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How to Plan for Employee Salary and Raises

In a previous article, we discussed how important it is for a medical practice owner and medical practice office manager to "Build a Winning Team". Building a winning medical practice team requires you to attract and retain the best employees you can. Though the practice environment, flexibility, and advancement opportunity are important to retaining and attracting the best employees, today we are going to focus on pay.

From our experience in medical consulting and dental consulting we know that employee salary, bonuses, and raises are a strategic way to motivate your best employees to stay and your poor performing employees to leave. If done smartly, your poor performing employees will leave on their own without requiring you to let them go and the subsequent pain involved from firing and/or paying federal unemployment. Firing is painful and hopefully, that is motivation enough to be smart in how you reward all your practice employees.

In order to do this, you are going to need at least three things. The first is performance history. Performance history can be done by tracking the good and bad for each employee over the year. This can be done in a spreadsheet or using the free Doctors CFO Performance Appraisal that we discussed in this article. The second thing that you will need is a way to simulate spreading a payroll budget increase over your employees. You can do this manually or you can hire a consultation from Doctors CFO for $595 to help you think this through. The third is enough success to be able to award bonuses and pay increases.

Here are some of the elements that we recommend you include in your calculation:

Current Pay

  • It is typical for increases to be based on a % of what the employee makes whether salary or hourly.

  • Awarding higher percentages for your best employees is recommended as opposed to assigning the same percentage across the board.


  • It is typical for increases to be based on how long the employee has been with you.

  • An employees loyalty to your practice is a major factor to consider when determining who your best employees are.


  • Has the employee maxed out at their current job responsibility?

  • If so, are they so awesome that you are willing to go higher?

  • Perhaps not because higher pay is permanent but a one time bonus might be worth consideration.


  • You may want to exclude new employees or employees with poor performance from raises.

  • An example would be employees who have been with your practice for less than 6 months are not eligible for a raise.

% of Collections

  • For staff salaries, excluding doctors, the pay should stay within some percentage of collections, this will help determine the practice budget for raises.

  • Generally, depending on your specialty the percentage should be between 15% and no more than 30% of collections.

One Time Bonus

  • As mentioned, perhaps the employee is deserving of a raise but it doesn't make sense for the type of work they do and a one time bonus makes more sense.

  • Perhaps they get a raise and a one time bonus.


  • Then you need to combine all of these elements to determine how much you are going to pay each employee to stay within the budget you can afford.

  • Thought the average might be 2% or 3%, some might get 0% increases and others 5%.

  • This will be a trial and error effort as you calibrate it to make sense.

  • While doing the calibration you will do much reflection on your employees so be as honest and as objective, as you can.

To participate in this week's poll, please subscribe to our mailing list ad follow us on Instagram. "When Giving Raises, Do You Award All Employees With the Same Percentage Increase?"

Prior Article Poll Results

Our previous article asked the question "If You Had the Opportunity to Hire This Person Again,, Would You? ". This is the single most important question to take ask yourself when considering employee raises. Our poll asked "What Do You Commonly Base Your Employee Raises On?". Based on the responses we received, 16.7 % go with gut feeling, 33.3% look at time of service, 0% look at current pay and job function, while 50% say they take all of these categories into consideration.

The reason we are publishing these articles is so that your office can increase its success. We appreciate your feedback on how we can help you more and love it when you pass these articles along to other practice owners and office managers. If you have a question that you would like answers to in a blog post, please email it to info@drcfo.com. If you have not signed up for our blog, please do, so you can continue to receive these important insights and participate in our polls.

Developing a management report is not easy and Doctors CFO currently has a robust model for most practice types that is customized for our monthly and bi-monthly clients. If you have questions on how this model applies to your practice or you are interested in applying the Doctors CFO model in your practice, via one of our annual, bi-monthly or monthly assessments, please reach out to us as info@drcfo.com. Doctors CFO provides financial analysis and valuations for doctors and dentists in the United States. We also offer programs for new patient marketing, revenue and collection management, medical practice consultant, dental consultant, and practice analysis.

(c) 2019 Doctors CFO, All Rights Reserved.

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©2019 by Doctors CFO LLC, All Rights Reserved.