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4 rules for effective compensation in your dental practice

March 24, 2015
When dental staff ask for a raise, many dentists do not realize how that simple "$2 an hour" will impact their bottom line. Here are some guidelines for establishing pay raises in your dental practice.

Is it time to increase pay in your practice? According to, 88% of employers set their sights on increasing pay this calendar year, and the average pay increase is expected to be 4.5%. But rest assured, the majority of those increases are determined based on careful planning and consideration. In fact, more than 73% of respondents indicated that their businesses use a formal compensation strategy.

It is that last point that dental practice owners would be wise to note – a formal compensation strategy. In many dental practices, the “compensation strategy” simply involves an exchange between doctor and employee that goes something like this:

Employee: “Dr. Tom, could I talk to you for a moment?”
Dr. Tom: “Of course, what would you like to talk about?” Employee: “Well, I really like my job and everyone here, but I’m having trouble making ends meet. I was hoping that you might be able to give me just a small increase in pay, maybe just $2 more an hour?”
Dr. Tom: “Well, that hardly seems like an unreasonable request, and you are quite an asset to the team. I’m sure we can make that happen for you.”
Employee: “Thank you so much!"

ALSO BY SALLY MCKENZIE:7 signs your dental practice is busy, but not productive

Dr. Tom means well, but he has absolutely no idea how much the employee’s change in pay will impact his bottom line.Certainly, creating a “fair” system for compensation can be challenging in any workplace that depends on teamwork and trust, which would be virtually every dental practice. Reward some and you seemingly punish the rest. Reward all and you send the message that average effort pays the same as excellent effort. It’s a management minefield for most dentists who struggle with balancing the financial needs of the practice with the financial desires of the staff. How do you navigate this tricky issue? With clear leadership and specific salary guidelines.

Effectively handling the matter of money with your staff requires that you manage their expectations from the outset. It starts on day one, not six, eight, or 12 months after the employee comes to work for you. Explain when raises will be discussed and under what circumstances a raise will be given.Implement the following four rules of staff compensation, and start managing payment expectations immediately.

Rule 1: Establish a clear compensation policy – Based on the market, identify the pay range for each position. Explain to every team member exactly how the compensation system will work, how much is available to the employee, what formulas are used, what it takes for them to earn more money, and how much more they can earn in that specific position.

Rule 2: Conduct a salary review – Before you convince yourself that another $1.50 an hour isn’t going to break your bank, check the balance sheet. We have a clear and simple salary review form that is a mathematical tool you can access immediately to determine exactly how much more money you’ll need to collect each month to cover that seemingly insignificant pay increase. This ensures that you’re making an informed rather than emotional decision when it comes to salary increases. Your goal is to follow compensation benchmarks, which means wages should be in the 19% to 22% range of gross collections, not including the doctor’s salary or taxes/benefits.

Consider this example: if your current monthly collections are $48,325 per month and your existing salaries are $9,353, then a $2 hourly raise from $15 to $17 for your assistant, who is working a 36 hours week, will increase existing salaries to $9,665, which is within the 20% industry benchmark. However, if your current monthly collections are $39,000 and existing salaries are $9,353, that puts you at 24% of gross production and well above the standard.

Rule 3: Develop a plan – As a team, discuss ways
to make more before you spend more. Every salary increase, no matter how small it seems, has a direct impact on overhead. For example, consider new strategies to boost hygiene production and treatment acceptance. Take a close look at collections, and make one employee accountable for collecting money, generating accounts receivable reports, and following up on delinquent accounts. The financial coordinator should achieve a daily collections rate of 45% or higher. In addition, expect full payment for all procedures under $200. Provide patient financing through CareCredit, and require insurance patients to pay their portion of their payment at the time of service.

Rule 4: Develop job descriptions – Results-oriented job descriptions should be created for all staff. Involve each team member in establishing his or her own performance objectives that are consistent with overall practice goals, such as scheduling to meet production goals, keeping the hygiene schedule full, and more. Offer professional training for employees to help them succeed, and provide constructive and instructive feedback regularly. Finally, hold employees accountable for their systems. Remember, pay increases should reward excellence and dedication to advancing the practice, not another year on the calendar.

Sally McKenzie is CEO of McKenzie Management, a nationwide dental management, practice development, and educational consulting firm. Working on-site with dentists since 1980, McKenzie Management provides knowledge, guidance, and personalized solutions that have propelled thousands of general and specialty practices to realize their potential. She can be reached at 877-777-6151 or [email protected].