Many times, I am asked questions regarding staffing and staff compensation issues. When we were in dental school, nobody ever told us that we would have to be a human resource professional, but that is exactly where many of us find ourselves. Decisions about hiring and firing, as well as salaries, insurance, retirement planning, and bonuses must be made. Each of these issues are complicated and specialized in their own right, so I will do my best to simplify and address each of these issues as succinctly as is possible in the space that I have.
Let’s discuss each of these important subjects starting with salaries. Total staffing costs are normally in the 24% range of gross (total) income. It is important to note that this number fits into a range and is by no means an absolute figure. The growth of managed care plans in the market today has caused these percentages to slowly shift higher. The cause for this is that payment for procedures has decreased, but due to the increased need to provide these services and being forced to see an ever increasing base of patients to make ends meet, we have had to hire more staff thus pushing that range upward toward the 30% level. Even if we don’t accept plans, many times certain employees are worth extra pay due to their expertise, or patient skills, and will cause the ranges to skew to the upside as we reward these staff members. Improved office management with increased scheduling skills can improve efficiency which can decrease these percentages.
Well-run offices many times operate their offices at a 20% staff compensation level. The important take away here is that staffing compensation is in a range and not an absolute number. However, this is singularly the largest area of the dental budget and should be scrutinized the most. Overstaffing has choked many practices that I have seen. Remember to include staff benefits whenever you calculate staff compensation as it is part of the total compensation package.
Speaking of benefits, these costs for these programs can vary widely. Many times, the decision to offer certain benefits is dependent upon those benefits offered by other dentists in your area. I would always recommend not to offer benefits unless you feel that you must, as they can cause a significant drain on the financial resources of the practice. An important issue to remember is that once you offer a benefit, you will pretty much be married to that benefit for the foreseeable future, so be careful in what you introduce.
To be competitive, and to retain top notch staff, benefits may have to be offered. The most common benefit offered is medical insurance. It is the one that is most sought out after as staff. It is always better for the bottom line of the practice if you don’t have to offer this benefit, but if it is either necessary for competitive reasons, or you embrace it because of a moral stand, then we must be wise in its application.
Medical insurance is one of those benefits that if offered to one employee it must be offered to all employees, meaning that you can’t discriminate, or cherry pick, the employees that receive these benefits. One way to provide this benefit is to offer a maximum amount that you will pay monthly toward the benefit (perhaps $250–$300/month/employee). While perhaps not being able to cover all of the benefit, it can substantially help your employees, especially those in need. It can also allow them some determination in their plan design. There is no need to offer life insurance or disability insurance and I would deem these unnecessary for dental offices.
Another benefit that is often offered is retirement plan contributions. In the past, these contributions were usually the dentist’s responsibility utilizing defined contribution plans, in the form of profit-sharing plans, and defined benefit plans. These plans have slowly fallen out of favor due to the cost for employers in contributions, as well as plan design and maintenance costs. Times have changed and the 401-k has become more prominent in the dental world. This has taken the responsibility of contributions from the dentist and shifted it to the staff. The dentist agrees to match a certain percentage of contribution that the employee pays in order to entice them to contribute. In this manner, it limits the owner’s responsibility and contribution cost significantly.
Finally, let’s talk about bonuses. I have seen many forms over the years and have seen their benefit and motivation value to staff. One of the forms that I am most fond of is where a monthly goal is set and production and collections are averaged rather than use only one, or the other. This way the staff understands they must work hard to produce that number, but the business office must also collect it. By doing this, it prevents overloading the schedule in order to achieve the goal for a particular month. The benefit is then set on a three-month rolling average. In this manner, one great month or poor month doesn’t skew the results and cause financial hardship. This allows for a more even cash flow distribution.
Salary compensation is never a fun subject, but it needs to be put in the perspective that these individuals are the life blood of a practice and by far our most important business asset. If you don’t believe me, reflect on how the loss of that valued assistant or hygienist in your past has affected your practice. I would dare say that losing an important individual will cost the practice a minimum of at least $50,000. So while the bottom line is always important when addressing staffing, be sure to be prudent in your planning and not cut staff just to save money.
John W. Portwood, Jr., DDS, MS, MSF, CFP, ChFC, CLU, MAGD is a frequent lecturer on financial issues that affect dentists. He is a former state AGD president and recipient of the the AGD’s Distinguished Service Award.
