Setting compensation levels for staffers is one of the more difficult issues that physicians face. After all, salaries typically account for a large part of a practice’s expenses. If your pay scale is low, it may drive up the rate of employee turnover. On the other hand, paying above-market rates can inflate your overhead unnecessarily.

Attracting and retaining employees isn’t the only goal when setting compensation levels. They should be structured in such a way that your staff members recognize that productivity and additional effort will be rewarded.

So what can you do to ensure that your compensation plans achieve these goals? Start by considering these issues.

Study Benchmark Data
Pay and benefits may vary considerably from one location to another and even from one practice to another. Find out what other local physicians are paying or get wage and benefit data online to use as a benchmark when you are making compensation decisions.

Adjust for Circumstances
You’ll need to adjust the benchmarks you find for a variety of circumstances. For example, consider your location. Are you in a high-cost urban/suburban area or a low-cost rural one? In addition, you should adjust for any factors specific to your practice, such as payer mix. Tailoring benchmarks to your practice’s specific circumstances will give you custom tools you can use to evaluate staff costs.

Create Incentive Plans
It may make more sense from a budget perspective to offer merit or productivity bonuses to employees rather than offering an across-the-board pay raise for the whole practice.

Offering incentive bonuses allows you to set specific goals. For example, if you want to reduce the number of claims that insurers reject, offer employees a monthly bonus if they can reduce rejected claims by a certain percentage, say 30 percent.

Your practice can use merit bonuses to encourage staff members to acquire additional qualifications and training. It’s generally a win-win situation: Your staff member acquires additional qualifications and your practice benefits from his or her enhanced skills.

Talk to Us
We can help your practice review your current compensation practices to determine where changes might be necessary and beneficial.

Copyright 2015 by DST. All rights reserved.

The general information in this publication is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purpose of avoiding tax penalties