The Cost of Labor

Staff labor costs represent the biggest overhead expense in most practices these days. In a recent survey, The Blair/McGill Advisory questioned readers regarding the strategies used to control these ever-rising costs. The more than 800 responses produced some surprising results.

Dentists employ a wide variety of strategies to control staff labor costs.

W. Charles Blair, DDS

Staff labor costs represent the biggest overhead expense in most practices these days. In a recent survey, The Blair/McGill Advisory questioned readers regarding the strategies used to control these ever-rising costs. The more than 800 responses produced some surprising results.

Salary vs. hourly

Only 29 percent of the doctors responding indicated that they paid their employees (other than hygienists and associates) on a pure salary basis, while the remaining 71 percent paid on an hourly basis. We long have recommended hourly pay. Doctors benefit from the increased efficiency by paying only for the time that employees actually work, not when the office is closed due to vacation, sickness, continuing education, etc.

Paying hygienists and associates

Twenty-five percent of the doctors surveyed (mostly specialists) reported that they did not employ any hygienists. Of the remaining 75 percent who did employ hygienists, 36 percent paid on an hourly basis only, 25 percent paid a salary or flat per diem, 8 percent paid a base salary with some productivity commission, while only 6 percent were paid on a purely commission basis.

Commission pay was more common for associates. While 74 percent of the doctors responding indicated that they had no associate, of those who did, 16 percent paid on a straight-commission basis, 6 percent on a salary basis, and only 4 percent on a base salary with some commission.

Part-time employees

We`ve long recommended using part-time employees (less than 20 hours per week) to maximize productivity per hour while eliminating fringe benefits and retirement-plan costs. Thirty-eight percent of the respondents, though, had no part-time employees. Forty-seven percent indicated that 1 to 25 percent of their employees were part-timers, while 11 percent said that 26 to 50 percent of their employees worked part time. Another 3 percent indicated that 51 to 75 percent were part-timers. Only 1 percent said that more than 75 percent of their employees worked part time.

Other strategies

Doctors were asked which strategy they had used during the past two years to control labor costs. Over half (454) of the doctors responded that they had cross-trained employees so that they were able to fill in without hiring additional employees. Another 247 reported that they used job sharing in order to have two individuals employed part time in a single job and realize greater productivity and cost-savings from part-time employment. Another 214 doctors responded that they adjusted employee-staffing needs and employee hours based on peak and slow periods in their practice.

Maximizing delegation to the lowest-paid, qualified staff member was a strategy employed by 211 of those doctors responding. Another 184 doctors indicated that they had redesigned their retirement plans to reduce staff-funding costs, while 162 offered that they had reduced payroll taxes and retirement-plan contributions by providing fringe benefits in lieu of salary. One disappointing note: only 75 doctors reported that they have begun outsourcing tasks such as payables, payroll, and collections, to third parties in order to reduce labor costs.

Readers to submitted other strategies that successfully to controlled staff labor costs. While many doctors commented that the task was extremely difficult due to the tight labor market in their area, others share some excellent strategies as follows:

Hiring

Y OHiring the best at top pay gets maximum productivity in our practice.O

Y OWe run Olean? and are careful not to overhire. When we have turnover, we see if we can maintain the practice without replacing that employee or, at worst, replacing a full-time employee with a part-time staff member.O

Y OWe are careful to hire part-timers, or others who will not need benefits or retirement-plan contributions, such as younger employees.O

Y OWe hire beginners and give them good training rather than paying top dollar for more-experienced staff.O

Efficiency

Y OWe have increased computerization, particularly in the operatories, to boost production with the same number of employees.O

Y OWe have eliminated overtime and reduced our work schedule through improved productivity. The employees are paid only when they work, and they work only when I work.O

Y OWe have been able to downsize our office as a result of increased efficiency.O

Wages and raises

Y OWe determine an hourly wage for each position and do not overhire.O

Y ONo more automatic raises in our office; only bonuses based on increased production.O

Y OIn our office, staff salaries are fixed at a certain percentage of collections by department. The total salaries are shared within each department based upon the number of hours worked.O

Y OWe give time off in lieu of increased pay, which works well for our employees.O

Y OWe give staff-salary increases only if practice income increases.O

Y OWe involved the staff in team-building, which has significantly increased practice production and collections.O

Y OWe have raised fees and increased production so that staff-labor-cost percentages have fallen into line.O

Y OWe have linked pay raises to fee increases in our office.O

Other strategies

Y OWe have reduced turnover and kept mature, long-term, high-quality staff members.O

Y OWe have shifted more benefit costs to employees.O

Y OWe have instituted a well-pay plan ? no more sick leave in our office.O

Doctors should be able to develop a staff-salary budget that will allow them to increase practice profitability in 1999.

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