If you are like most practice owners, you struggle with the issue of providing benefits for your staff - What benefits do I provide? When do I provide the benefits? What are other dentists providing? How much can I realistically afford?
Like it or not, benefits have become an expected part of the workplace. As common as “How much are you going to pay me?” is the question, “What benefits do you provide?” As a result, employees have become accustomed to receiving benefits from their employers and will generally seek employment with those who do.
Benefits influence employees’ decisions about the employers they want to work for and if they want to stay. A highly qualified applicant will likely have several employers seeking to hire him or her at one time. Studies have shown that the employer with the better benefit package will win almost every time, even if the pay rate for the other employer is higher.
One reason for this is that benefits are perceived emotionally, as opposed to the actual financial value of them. Benefits are viewed as an indication of how much employers value and care about their employees. Thus, offering a slightly lower pay rate, coupled with an excellent benefit package, will often be viewed more favorably.Since many benefits are intangible or unseen, we recommend you do an annual employee compensation and benefits summary for each employee (contact our office for a complimentary example our form #403). This allows employees to learn about and have a better understanding of -their total compensation packagethe value of the benefits provided and paid for by the employertheir true effective hourly rate (which can be as much as 20 to 30 percent higher than their regular pay rate).Meeting the challengesHaving the ability to offer a strong benefits package will give your practice a competitive advantage in your respective area. Yet, the cost of providing benefits continues to rise. Health insurance continues to increase and, when other employer-sponsored benefits such as vacation, sick leave, or holiday pay are factored in, benefits can start to make a significant impact on the overall profitability of the practice.According to an annual study conducted by the U.S. Chamber of Commerce, “Employers have seen benefits costs grow to about 42 percent of employee payroll, which represents about $18,000 per employee annually. The biggest cost increases have been in the health benefits, which have been rising at an average of 12 percent per year for the past several years.” (Source: HR Management; Robert Mathis, John Jackson.)It is not surprising then, that the cost associated with offering benefits is a major concern, especially among small employers such as dental practices. Practice owners need to structure their benefits programs in ways that will recruit and retain quality staff, as well as be financially sound.In reaction to the rising expense of benefits, some employers, in seeking ways to reduce the overall cost, are eliminating benefits. Unfortunately, some of the changes, while saving money for the employer, are having detrimental effects on workplace morale and staff retention, resulting in higher turnover. “These actions have reduced employee satisfaction with their benefits, especially in smaller companies. According to a Society for Human Resource Management, or SHRM, survey, only 47 percent of employees in firms with fewer than 100 workers are satisfied with their benefits, whereas 74 percent of employees in larger firms are pleased with their benefits.” (Source: HR Management, Robert Mathis, John Jackson.)De iureIn considering which benefits to provide, it is important to recognize that there are certain benefits that employees receive for which employers are expected to pay. These benefits are required either by state or federal law. Some examples are - Social Security: Every employer must contribute to Social Security on behalf of each employee. This payroll tax is known as FICA and is currently 6.2 percent based on employee compensation.Medicare: Every employer must contribute to Medicare on behalf of each employee. This payroll tax is currently 1.45 percent based on employee compensation.Unemployment insurance: Employers finance unemployment (both federal and state) by paying a percentage on employee compensation based on the employer’s industry and claims rating.Workers’ Compensation: State laws mandate that employers provide certain benefits to persons injured on the job. These benefits are typically provided through either a separate policy or a state-funded program similar to unemployment.Health Insurance: Although there is no federal requirement for private-sector employers to provide health insurance, several states, such as Massachusetts, New Jersey, and Hawaii have enacted their own health insurance laws that affect employers. Massachusetts recently passed a law requiring employers with 11 or more full-time equivalent employees to provide an IRS Section 125 cafeteria plan either under its own group health plan or through the independent quasi-governmental entity called the Commonwealth Health Insurance Connector. In addition, New Jersey state law does not require you to offer health insurance, but if you do, then it must be provided to all employees who regularly work 25 hours or more per week, regardless of whether the employee is classified as part time at your practice and would normally be excluded from health insurance benefits. All employers in Hawaii are required to provide health insurance to all employees who work 20 or more hours per week and earn a monthly wage of at least 86.67 times the Hawaii minimum wage after four consecutive weeks of employment. The employer also must pay at least one half of the premium. Other states are considering similar health insurance legislation.Uniforms: If the employer requires employees to wear uniforms, the cost and maintenance of uniforms is usually at the expense of the employer.Other: Individual states may have laws requiring employers to pay for other benefits. For example, California has an Employment Training Tax, or ETT, and several states require compensating employees for time spent voting or serving on a jury. Check with your state for any additional costs associated with mandatory benefits.Designing your benefits packageMost other benefits offered by employers are voluntary and generally not mandated by law. These include health insurance, dental insurance, vision insurance, life insurance, sick leave or well pay, vacation pay, bereavement leave, severance pay, retirement plans, educational assistance, referral bonuses, and paid holidays. Many employers also are offering benefits to assist employees with difficult life situations such as legal coverage, elder-care assistance, and child-care assistance.As mentioned above, the primary reason for providing other types of benefits is for the employer to have the ability to compete for and retain top-quality staff members. In a tight labor market, employers may need to “beef up” their benefits program to attract applicants. Competition within the industry also will influence benefit programs. For example, the benefit programs other dental practices provide may determine how you modify your plan to directly compete with those practices. Benefit programs within the dental profession have many similarities in terms of what is offered and how they are administered. The following is an outline of a dental benefits program frequently provided, which may vary depending on the practice and location. It may assist you in making decisions about your benefits. Health insurance: Premiums are paid to a maximum amount of $150, or a monthly stipend of the same amount is given. The benefit typically is only provided to full-time employees or on a pro-rated basis to part-time employees.Dental insurance: Provided to all employees who are scheduled to work more than 20 hours a week after 90 days of employment. Using the Personal Dental Benefit Account, or PDBA (explained below), full-time employees receive a monthly credit of $125. Part-time employees receive half that amount.Sick leave: Up to three days per year are given to full-time employees; part-time employees may receive a maximum of one day or none at all. Well pay, in which the sick leave days are paid out at the end of the year if not used, also is very common.Paid vacation: Generally follows a schedule of one week after one year, two weeks after two years, three weeks after five years, and some practices provide four weeks after 10 years. Part-time employees typically are excluded.Paid holidays: Typically, these include New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, other religious observations, and/or days that correspond with federal or school holidays. Part-time employees may be included, but only receive holiday pay if the day falls on their regularly scheduled workday. Bereavement leave: Three paid days are offered to employees for a death in their immediate family, and one paid day for other relatives. Part-time employees may receive one paid day for immediate family and one paid day for relatives, but are frequently given only unpaid time. Cost-saving ideasEmployers have a great deal of flexibility when structuring benefits plans. Below are some ideas to decrease overall cost while maintaining an attractive benefits package:Health insurance: If the practice offers group health insurance coverage, consider putting a cap on how much the practice will pay. You may pay a percentage of the premium (50 percent, 75 percent, or 100 percent) up to a maximum dollar amount. For example, the practice will pay 100 percent of the premium or $250, whichever is the lesser amount, each month. “Mini-medical” plans and Health Savings Accounts also are gaining in popularity with cost-conscious employers. Alternative: If you do not want to offer group health insurance coverage, you may want to provide a monthly stipend in lieu of coverage. This amount can be used by the employee to obtain and help pay for his or her own health insurance coverage. Dental insurance: It is common for dental practices to offer 100 percent discount for dental treatment to all employees after a designated period of employment. To avoid inequity among employees, you may want to limit treatment to $2,000 per employee/family per year. A preferable option is to implement a Personal Dental Benefit Account, or PDBA.With a PDBA, your potential financial liability is more effectively managed. Each employee earns monthly credits for dental treatment. For example: the credit for full-time employees is $150 per month. Part-time employees receive 50 percent or $75 per month. The credits should have a maximum accumulation. As employees receive treatment, 100 percent of the treatment cost is charged against the PDBA, excluding labs fees which are paid by the employee.Paid holidays: Once you have chosen the holidays you will offer as paid time off, one way to cut cost is to only pay for the holiday when it falls on a regularly scheduled workday. Therefore, if your practice is open Monday through Thursday and the holiday falls on a Friday, then no holiday pay will be given. Also, you may decide to pay for the holiday only when the employee works the last scheduled workday before the holiday and the first scheduled workday after the holiday, excluding approved paid time off such as vacation. This will reduce the problem associated with employees calling in sick before the holiday to get more consecutive days off. Part-time employees: Part-time employees are either not provided benefits or are provided benefits on a prorated basis. Because practices often rely heavily on their part-time employees, it may be beneficial to offer prorated benefits based on the number of hours worked if they are less than what is considered full-time, but more than 20 hours per week.Formula for success: long-term stabilityNothing beats having quality staff that stay with you for the long term, and benefits are key contributors to that goal. Remember that the outcome of creating an excellent benefits plan is to attract, hire, and retain long-term, top-notch employees - the ultimate benefit for any practice owner.The cost associated with each benefit, whether it is mandated by law or voluntary, will affect the profitability of the practice. Therefore, it is important to be creative about ways to offer a great benefit package that will maintain financial stability.The benefits you offer can greatly impact the success of your practice. Given the high degree of flexibility employers have in designing their benefits program, it should be easier to meet the needs of both the employer and employee.