Small businesses are facing increasingly complex wage issues driven by a trend toward a gig economy, as well as care delivery that happens outside a practice's walls. Is a worker classified as a full-time employee or an independent contractor? The answer to that and other important wage-related questions can impact a practice's finances.
More than 40 percent of the U.S. workforce will be comprised of independent contractors in the next several years.
There’s a new trend afoot toward a gig economy — or in other words, an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements.
A recent study by Intuit indicates that 34 percent of the American workforce is part of this trend, which is expected to expand to 43 percent within the next three years.
That means more workers being independent contractors rather than full-time employees. And that, says Shanna Wall, Esq., labor law attorney for ComplyRight, can create quite a bit of confusion for dental practices, especially where wage issues are concerned.
QUESTIONS TO ANSWER
Wall says it’s normal to think in a growing gig economy that if you take someone on as an independent contractor, they’re hired to perform one certain function. This is where things can become complicated.
“When you’re trying to determine if somebody is an independent contractor versus an actual employee, there are numerous tests or questions to be answered to determine which category the individual falls into,” Wall explains.
For example, how will taxes be paid? The IRS has a specific test, and individual states might as well. There are also different tests where worker’s compensation insurance and benefits are concerned. A dentist might also operate a mobile clinic. If so, how much control does the dentist have over the person operating the clinic, so as hours worked or equipment used is concerned?
“If you’re talking about a transcriptionist, you give them a bunch of files and say, ‘Transcribe these,’” she said. “They’re using their own equipment, and there are no set hours. Then, they’re more than likely to be an independent contractor.”
In other words, Wall says, if you can’t describe a person’s title in definite terms, they’re an independent contractor.
OTHER WAGE ISSUES
In addition to the full-time employee versus independent contractor conundrum, there are other wage-related issues dentists need to be aware of. They include what full-time employees are being paid versus part-time employees, the gender wage gap, and geographic influences.
“If I have a male dental hygienist and a female dental hygienist, are they paid around the same amount of money?” Wall asks, rhetorically. “If they’re not, why not? Does one have more education? Have they been with the practice longer? Or are they pretty much identical in terms of their level of expertise?”
One method enabling dentists to work around the confusion is to ask what an individual was paid at their last job. However, many states are now making employers remove that job/salary history question from applications. Instead of trying to negotiate what you’re going to pay that person based on what they’re used to being paid, you’re paying them what the position calls for. It doesn’t matter what they were paid previously.
“The philosophy behind that is since women are typically paid less than men, they’re always going to start at a disadvantage if you’re negotiating based on what they were paid before,” Wall says.
In addition to defining status between an independent contractor and full-time employee, along with the assorted wage-related questions that accompany those determinations, dental practices should be aware of the impact that inflation has on employee and contractor salaries.
For example, the PayScale Real Wage Index indicates that while wages have risen 9.5 percent since 2006, when inflation is factored in, real wages have actually declined 7.4 percent. It means that the income for dental practice employees has less purchasing power today than it did 10 years ago. Loyalty goes out the door if a practice on the other side of town is willing and able to pay more.
“When you’re trying to consider what you should be paying your employees, you also have to take into consideration turnover and other factors,” Wall says. “If you have competitive wages and competitive benefits, things like that that you’re offering, the chances of you keeping your employees dramatically improve.”
The only thing the law requires is that employees are paid minimum wage and overtime. But beyond the law, there is clearly a wide range of other considerations. What’s the going rate for the position? For the geographic locality?
Staying competitive is critical, but so is employee retention, Wall says. Consider how much time and money is spent training staff on equipment and processes.
“That’s why a lot of different industries are looking more at this gig economy,” she says. “If you can classify someone as an independent contractor, you can just pay them their wages and be rid of a lot of other considerations. There are a lot of benefits to that.”