Employers have multiple options when deciding how and when to pay their employees – especially when it comes to managing another dentist in their own office. A decision between the employer and the employee needs to be made as to which option will work best for both parties. Some of the ways dentists choose to be paid within a multi-practitioner office include:
Salary – Dentists can be paid a straight salary, a yearly salary with bimonthly or monthly pay or a daily rate. Advantages include a steady, even paycheck. The disadvantage is that there is no incentive to work harder or faster.
Production – Your associate gets paid based on the quantity of patients they serve and the type of treatment provided in a given time period. This encourages the other dentist with an incentive to work harder. They do not have to depend on collections in order to get paid. Being paid on production is easier to track because there is often a lag of payments for insurance companies, if waiting on collections. Unfortunately, if patients do not pay for their treatment, the owner still has to pay the other dentist.
Collections Based – Providers get paid based on payments collected from patients on procedures they performed. With this option, the employee is paid based on a percentage of his production that is collected. There is thereby an incentive to increase production, and the employer has received payment via collections prior to paying the employee. Unfortunately, the employee has no control over how much is collected, and they must wait for delays from insurance companies on some payments.
Guaranteed Minimum – Dentists are paid a daily minimum rate and/or percentage over daily rate, whichever is higher. This rate can be in addition to percent production or percent collections. Advantages are that the dentists do not have strict control over their schedule and patients, therefore this system ensures the employee is compensated for their time and gives the incentive to work harder. Unfortunately, you must still pay the daily minimum even when the employee doesn’t meet or exceed it.
The owner of the practice must decide whether or not he will hire employees as a W-2 employee or an independent contractor. Will the employee be full-time, part-time, temporary or a PRN (as needed) employee? A temporary employee may only fill-in for a short period of time, for example, when a dentist is on maternity leave.
As a W-2 employee, the employer pays the Medicare and social security taxes. The employer has control over hours worked and scheduling.
Paying a new hire as an independent contractor, the employer avoids paying employment taxes. The employee receives a 1099 at the end of the year. However, to qualify as an independent contractor, you must meet several criteria outlined by the IRS.
Benefits for both the Employer and the Employee to Consider
If the dentist is a W-2 Employee, often times many of these benefits are covered by the employer. If the employer is an independent contractor they will be responsible for finding benefit coverage themselves.
- Health Insurance
- Life Insurance
- Retirement Plan
- CE reimbursement
- Vacation and PTO/Sick time
- Reimbursement of state license/fees