3 questions dentists should ask before giving raises

April 27, 2015
Sally McKenzie
Sally McKenzie
Sally McKenzie

Sally McKenzie is CEO of McKenzie Management, which offers educational and management products available at www.mckenziemgmt.com. Contact Ms. McKenzie directly at (877) 777-6151 or at sallymck@mckenziemgmt.com.

Your loyal hygienist of 10 years just asked for a raise. She tells you she’s struggling to make ends meet, and if you could just bump her pay a little, it would be a huge help. Without hesitating, you agree. You’re happy to reward her for her dedication to your practice, and you’re sure you can spare an extra $2 an hour.

The problem is, you have no idea what this pay increase will do to your bottom line. A few bucks an hour might not seem like a lot, but every time you give an employee a raise it directly impacts your overhead. That’s why you can’t just give raises out because a team member asks for one, or because it’s been a year since the last bump in pay.

Related reading: How dental team members should ask for a raise

Unless you want to send your overhead costs soaring, employee salaries must not exceed 22 percent of average monthly collections. If they do, it’s time to change how you think about raises. Here are three questions to ask yourself before giving out raises, and how to motivate your team to earn pay increases rather than just expecting them.

1. Can you afford it? Before giving out raises, I recommend conducting an Employee Salary Review. It only takes 10 minutes, and will tell you exactly how much more money you’ll need to bring in to cover pay increases. This clear, simple mathematical tool can save you a lot of heartache, and will help ensure you keep your total salary overhead in line with the industry.

Let me give you an example to show you why this is so important. If your current monthly collections are $48,325 and your existing salaries are $9,353, then a $2 hourly raise from $15 to $17 for your assistant, who works a 36 hour week, will increase existing salaries to $9,665. This is within the 20% industry benchmark.

But, if your current monthly collections are $39,000 and existing salaries are $9,353, that small $2 pay bump puts salaries at 24% of gross production. That’s well above the industry standard, and will leave you struggling to make ends meet.

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2. Has the employee earned it? You have to take the emotion out of raises. Don’t give out raises just because-encourage your employees to earn them. Establish a compensation policy that makes it clear when employees are eligible for raises, and what they must do to earn more money.

To keep team members on track, it’s also important to create results-oriented job descriptions that outline your expectations. Involve them in the process and work together to develop performance goals that are aligned with practice goals. Provide the training they need to meet those goals, and hold team members accountable for their systems.

Remember, salary increases should be based on performance, not simply because your hygienist has been with you for 10 years. Raises let your employees know you value their contributions to the practice, and will motivate them to meet and even exceed expectations. If you give out raises just because you feel like you should, team members will have no reason to put in any extra effort to help grow the practice. After all, if you’re giving them a raise, they must be doing something right.

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3. Do you have a plan in place? I know you want to reward your team members for their work, but for them to make more money, the practice has to make more money. Sit down as a team and discuss how you can do that. Here are a few ideas:

Talk about ways to boost hygiene production.

Focus on improving case acceptance.

Take a look at collections and task one team member with collecting money, generating accounts receivable reports and following up on past-due accounts.

Make sure the financial coordinator knows she’s expected to reach a daily collections rate of 45 percent or higher.

Establish a collections policy and communicate that policy with new and existing patients.

Make sure patients know you expect full payment for all procedures less than $200 at the time of service.

Consider offering patient financing through CareCredit.

Require insurance patients to pay what they’re responsible for at the time of service.

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These are all examples of ways you can bring in more money to your practice-money that can be used to give raises to deserving employees.

When giving out employee raises, it’s important to base it on practice facts rather than emotion. You have to make sure the money is there, and that you’re giving out raises because your team members earned them, not just because they want them. This will encourage employees to excel in their roles, helping you move your practice toward true success and profitability.