Are You (and Your Practice) Ready to Bring On an Associate?

Are you ready to hire an associate? Hiring an additional dentist for your practice can have numerous benefits such as growing your practice and providing you with an exit strategy, if you are considering retirement, as the new associate may be a potential buyer of the practice down the road. The problem is many dentists hire an associate without conducting a proper analysis to see whether their practices can support the senior doctor as well as an associate. If you are thinking about hiring an associate for your practice, you need to consider a few factors to ensure that it will be a profitable decision for you and your dental practice. Proper planning is key to avoid any unpleasant surprises.

To ensure that you include all of the factors involved in hiring a new associate, creating an overhead expense analysis is very beneficial. When creating the analysis, you want to lay out the terms of the arrangement, including:  the projected number of days the associate will work, the collections per day of the associate dentist’s production, and the collections per day of the hygienist who will be working with the new associate.

You will then need to determine the percentage of either net collections or net productions that you are going to pay the associate. Net collections would be the percentage based on the monies your practice actually collects from patients or their insurance companies. Net production would be the percentage based on the associate’s actual production.

You must also factor in employment taxes, which include: FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act), state unemployment taxes, and worker’s compensation. In addition to taxes, any fringe benefits that you will offer your associate must be calculated in the analysis. Fringe benefits may include: professional dues, continuing education expenses, business expense reimbursements, malpractice insurance, health insurance, and matching 401K contributions, just to name a few. You and the new associate will most likely need to negotiate fringe benefits, but it is important for you to understand what you can afford to offer your new associate before you begin any negotiations.

Creating an analysis helps you visualize how much you will be investing in an associate and how much your practice could potentially profit from hiring an associate. Once you complete your analysis, you want to review it carefully and think the deal through to make sure your practice can support a new associate in addition to the staff that you currently have, as well as any additional staff you may need to hire to support a new associate.

Nardone Limited Comment: Most importantly, we would advise you to work with a dental accountant to ensure that the analysis is correct and other factors are considered as well. That is, the overhead expense analysis is only one factory of many that should be considered when looking to hire an associate.

After you have reviewed the analysis, you need to discuss all of the terms and agreements of the employment relationship with the associate, and have an employment agreement prepared.

As with any major decision, proper planning is vital. Once you think your practice may be ready to bring on another dentist, carefully consider the factors detailed above and make sure it is not only a viable, but a profitable decision for both you and your dental practice.

About the Author

Ashley Privett is a tax and business attorney with Nardone Limited. She represents individuals, businesses, and professional healthcare and dental practices in a wide variety of legal areas. Ms. Privett earned her BSBA, her JD, and her MBA all from the University of Akron.