Is 20% Of Gross Enough For Staff Overhead?
Dr. Hayes,
I was curious about your 20% cost of staff benchmark mentioned in your blog of May 11. For any given practice, you are suggesting $25k per FTE based on your one FTE per $125k of production. With taxes and benefits, you are looking at $10-11/hr. I don't see how one can develop and retain a well trained professional staff on that kind of compensation. Are these benchmarks skewed toward rural depressed areas? Even at 25% for labor you are looking at $31k per employee.
Love reading your insights. Keep them coming. Dr K
Jerry,
I have generally followed your recommended guidelines/metrics for cost containment. They have been very helpful to make sure we are on the right track. But I disagree with one employee for every $125,000 of practice income. This only allows for $12/hr. employees. It is difficult to find anyone with half a brain that will work for $10-12/hr, especially after a couple of years of employment.
I think it is definitely better to have higher paid employees that are smart, dedicated, and good workers.
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20% of growth
I will agree with the 20% of revenue. I took over a practice that was paying 27% to the employees and they were "show up every day and work for my paycheck" type employees. Educated but without incentive to strive and improve.
I had a little turnover and instituted a bonus program and my EMPLOYEES have grown my practice 200K (I now have a million+ practice) in one year and THEY are making MORE money and the percentage that I am paying them has dropped (therefore I am making more money).
Incentive is the key, and keeping employees feeling as if they are PART of the business and not just another employee!!!!! The other thought, by keeping employees in the loop and working with their requests (a simple ice machine in the breakroom, for example), you develop LOYAL employees who show up every day because they WANT to work and not just for a paycheck.
Dr. D