Are your staff salaries eroding your bottom line?
Dentists traditionally have great relationships with their staff resulting in low turnover. Although this is good, when long-term staff have been given 3-5% raises annually, this can lead to staff wages above national and regional averages. Our new Dental Practice Comparison Report features average salaries by specialty and size, available to download for free so you can see how your salary expense compares.
Our advisors suggest staying within the following ranges in order to keep your overhead healthy. If you find yourself outside of this range, it’s time to regain balance.
General & Pediatric Dentists: 20-24% of Collections
Orthodontic & Periodontic: 18-20% of Collections
Oral Surgery & Endodontic: 15-17% of Collections
Similar to fees, being off by only a small amount on salaries can really add up. For example, a 1% overage on staff salaries for a $1 million general dentistry practice would equate to $10,000 each year, while a 4% overage would be $40,000. This could be the difference between the ability to fund your share of the profit-sharing plan, or not.
Get more tips from CPA Angie Svitak on how to know if your practice’s salaries are getting too high.
Associate Doctor Compensation
The percentages listed above exclude doctor salary, for both owning doctors and associates. Although associates are one of the highest-paid individuals in the practice, it is typically offset by the additional collections they bring in.
Associate doctor compensation can average anywhere between daily rates of $1,200-$1,400 for orthodontic practices and $1,100-$1,300 for pediatric practices. Other practices are typically a percent of adjusted production or collections, on average 30-32% for general practices, 40% for endodontics and 37% for periodontic and oral surgery practices.
Associate salaries seem to be on the rise the past few years and one hypothesis is that corporate dentistry groups are the cause. Why do they pay so much? With no long-term ownership incentive to offer associates, high daily rates are means to attract young doctors in, and as a result are driving up associate salaries as a whole.
Additionally, more practices are beginning to compensate their associates on production that has historically been considered part of recall/hygiene. Getting paid on a larger number of procedures can also be attributed to the steady incline. This is illustrated by the 12% increase in daily pay rate over the prior year in our latest Pediatric Practice Comparison Report.
Steps to Regain Control
During COVID shutdowns, many dental practice owners laid off staff members so they could get unemployment benefits. The side effect a year later seems to be that many practices were able to hire new people for existing positions, which brought hourly rates down across the board.
This has allowed many doctors to realign their salaries expense within their target range. But now it begs the question: if this is the case, how can owners prevent salaries from becoming inflated again? Don’t people need raises every year?
The goal should never be to underpay your staff. That can lead to unhappy employees and high turnover, which is expensive. It is important to give raises to underpaid individuals, but for those that are within the average range—keep them there by only giving cost of living increases on an annual basis.
Production-based bonuses are a great way to reward based on performance. This way you can offer incentives based on growth and profitability, rather than a blanket hourly increase.
If you welcomed back staff members that are overpaid, unwinding this is one of the hardest things to do. No staff member will volunteer to take a cut and turnover may be needed to regain control.
As the largest expense on your balance sheet, it’s more important than ever to keep these costs consistent. Allowing staff salaries to get out of line will quickly impact your bottom line.
For a complimentary consultation to examine your overhead versus collections and how you could increase your practice’s net income, contact a member of our team at cainwatters.com/contact.
