When downsizing your dental practice becomes necessary

When it comes to owning a business, there are natural ebbs and flows in financial well-being; there are periods of growth as well as times of financial struggle. A good business manager is prepared to handle both. When it comes to making decisions about downsizing in particular, business owners must be diligent. Poor decision-making can carry consequences if mishandled.

Reducing hours and/or staff reductions

One of the primary ways to cope with economic downturn is to reduce your employees' hours of work. Whether this affects one employee or your entire staff will depend on the total impact of the business slowdown, but it's a good place to start. It will allow you to retain your employees—only with fewer hours—and may result in less disruption to the business overall.

If reducing staff hours fails to generate the cost savings you need, then you may have to consider downsizing your staff altogether. This can primarily occur in one of the following three ways:

Furlough

A furlough is intended to be for a very limited duration (few weeks to a few months) and has an absolute expectation on the part of both the employer and employee of returning to work. The key is that the staff member remains employed during this temporary unpaid leave of absence. Furloughs make sense when the circumstances the business is experiencing are not intended to be permanent.

Layoff

Layoffs end employment indefinitely. In a case based on economic downturn, the staff member does not remain employed; a laid-off individual should seek employment opportunities elsewhere. This makes sense when there is overstaffing with certain positions, and the financial circumstances are unlikely to change within six or more months.

Position elimination

Eliminating a position permanently removes that job role from the organization entirely. For example, this could be the consequence of outsourcing a particular role to a third-party vendor to save on overhead.

Any mix of the above can be used to make staffing adjustments in the short- or long- term. The key is to make decisions based on real motives and not fabricate something to "save face." If the former employee legally challenges your decision, falsifying why the person was let go will not be viewed favorably.

Avoid discrimination

As always, employers must be aware of the laws prohibiting discrimination based on protected characteristics such as race, religion, sex, age, disability, etc. Not only that, but employers must ensure they do not disproportionately affect individuals with these characteristics, even inadvertently. For example:

• Eliminating the only hygienist over 40 could trigger an age discrimination claim.

• Reducing the hours for an assistant who recently took medical leave could look retaliatory under leave and disability laws.

Always document the objective business reasons for each decision you make and apply this consistently to all employees involved in the reduction process. If a claim arises months later, you'll need documentation to show your actions were legal and justified.

Follow rules for final paychecks and separation notices

Each state has rules about when and how you must deliver a final paycheck after separation. Failure to comply can result in penalties against the employer if the ex-employee files a wage and hour complaint.

At a minimum, the final check must include all hours worked (plus applicable overtime), any accrued, unused vacation or PTO (if applicable, per policy or state law), and any earned commissions or bonuses.

Many states also have requirements for separation and/or unemployment insurance notices that must be provided when ending employment.

Protect practice property

Once an employee is notified that their employment is ending, take all necessary steps to secure the practice, such as collect keys, access badges, or other practice entry devices, changing passwords promptly, and removing access to practice computer systems.

Reassure team and build trust

To preserve your relationship with your remaining team, share, in general terms, why the reduction occurred and reassure them about the practice's stability going forward. Also, avoid overburdening their workload to "get by." This can damage morale, hinder productivity, and hurt your period of regrowth.

Downsizing is never easy, but it can be managed in a way that minimizes risk and preserves trust with your team. Your effective planning today can lead to healthier future growth!

Editor's note: This article appeared in the November/December 2025 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.