Compensating a New Provider

Hiring a new employee for your dental or aesthetic practice is no small feat. If you’ve found an all-star dentist that you’re preparing an offer letter for–congratulations! The most difficult part of the process is behind you. Now, let’s talk about a dental compensation plan.

How much do dentists or hygienists expect to be paid? The short answer is that it depends. Experience, job security, and production all play a role. Learn how we recommend dental (and aesthetic) practices pay their providers. Also understand the important vocabulary words to include in your offer letter.

Dental Compensation Plan for New Providers

When hiring a new dental associate or provider, the primary factor in their compensation is experience. A competitive benefits package will help you recruit and hire new employees. The three general levels of experience require a specific type of pay.

Compensating new graduates and/or inexperienced dentists.

Typically, associate dentists who are fresh out of school receive a flat salary. This offers them security to learn the ropes, understand dentistry in the professional world, and iron out the kinks of their practice. Don’t expect new hires to recruit new patients right away. Your dental practice should share current patients with the new hire. Thus, a flat salary promotes quality over quantity.

Community Dental Partners recommends new dentists find a positive work environment that encourages long-term career growth and work-life balance. They also suggest being cognizant of student loan repayment. By sharing the patient load and offering a steady income, your dental practice can become an attractive place to work for aspiring new graduates.

Compensating new graduates who’ve improved in quality and/or dentists with some experience.

Once a new associate has several years of experience under their belt, it’s time to reward their efforts with a partial commission. This plan may offer a hybrid of a daily minimum or flat salary plus a bonus based on production or collection (we’ll discuss the difference later on). Quantity becomes a factor to balance with quality. Trust that the dentist can now offer high quality services to more patients than they could before.

Another rule of thumb is that if the dentist begins to bring in loyal patients of their own, compensation is due. Reward their success that’s benefiting your practice by sharing a percentage of the wealth.

Compensating experienced dentists.

A tenured dentist will expect a salary based on a percentage of their production. The percentage usually ranges between 30-35%, depending on the state of the industry and location for the practice. There are two important vocabulary words to keep in mind: gross versus net. 

Gross production is the earnings BEFORE deductions, such as discounts and insurance write-offs. While revenue is a financial number worth tracking, we don’t suggest using gross production as the baseline for a dentist’s compensation percentage. After deductions factor in, your practice may bring in even less than you expected to your bottom line.

Net production is the practice’s total profit AFTER deductions. This represents the true profitability of a dentist’s production. Any compensation percentage should be calculated using this number. Reward experienced dentists with the quantity of patients they serve, assuming each patient is also receiving high quality, excellent care.

Aesthetic Compensation Plan for New Providers

Compensating providers in the aesthetic industry varies more than in the dental industry. The standard formula includes an hourly or salary compensation plus a bonus based on production or sales. According to our friends at American Med Spa, a bonus structure should have a minimum level of productivity. It should aim for a goal based on your annual budget or gross profit. And it should communicate clearly to employees.

The many tiers to aesthetic compensation are more complicated than a hygienist’s or dentist’s compensation. Talk to your attorney about your state’s laws regarding paying providers. Also, ask your financial team how much you can afford to compensate.

Compensating on Production Versus Collection

When calculating a commission or bonus structure, there is a critical distinction to make between production versus collection. Production is the value of chairs filled and treatment provided, regardless of payment. This is the number the provider is ultimately responsible for. How many patients are they able to get in and out the door? What treatments can they sell? How many new patients do they bring in?

On the other hand, collection is the payment recorded as actually received. It’s the production that is actually collected on by the practice. This is in the number the front desk is usually responsible for. Is the front desk calling patients and insurance companies for payment? Are they following up on unpaid bills? Are they accurately tracking patient statuses? (This number also affects your dental marketing budget!)

This differentiation matters when it comes to compensation. Many dentists prefer a commission percentage of production, because it’s a number they can control. If you say they’ll be paid based on collection, they may respond, “That’s the front desk’s job. My job was to treat the patient.” Be prepared as you enter conversations about compensation to discuss the difference and decide what works best for both the new hire AND your practice.

Maven Financial Partners help businesses connect the dots between their financials and their business strategy. This includes setting compensation and keeping great employees on board for the long run. Are you ready to learn how to excel in your practice’s finances so you can focus on your patients? Contact us today for a complimentary financial analysis!