Case study: salary vs. hourly

July 1, 2004
A doctor paid staff a salary rather than at an hourly rate. The staff liked a salary because they could anticipate the amount of each paycheck.

Bent Ericksen and Tim Twigg

A doctor paid staff a salary rather than at an hourly rate. The staff liked a salary because they could anticipate the amount of each paycheck. Although when they were late, left early, or took personal time off they also expected the same salary. When the doctor started "docking" their pay for time not worked the staff was resentful, complained, and threatened to file a grievance with the Labor Board.

In this case, the staff was wrong to think because they were getting a salary that their pay could not be "docked" for time not worked. While legally the doctor could dock their pay (that's the good news), managerially it caused problems and led to resentment and bad feelings (that's the bad news).


Your success depends upon competent and dedicated staff — people who have the best interest of your practice in mind, who will strive to improve their skills, accept your policies and procedures, and can be trusted to do a great job. That includes having an acceptable attendance record. Staff in this category generally expect and work best when receiving a salary.

A common misconception about salaried workers is that employers cannot dock pay. The truth is that salaried, nonexempt employees can have their pay docked and need only be paid for the actual time worked. A second misconception is that salaried employees do not have to be paid overtime. The truth is that salaried, nonexempt employees must be paid overtime consistent with federal and your state laws. Without going into the stringent Fair Labor Standards Act (FLSA) guidelines, the bottom line is that at least 95 percent of all dental staff are classified nonexempt. FLSA requires that overtime be paid when staff works more than 40 hours in a week, regardless of how they are paid. In addition, several states have daily overtime requirements.

Paying staff hourly represents a straightforward way of dealing with issues related to time-not-worked and overtime. It also has been shown that in many cases, when certain staff members are switched from a guaranteed salary to hourly pay, their attendance improves.


If you have great staff, then consider acknowledging their contribution by paying them a salary. Their performance and attendance record usually will be excellent.

Recognizing that many employees are living on a tight budget, any loss of income can be stressful. Managerially, you can choose to pay the full salary even if they miss some time now and then. Your generosity, by not reducing pay, will be appreciated and can minimize stress that might negatively affect work performance. To avoid claims of being unfair or of discriminatory wage practices, be consistent with all employees — i.e., don't dock one and not another. Make sure your policy manual informs staff members that you reserve the right to dock their pay.

As for existing employees who do not meet your criteria for salaried employees, pay them on an hourly basis. You don't have to compensate all employees the same way. Some can be hourly, some salary, or some daily, etc. Consider paying new employees an hourly rate. Then, upon satisfactory completion of your "Orientation and Training Period" (for legal reasons, do not use the term probationary period), switch them to a salary.

Make sure your employees know the qualities of behavior, attendance, and performance standards that are required on an ongoing basis for the privilege of being paid a salary. Let them know that if this privilege is abused that they can be switched back to an hourly basis. Again, be consistent and fair to prevent discrimination or bias claims. To support and justify any decisions — and to insure good and objective documentation — use the employee's periodic performance review and attendance record (like our Performance Appraisal Form No. 400), along with documentation for any disciplinary action taken (such as our Employee Counseling Memo Form No. 418).

Understandably, you are asking and expecting a lot from your staff. Be fair and acknowledge that for staff to do their work with the excellence you require and for which most staff members strive to achieve, they also have the right to expect much of their employer. One of management's responsibilities is to provide staff with the work environment, respect, recognition, compensation, and incentives that enable them to perform at their very best.

Bent Ericksen is the founder and Tim Twigg is the president of Bent Ericksen and Associates. For over 25 years, the company has been a leading authority in human resources and personnel issues, helping dentists successfully deal with the ever-changing and complex labor laws. Both authors are members of the Academy of Dental Management Consultants. To receive a complimentary copy of the company's quarterly newsletter or to learn more, contact them at (800) 679-2760 or at

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