The Bottom Line on Bottom Lines: What New Dental Associates Need To Know About Compensation Structures

May 16, 2023

Every spring, thousands of newly minted dentists leave behind their academic pursuits and venture out into the job market, looking for their first position in their chosen profession. There are many things to consider when evaluating potential opportunities – the role and responsibilities, opportunities for advancement, and personal or cultural fit, among other factors. But the bottom line for new dental associates often comes down to the actual bottom line – how and how much they will receive in compensation.

 

Compensation structures for dental associates come in many forms, most of which are more complicated – and less consistent – than a straight salary. Whether you are venturing out into the real world of dentistry for the first time or are looking for greener pastures, it is essential that you understand the common types of compensation packages in the industry, how they work, and their potential risks and rewards. Only then can you make an informed decision that will significantly impact your career trajectory and bank account.

 

Here are five associate dentist compensation structures you may encounter as you receive the multiple job offers a talented new professional like you will inevitably receive:

 

1.  Salary-Based Compensation

 

Simplicity and consistency are the two main benefits of a salary-based compensation structure. You receive a fixed salary at an annual or monthly rate based on a full-time work schedule. Salary increases may be tied to performance metrics or other factors, and the salary may be accompanied by potential bonuses or profit-sharing/equity ownership opportunities. A salary-based structure is a good fit if you value a steady paycheck more than compensation that can fluctuate based on your performance or that of the practice.

 

2.  Production-Based Compensation

 

If you are the type of person who will happily put in long hours and give maximum effort to your work, tying your compensation to your high-performing nature may be a smart move. Production-based compensation is based on the amount of work the associate dentist produces, such as the number of procedures performed or the billable fees generated from their services. The associate may receive a percentage of the billable fees generated from their work or a fixed amount per procedure. In either case, production-based compensation is adjusted for insurance discounts or other contractual payment arrangements. Compensation based on production is also generally paid at a slightly lower percentage than compensation based on collection, as the dentist has no exposure to collection issues and receives their compensation upon completion of the applicable procedure rather than upon collection from the patient.

 

3.  Collection-Based Compensation

 

Unlike a production-based compensation structure, a collection-based compensation structure is based on the amount of money actually collected from patients rather than billable fees generated in connection with the applicable treatment. Obviously, the amount of collections for an associate dentist’s work is largely a factor of how hard that dentist works, but it also depends on patients paying their bills. While this structure is attractive for practice owners – the amount of money going out depends on the amount coming in -tying compensation to something beyond your control is not without risk. Nevertheless, if you are willing to wait and bear that risk, the compensation is generally slightly higher than production-based compensation structures. In an insurance based practice, it is important to note that there may be an initial lag in receiving collection based compensation while the practice waits for insurance reimbursements. Many associate compensation structures will, therefore, include some minimum compensation during this ramp-up period to avoid the associate essentially working without being paid.

 

4.  Hourly-Based Compensation

 

This type of compensation structure is based on the number of hours worked by the associate dentist, and they are paid a fixed hourly rate. This type of compensation can be attractive to new associate dentists who are looking for a steady income while they gain experience and build their patient base. It’s also more common in certain dental specialties where cases tend to be longer term projects and thus compensation based on completion or collection would be impractical. In addition, where an office doesn’t have a full plate of overflow work, but rather is looking for the associate to grow a practice, an hourly arrangement can provide assurance that there is a minimum income available to carry the associate through the early leaner times.

 

5.  Hybrid Compensation

 

A hybrid compensation structure is just what the name implies: a combination of two or more compensation models, such as a salary plus production-based compensation, or a minimum daily fee plus a percentage of collection. This can be an attractive option if you want the stability of a fixed salary but also want to be rewarded for your productivity and hard work. Many offices hiring new associates offer a minimum daily fee while you get up and running that is reconciled periodically with a percentage of collection. This allows you to receive at least some minimal compensation while you build a practice or while you wait for insurance payments to come in.

 

Bonuses and Equity-Interest Opportunities

 

As noted, any base associate dentist compensation structure can be and usually is accompanied by other income-generating opportunities. These include performance-based bonuses, commissions, profit-sharing plans, and equity sharing and ownership. These can be significant sources of income and should be taken into consideration when evaluating compensation structures. But these additional sources of compensation can be complicated, especially those involving potential equity or ownership interest in a practice.

 

It is therefore important that you consult with an attorney who has experience with dental practice compensation packages before accepting any position or compensation plan. Doing so can help you maximize your income and make your first position in the profession as lucrative and rewarding as possible. 


We Focus on You So You Can Focus on Your Patients

 

At DDS Lawyers, we focus our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.

 

Please call us at (630) 833-5533 or contact us online to arrange for your free initial consultation.

 

Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices. This blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.  



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Because of the financial complexities and legal risks involved relating to unclaimed patient credits, practice buyers and sellers alike should consult with experienced counsel to help them navigate this significant and oft-neglected aspect of the practice’s finances and operations. If you are a dental professional considering a sale, acquisition, or merger, please contact us at ddslawyers.com at (630) 833-5533 or contact us online to arrange for your complimentary initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. 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