Three Years After Recession a Long-Tail Emerges

As Tolstoy famously said, “The strongest of all warriors are these two – time and patience.” On the tail end of fighting through the longest recession in the memories of most alive today, time has brought about many changes. In the first quarter of 2009, more than 2 million jobs disappeared. On March 6, 2009, the Dow closed at 6626 and by the end of the year unemployment had risen to 10 percent. In the first quarter of 2012, more than 600,000 jobs were added, the Dow reached over 13000 points and unemployment nearly fell below 8 percent. 

“People experience recessions in such slow motion that they don't realize how far things have come. The economy came out of recession three years ago, but it’s left a residue on our perceptions," says Rob Romaine, president of MRINetwork. "When faced with vacancies, managers still fall back on the recessionary mindset of the candidate pool being plentiful, though even in the depths of the recession that wasn’t necessarily true for many types of roles." 

The professional and managerial unemployment rate fell to 3.7 percent in April, its lowest point since 2008. While the rate fell to below 2 percent before the recession began, the current level is quickly approaching so-called “full employment.”

“A tightening labor market, though, isn’t the entire story. While 3.7 percent of professionals may be out of a job today, as you layer on specific qualifications, backgrounds, or years of experience, the number of candidates actively seeking a job can drop to virtually zero,” notes Romaine.

The poor hiring environment for college graduates over the last several years also creates a new challenge. A recent survey by CALinnovates showed 70 percent of companies were planning to hire college graduates in the coming year, up 26 points from 2011, indicating just how poor graduate hiring was during the recession.

The recession disproportionately derailed or delayed the careers of people who graduated college as early as 2005. Now, as employers are trying to hire lower-middle managers—those with between five and ten years of experience—they will be hiring from this significantly diminished population. The long shadow of the recession will be seen in a deficiency of talent availability for at least another decade.

At the same time, Baby Boomers are no longer delaying retirement at the rate they were three years ago. This vacuum at the top is helping to pull talent who had established careers prior to the recession up the corporate ladder, but is exacerbating the donut hole that currently ranges from about one to six years of experience.

“Even if the economy was at a standstill, the world never stopped moving and generations continued to age. Babies who were born when the recession began will be entering first grade this fall,” notes Romaine. “There is never a bottomless pool of active talent in the first place, but the recession has made it so that whatever pool there currently exists is only likely to get smaller.”

As Job Market Improves, Candidates Notice

In the depths of the recession, as unemployment rates were rising and everyone knew someone who was being affected, “It’s better than no job at all” became a common refrain across the factory floors and offices of America. While it was a poor retention strategy, it was a worse recruiting strategy and now, with the economy on the mend, candidates are no longer falling for it.

“Candidates now know—as much, if not more than hiring managers—that the market is improving,” says Rob Romaine, president of MRINetwork. “Top candidates are getting multiple offers, and those who don’t like what they hear from one employer are more frequently willing to wait for another suitor.”

Employment growth was below expectations in March, with just 120,000 positions added compared to more than 200,000 in some projections. Though, that had followed four months in which more than a million positions were added collectively. The rate of growth is expected to remain decidedly slower for the remainder of the year. However, short of the U.S. economy slipping back into to a major recession—something almost no economist is projecting—the labor market is going to remain competitive.

“It’s dangerous to underestimate the competitiveness of the labor market. Companies are pursuing plans, bidding on business, and making projections, only to later realize that it is taking many months for their internal HR departments to fill the roles and often at higher starting salaries than expected,” notes Romaine.

The job openings rate has risen from 1.8 percent in the worst of the recession to 2.5 percent in February. Over the same time, the hires rate has risen from 2.8 to 3.3 percent, while the separations rate has fallen from 3.5 to 3.1 percent. While the positions available and being filled span almost all sectors of the economy, the bulk of employees being hired share one thing in common: four-year college degrees.

Since March of 2011, total employment by those with a Bachelor’s degree or higher has risen by more than 1 million positions. Total employment by those with less than a Bachelor’s degree, though, has actually shrunk by 218,000 positions. The unemployment rate for those in management, professional, and related occupations has fallen to 4.2 percent, and when you look at more technical fields, the rate begins to approach full employment.

“Candidates have realized how rare a commodity they are, but when an employer isn’t making them feel courted, someone else will,” says Romaine. “It’s not that top performers are demanding the red carpet treatment during the hiring process, but when they have multiple offers, the style of the process can be as important as the substance of the opportunity.”

Dentist Contract Negotiations - Compensation Considerations

When preparing to negotiate compensation with a practice, it is important to understand the various options.

W-2 or 1099?
Be sure you know the difference. Practices like to pay their associates as independent contractors in order to avoid paying employment taxes. But, in order to actually qualify as an independent contractor, you must meet several criteria. For instance, you must provide your own assistant, provide your own equipment, set your own hours and set your own fees. Filing as an independent contractor without meeting the criteria can have serious financial consequences and can get you into hot water with the IRS.

Collections vs. Production
While associates typically prefer to be paid commission based on a percentage of production, in the vast majority of the country practices still pay commission on money collected. Associates prefer production for several reasons but the two main advantages are that it allows for greater clarity and that it does not penalize the associate if the front desk does not do their job. Practice owners counter that paying on collections is better for the business and that it encourages the associate to get clear consent when presenting treatment plans. Whether or not a practice uses one system over another often has to do with the norm for the geographic area. In some cities, pay on production is more common, though it is still rarely the predominant method.

Collections
As discussed above, most practices prefer to pay their associates a percentage of collected funds from the associate’s work. The nationwide average is 32-35% of collections but the rate varies depending on location, the procedures being performed, and the method of patient payment. Under this system it is important to know when you can expect to be paid for your work. In some cases it takes months for an insurance company to compensate the doctor for services performed. In many cases a guaranteed salary or a draw should be considered, particularly during the start up phase of the associate arrangement. Another important consideration is the percentage of total office collections. An inefficient front office can cost a practice (and the associate) thousands of dollars in missed receivables.

Draw
In a draw the practice pays the associate in anticipation of future earnings. Another way to look at it would be as a forward of future income. If the associate’s earning for a pay period fall under the agreed draw amount then the practice would cover the difference in the associate’s paycheck. Whatever extra the practice paid would then be deducted from the associate’s paycheck during the next pay period in which the income generated was above the draw amount.

Guaranteed Minimum Salary
If there is a guaranteed salary then the practice will pay the associate no less than the guaranteed amount with no expectation of future reimbursement should the associate fail to produce enough to offset the salary.

Production Percentage
Typically associates prefer to be paid on a percentage of the total billings generated by their services. They find that there are fewer headaches tracking payments and less lag time between performing the service and receiving compensation. Typically the associate receives net production which accounts for insurance discounts if applicable. The average rate nationally is 32% of production.

Guaranteed Salary
A guaranteed salary is the most reliable method of compensation and offers a great deal of security. On the flip side, the associate will very rarely make as much money as they would under a different payment method. Practices offer a salary based on the revenue they expect the associate to produce. Since they do not expect to receive any return on their investment should the associate not meet minimum production standards, practices will set the bar low. If the associate generates $1,000,000 in practice collections the associate cannot expect to make any more than if the y generated $500,000 for the practice.

Who pays labs?
Depending on the focus of the practice, lab fees can run into the thousands very quickly. It is important that you take this into account when considering a compensations package. The most common solution is for the associate to cover a proportion of the total lab bill equal to the percentage of collections/productions that they receive as compensation. For instance, if an associate receives 35% of collections, he or she should expect to pay 35% of the lab bill.

Fringe benefits
As insurance costs go up, the number of practices offering full health benefits has decreased significantly. Practices typically will either offer a monthly insurance stipend or will offer to cover the insurance cost for the individual associate leaving the associate responsible for covering the cost to insure any dependents as a part of the practice’s group plan.
Some practices will offer to pay for malpractice insurance. Many practices also pay membership dues to the local dental association as well as local civic organizations in order to encourage the associate to network within the community to attract patients.

Other benefits to consider:

• CE stipend
• CE time off
• Vacation and sick days
• Retirement plan
• Disability insurance
• Liability insurance
• Life insurance

Written by Morgan Pace, Southeastern Region Recruiter for ETS Dental.  
Contact Morgan at mpace@etsdental.com | 540-491-9102 | http://www.etsdental.com/

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