Should associates have to pay their lab bills?

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OK, let me start off by saying there is no one correct answer to this question, but there are some wrong ones. Many dentist-employers and dentist-employees have asked me what would be fair compensation. Hourly or flat base pay plus draw, covering CE expenses or not … there are a myriad of packages that can be put together to woo a talented dentist into an associate position and hopefully keep the person employed for the long term.

In dentistry, as in life, you don’t get what you deserve, you get what you negotiate. So I take a holistic approach to associate compensation. Add up all of the elements rather than looking at just one individually and see if the offer is attractive to both parties.

However, there is one element that I would like to dissect out for your consideration—the lab bill. Some fiscally conservative employers like to have their associates pay all or a portion of their dental laboratory costs. I’ve always found this perplexing. Associates don’t pay for their assistants, or portion of the rent, or impression material, so why single out that one part of the overhead?

I love writing and lecturing about overhead so I will restrain myself here from a lengthy rant on fixed versus variable expenses and profit margins. Instead, I’ll cut to the chase: the typical associate makes around 30% of collections (or if they’re lucky, production). Why is that the going rate? Because the prevailing opinion is that a practice runs on about 70% overhead, so 70% of the associate’s generated cash should go to paying the bills. That’s fine. But if the dentist wants the associate to also pay the lab bill, which is about 10% of overhead, then it would be unfair to only give the associate 30% of collection as compensation. I would argue that the associate should be paid closer to 40% of collections if he or she is expected to pay his or her full lab bill.

What do you think? We’ll be sharing this story on the Principles of Practice Management Private Facebook Group. We’ve had many a healthy debate over there in the group and I’d love to hear your thoughts on this one.

Cheers,