Managing Performance: Staff Compensation

Managing The Dental Team

Staff compensation is a complex topic for many reasons. From an emotional standpoint, your employees work hard for their pay, depend on their incomes for their livelihoods, and sometimes even view compensation as proof of their value to the practice. From a practical standpoint, there are numerous regulations and guidelines, at both the federal and state levels, that must be followed to ensure both legal compliance and that each employee’s compensation is based on sound reasoning and a consistent system.

Different rules often apply depending on whether employees are exempt or non-exempt from the requirement to pay overtime pay to salaried employees who work more than 40 hours in a given work week. While other factors apply, exempt employees are usually managers, administrators or professionals who spend at least 60% of their time performing duties requiring them to exercise independent judgment. . Non-exempt employees are covered by the provisions of the U.S. Department of Labor’s Fair Labor Standards Act (FLSA) which outlines the wage and overtime requirements for employees.

When considering staff compensation, it’s also important to be aware of regulations regarding overtime pay. Effective Dec. 1, 2016, the U.S. Department of Labor’s (DOL) salary threshold under which most salaried workers are guaranteed overtime will become $47,476 per year. The previous threshold had been $23,660. The DOL expects to update the threshold every three years and to maintain it "at the 40th percentile of full-time salaried workers in the lowest income region of the country." According to an informal survey of ADA volunteer leaders conducted in 2015, about 39% of all dental offices have at least one employee in a salaried position. More information is available in the DOL’s Wage and Hour Division (WHD) website for Overtime Pay. The regulation does not affect hourly workers.

Try to establish a culture where employees understand that increases in salary are directly linked to specific performance measures that the two of you have established. Allowing staff to view raises as rewards for completing another year of service can create a culture of entitlement, rather than one that’s driven by performance.

One way to support this performance culture is to ensure that all salary ranges, including those for new employees, reflect conditions and expectations for the market where you practice. Incorporate a verifiable process to keep track of hours worked. Another is to notice if anyone is “milking the clock” by coming in earlier or staying later than they’re supposed to in order to get paid for extra hours. This can cause payroll to fluctuate and could result in you having to pay overtime. Protect the practice by having a written policy that requires you to pre-approve all overtime before it’s worked.

It’s a good idea to have a clear compensation policy so every employee knows how your compensation system is managed. Avoid loopholes, exceptions and other practices that can be viewed as favoritism.

Plan and budget for salary increases so you know the practice can support the additional expenditure over time. Try to think long-term if you experience a situation where you’re inclined to give someone an instantaneous and unbudgeted salary increase. Even a modest salary increase to a single employee can have a major impact on your balance sheet.

Use a set formula, often based on such metrics as production and monthly collections, to determine salary increases; this approach ensures that the budget can support the increases. It also prevents any accidental bias, whether real or perceived, from influencing your decisions and lets employees know exactly what targets they need to meet in order to receive a specific wage increase.

Some practices structure compensation so it works from the inside out. Under this model, you create a plan to have the practice generate more income before increasing spending. The most common ways of accomplishing this are to increase hygiene production, treatment acceptance, or collections from delinquent accounts. Of course, if you decide to follow this approach, it’s a good idea to identify what strategies you’ll implement in order to achieve growth.

Periodically give employees a report that recaps the value of their total compensation package, which includes information regarding the total value of their salary and all applicable benefits. This will help them understand that the practice provides them with much more than just a paycheck. A sample worksheet to help you determine the value of Total Staff Compensation for each person on staff is included as a resource. Consider providing that data to employees each year so they can see that your investment in them is much greater than their salary.

Whatever system you use, it’s helpful to make it a formalized policy so all employees are aware of your position on compensation and salary increases.

Resources:

U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) website for Overtime Pay

Sample Report: Total Staff Compensation