Tuesday, September 30, 2014

Base Salary (AKA Minimum Guarantee) for Associate Dentists

Over the past ten years, base salaries for General Dentists seeking associateships have become more commonplace in response to an increasingly competitive dental job market. Several factors have played into this change, including the ever-growing level of student debt and increased presence of Dental Service Organizations (DSOs) in the industry. From a practice owner’s perspective, the practice can use the guaranteed minimum to say “we have the patients and potential production available - can you produce?” As such, there is a perceived financial security with a base salary.
Below are some common ways we’ve seen dental practices pay base premiums to its associates.

Common Ways Dental Practices Pay Base Minimums
  1. Daily/Monthly Draw on future commission : This structure is, by far, the most common method in dentistry. The practice will pay the associate dentist a fixed amount that will be deducted out of the associate’s future commission.
    1. Pro : the associate has greater security at the beginning because there is a cash flow.
    2. Con : if the associate does not produce/collect enough the practice cannot recoup the draw if the employment is terminated by either side.
    3. Most common example : $500 to $600 per day ($10,000 to $12,000 per month).

  2. Salary + bonus : This structure offers both sides more of a win/win at the early part of the relationship. The practice and associate agree to a set salary that is paid regardless of the associate’s production. The bonus is a carrot for achieving a higher level of production.
    1. Pro : Practice can pay based on what it expects associate will/should produce while offering a bonus if goal/expectations are exceeded.
    2. Con : Such as the draw, if the associate is underperforming the practice will lose money on the arrangement.
    3. Example : $10,000 month; Associate can bonus by being paid 15% of collections on anything exceeding $35,000 per month. Calculate monthly or quarterly.

  3. Salary only : As simple as it sounds. The Associate is paid a base salary. In most cases, a practice does this because it realizes there needs to be a lot of growth in the practice overall. It is more of an investment in the associate and potential of the practice. In many cases a practice and associate will agree at a future time to convert from salary to commission in order for the associate to be incentivized on their production.
    1. Pro : Great for a new grad that receives mentorship from a senior doctor. Allows the practice to secure an associate without making unrealistic claims to what an associate can earn on a commission plan.
    2. Con : if you don’t have an associate who sees the big picture, you can have an associate who doesn’t strive to grow in this position due to the lack of incentives, thus making a bonus option a great addition to the salary.
    3. Example : $120,000 per year.
Why should you offer a base minimum?
  • Excellent way for practice to back up their claims of available production and income potential
  • Offers initial short term security to associate by providing a minimum cash flow
  • Helps while production and patient base is built up by associate
  • Competition for talented dentists
  • Security for your practice by limiting associate turnover