and the scope of progression, hence determining the most effective approach to managing possible relativities. Countries such as Italy, Estonia, the United States, and Sweden have incorporated the highest social contributions in their employee compensation plan. Other countries such as New Zealand, Korea, and Ireland have the lowest social contribution in their employee compensation plan (OECD, 2012).
Over the past few years, governments have been subjected to changes arising from diverse sources. Economic changes experienced over the past few years such as the recent economic recession have stimulated governments to adopt job cuts in an effort to minimize government expenditure. The decision to implement job cuts in different public sectors has been motivated by the need to manage government expenditure.
However, the job cuts being adopted by different governments might affect the performance of the public sector employees (Labor Research Department, 2011). Over the past few years, public administrators have appreciated the concept of merit-based pay by incorporating a single pay spine. According to Albejaidi (2010), most federal governments introduced merit-based pay during the 1970s and 1980s.
The single pay spine is mainly based on a grading system and a basic pay and it is intended to eliminate trade-offs encountered by governments in managing the level of wages amongst the public servants. Furthermore, O’Riordan (2008) asserts that civil servants “are paid according to a salary scale, which is predetermined in the pay spine that is applicable to all job categories” (p. 14).
Some of the factors considered in the process of formulating the pay spine include the exchequers’ ability to finance and sustain the budgetary allocation to the civil servants and the employees’ performance (O’Riordan, 2008). Ireland is one of the countries that have adopted a grading system in determining the level of remuneration amongst the civil servants.
However, the Irish grading system can be defined as narrow as it is comprised of a series of jobs, which are categorized under one group depending on their relative equivalence. Despite the narrow grading system being effective in managing the employees’ compensation, the system requires the development of numerous grades in order to accommodate the diverse salaries.
Moreover, the narrow grading system is criticized as it limits the likelihood of employees progressing through their career path. O’Riordan (2008) asserts that promotion “to a higher grade is almost the only form of reward for good performance” (p. 14). The pay scale is determined by the central government, which means that the bargaining power of civil servants is limited. However, the government ensures that the process of determining the pay scale is highly transparent (O’Riordan, 2008).
Almalki and Clark (2012) affirm that numerous “state governments and federal agencies have launched competitive merit-based pay systems as a part of government reforms’ effort” (p. 2). This aspect has led to the emergence of new public management approaches. Some of these countries include the United Kingdom and New Zealand.
The motivation to adopt new public management approach arose from the need to improve service delivery. Moreover, Germany has also adopted a new public management model, which is commonly referred to as the ‘New Steering Model’. The model encouraged public sector firms to adopt employees’ compensation based on their performance, which led to the emergence of the performance contracts. Furthermore, the model further ensured that employees are customer oriented.
According to Almalki and Clark (2012), linking pay and performance leads to the attainment of a high level of effectiveness and efficiency within the workforce. Moreover, merit-based pay enables governments and organizations to reward exceptional performance.
For example, employees have the opportunity to receive high pay in accordance with their experience and performance. The available literature documents a number of cases whereby some public sectors such as the healthcare sector have performed dismally in their service delivery processes. Mid Staffordshire Hospital in the UK is a classic example of a firm that have experienced remarkable decline in its performance from 2005 and 2009 (Public Inquiry, 2014).
Similarly, the Saudi healthcare sector was characterized by unattractive employee compensation package, which limited the sector’s attractiveness to Saudis as opposed to foreigners (Al-Homayan et al., 2013). The chart below illustrates the basic salary applicable to healthcare professional in Saudi Arabia.
Source: (Al-Homayan et al., 2013)
The above table shows that nurses in Saudi Arabia are paid the least amount despite the fact that they work for a longer duration as compared to other healthcare professionals. Additionally, the table shows that the grading and pay structure is ineffective as it is extensively narrow.
For example, there are four main levels in each of the salary scale, which means that the likelihood of healthcare professionals achieving meaningful job promotion is limited. The compensation policy within the country’s healthcare sector also affects healthcare professionals. For example, the pay scale of foreign health care professionals is based on 1-year contract.
Moreover, the expatriates are compensated based on their country of origin and experience. This aspect affects the employees’ compensation policy in Saudi Arabia healthcare sector (Al-Homayan et al., 2013). Thus, the importance of developing effective incentive management systems cannot be underestimated in order to improve service delivery within the sector. However, the process of developing effective pay system is challenging and it requires the input of diverse stakeholders (Gohari, Ahmadloo, Boroujeni & Hosseinpour, 2013).
Data description
In order to assess the impact of the unified pay system on healthcare professionals in Saudi Arabia, the study has relied on qualitative and quantitative research design. The decision to adopt qualitative research design was motivated by the need to collect sufficient data from the field.
Subsequently, the researcher was in a position to explore the impact of the new national unified pay scale on the performance of different healthcare professionals. Conversely, quantitative research design enabled the researcher to understand the magnitude of the new compensation policy. This goal was achieved by incorporating quantitative measures such as statistics, hence enriching the descriptive data collected.
Data was collected from primary sources, which was achieved by issuing questionnaires to a number of healthcare professionals [nurses, physicians, and pharmacists]. A sample comprising of 100 respondents was selected from different public hospitals in the KSA.
Simple random sampling technique was adopted in selecting the respondents. Thus, the researcher eliminated bias during the data collection process. Moreover, the questionnaires were designed effectively in order to ensure that they were not ambiguous, hence increasing the rate of response.
The responses obtained from the survey varied. Ninety-six (96%) of the respondents argued that the new pay scale would lead to an increase in the level of motivation, while 4% argued that the new system would de-motivate healthcare professionals.
The respondents argued that unification of the pay scale would eliminate discriminatory practices in the process of determining the remuneration of healthcare professionals. Moreover, 97% of the respondents were of the view that the new national unified pay scale will promote the development of the Saudi healthcare sector.
In their opinion, the respondents argued that the new pay scale would improve the attractiveness of the Saudi healthcare sector amongst the Saudi nationals. More Saudis will join the Saudi healthcare sector, hence enabling the firm to deal with the skills shortage in the sector. Subsequently, the country will be in a position to deal with an increase in demand for healthcare services owing to increase in the country’s population.
Eighty-five percent [85%] of the respondents were of the opinion that the unified pay scale presents an opportunity for progressing through their desired career path within the healthcare professional. The respondents argued that unification of pay scale across the public sectors in the GCC countries means that they will not be discriminated based on their nationality.
On the other hand, 15% were of the opinion that the unified pay scale will increase the level of bureaucracy within the healthcare sector. These respondents were of the view that the unified pay scale means that the entire healthcare sector in Saudi Arabia would be centralized. Subsequently, the process of undertaking performance appraisal in order to determine the possibility of job promotion would be difficult.
Economic analysis
The data collected from the field corresponds with other studies that have been conducted on the performance of the healthcare sector in Saudi Arabia. First, the adoption of the new national unified pay scale has led to a significant improvement in the level of job satisfaction amongst the healthcare professionals.
Prior to the adoption of the new unified pay scale, the Saudi healthcare sector was characterized by a relatively low level of job satisfaction. A report released by the Saudi Arabian Ministry of Health shows that the level of job satisfaction index within country’s healthcare sector has increased tremendously over the past few years. The chart below illustrates the trend in the level of job satisfaction.
The graph above shows that the level of job satisfaction has increased across the various professional. However, the nursing profession has experienced higher level of job satisfaction as compared to the pharmacist and pharmacist professions. One of the factors that might have stimulated increased the level of job satisfaction entail an increase in the level of allowances.
In the unification program, the allowance of all healthcare professions, who have successfully attained professional excellence, will be subject to a 30% increase (Hartley, 2009). Therefore, salary increment has motivated healthcare professionals to be focused in enhancing their career by pursuing additional healthcare training courses in order to be eligible for the allowance increment.
The new national pay-scale unification scheme has also considered the training supervisors by rewarding them with a SAR 2,000 monthly allowance. Heads of departments and directors will receive a monthly lump sum (Hartley, 2009). Therefore, there is a high probability of the Saudi healthcare sector experiencing a significant improvement in the effectiveness of operational efficiency due to the high level of employee motivation.
The new salary scale has led to a considerable increment in the number of Saudi healthcare professionals as opposed to expatriates. Previously, the employee determination of healthcare professionals’ salary scale and compensation policy was based on discriminatory practices. Expatriates received a higher pay as compared to Saudi nationals.
However, the trend has changed as illustrated by the percentage change in the composition of healthcare professionals.
The above graph illustrates a considerable increase in the number of Saudi nationals who are joining the healthcare profession. This aspect implies that the sector will be in a position to deal with the increase in demand for healthcare services as demand increases. Moreover, the unification of the pay scale will enable the Saudi healthcare sector to adhere to propositions of the equity theory, which emphasizes equal employee treatment irrespective of their demographic characteristics (Gohari et al., 2013).
Findings of the study conducted affirm that the new pay scale in the Saudi healthcare sector has remarkably improved the level of job satisfaction. The sector has experienced a considerable decline in the rate of turnover intention over the past five years.
One of the factors that might have contributed to the reduction in the rate of employee turnover entails change in perception of healthcare professionals regarding the working conditions within the Saudi Arabian healthcare sector. The chart below illustrates the trend in the rate of employee turnover.
The level of service delivery in the healthcare sector has also been improved due to the high level of employee motivation.The MOH has recorded an increase in the number of patients seeking healthcare services in the public health facilities from 34% in 2009 to 78% in 2013. This aspect indicates a significant improvement in the quality of service delivery within the public healthcare facilities.
Conclusion
The sustainability of any economic sector is greatly influenced by the quality of its human capital. Therefore, it is imperative for the private and public sectors to improve their attractiveness to the local and foreign labor markets. One of the core areas that private and public sectors should focus on whilst improving their competitiveness in the labor market entails bettering the working conditions.
Thus, effective HRM practices such as employee compensation should be taken into consideration. The level of compensation awarded to employees should be aligned with their performance and level of qualification. Considering these dimensions ensures that the compensation policy adopted is equitable and fair.
The study above highlights that governments are increasingly appreciating the importance of adopting effective compensation policies in order to improve the performance of the civil service. Saudi Arabia is one of the countries that are focused on improving the quality of service delivery within the public sector.
Subsequently, the government has undertaken a number of reforms on its grading and pay performance system within the healthcare sector. The Saudi govrnment has adopted a new unified national pay scale, which is aimed at improving the level of job satisfaction.
Since its inception in 2009, the Saudi Arabian healthcare sector has become competitive both in the local and international markets. The new unified pay scale is focused on rewarding healthcare professionals based on their merit. The healthcare professionals are remunerated equitably and fairly irrespective of their demographic characteristics such as nationality.
Subsequently, the government has been in a position to eliminate discriminatory practices that previously characterized the healthcare sector. As a result of pay scale unification, healthcare professionals in Saudi Arabia have become motivated in executing their roles and responsibilities. Moreover, the unified pay scale has entrenched the concept of equity and fairness, hence leading to improvement in the level of job satisfaction.
Apart from the remarkable increment of the sector’s attractiveness to domestic and foreign healthcare professionals, it has also experienced a significant reduction in the rate of employee turnover. Consequently, the likelihood of the sector coping with environmental changes such as an increase in population has been enhanced. Therefore, the findings of the study validate the null hypothesis considered in this study.
Recommendations
The study shows that the adoption of the new national-unified pay-scale in the Saudi Arabian healthcare sector has remarkably improved the performance of healthcare professionals. However, in order to improve the sustainability of the healthcare sector in delivering healthcare services to Saudis, it is imperative for the government to consider the following aspects.
- The government should review the new national unified pay scale continuously in order to determine its effectiveness in motivating employees. By undertaking periodic reviews, the government will be in a position to make the necessary adjustments. For example, the Saudi government through the Ministry of Health will be in a position to factor inflationary pressures to the new pay scale.
- In order to ensure that healthcare professionals are motivated adequately, it is imperative for the Saudi government to incorporate other elements in designing the employees’ reward system. Some of the issues that the Saudi government should consider include non-monetary benefits such as offering healthcare professionals comprehensive training and development opportunities, social benefits like insurance, and career leaves. These components will lead to the development of an environment conducive for working.
- The Saudi government should ensure that the promotion of healthcare professionals is based on merit. Some of the elements that the government should consider include the level of experience and educational qualification. This aspect will provide all healthcare professionals with the opportunity to progress through their respective career paths.
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