Advisor Inquiry: I Feel Like My Money is Being Wasted

How can I stop my employees from eating breakfast as soon as they get to work? Do I have to pay them for that time? I feel like my money is being wasted.

It can be frustrating to watch employees clock in early and immediately sit down to eat a morning meal, head to the bathroom to apply makeup, scroll through social media posts on their phone, socialize, or otherwise engage in non-work-related activities while trying to pad their paycheck with a few extra minutes each morning.

On that note, let’s actually answer the second question first – do you have to pay them for this time? Well, that depends on a few things, such as whether they’re exempt or non-exempt employees and whether they’re doing any work-related tasks. If the employee is an exempt status employee (usually your office managers and associates are the only team members eligible for this status), they get paid the same amount each week regardless of the number of hours they put in – so yes, you’d need to pay them for time spent in the office, even if it’s not 100% work-related. You shouldn’t be docking their pay because they spent a few minutes sending a personal text, and generally employees who reach a high enough level to qualify as exempt are employees you can trust to manage their time effectively. We’ll discuss your options if this leeway for personal activities at work become a distraction in a minute.

If you have a non-exempt employee (typically paid by the hour; your assistants, front desk, treatment coordinators, etc. are going to fall in this category) wasting time on the clock, you actually can alter their timesheet to deduct the time spent on non-work-related activities. However, you should be absolutely sure that this was time used for personal pursuits. If they’re performing any work-related tasks – for example, eating breakfast at the front desk while checking email or answering phones – then the time spent is actually related to practice activities and must be compensated, even if they’re not managing their time as you would prefer.

So, what do you do to change the behavior you’re seeing? Well, now that you’ve taken the “wasting my money” part out of the question you can view this as you would any other employee behavior that goes against your ideal view for your practice. Treat this as you would any other disciplinary issue – manage it. If you don’t yet have a policy in place to manage when and where meals are to be consumed, write one. Put it in your Employee Handbook, and hold everyone accountable. A great standard policy to have is a “Ready to Work” policy. Let employees know that you expect them to arrive on the practice premises “ready to work” their shift – personal grooming taken care of, wearing their uniform, meals eaten, personal business taken care of, etc. – and that they must begin performing actual work duties immediately upon clocking in. Ensure that you consider the difference between “meals” and “snacks,” and be prepared to make some reasonable exceptions for employees with a valid medical condition that requires them to eat more frequently.

Separately, you should create a policy detailing appropriate times, places, and volume levels of personal devices, or any other unreasonable, unprofessional behavior you want to prohibit or restrict, since this type of distraction often occurs through the work day. Limit personal device use to breaks and emergencies. Your employees paid to perform a service for your practice, and not only is attending to personal matters while on the clock a waste of your money (for both exempt and non-exempt employees) for non-exempt, hourly employees it’s actually a form of employee time-theft when they accept pay when work is not actually done.

This is your practice, and your bottom line that suffers when employees waste on-the-clock time with personal pursuits. It’s critical to set the expectation for time-management, then hold everyone accountable for following those policies.


Your 2018 Marketing Budget

If you – like most enterprising practice owners – are already planning your 2018 budget, you know you’ll need to earmark a certain percentage of collections for a variety of marketing efforts. Identifying what exactly that percentage should be depends on many factors. Some advisors will tell you that the investment you make toward marketing should be inversely proportional to your current level of busyness, with percentages ranging from 1-15% of collections that fluctuate based on your patient capacity.

However, these across-the-board percentages fail to take into account a variety of situations that can affect your marketing budget. For example, if you are an orthodontist – whose patient lifespan is shorter than a general dentist – you might want to increase the percentage of collections invested in marketing, even if you’re at a higher percentage of patient capacity. To consider another scenario, if you are a growing practice and you plan to take on an associate, partner, hygienist, or other service provider in the next six to twelve months, you would want to continue marketing as if you were operating at a lower capacity than you truly are. Or, a doctor who purchases an established practice may want to heavily invest in marketing, even if it seems like they’re operating a reasonably high capacity.

So what’s your magic number? In truth, there’s not a one-size-fits all calculation for determining what percentage of
collections should be spent on marketing. Yes, as a general rule the percentage of collections that should be invested in
marketing activities typically falls within the aforementioned range. But the exact amount is a number that should be reached after careful consideration with your practice and financial advisor, accounting for all variables and then drilling down further to break out which percentage of the marketing budget should fall to certain types of marketing.

Are You Misclassifying Your Team Members?

Let’s play a game. The following five scenarios describe commonly seen employment relationships in a practice. Can you guess which team members are “employees” and which ones are “contractors”?

  • You have a receptionist who only comes in on Fridays for about five hours to answer the phones and book patient appointments.
  • Your assistant is going on maternity leave, and you need to find someone to replace her for the eight weeks she will be out. You hire a temporary assistant who is taking over the full schedule for the assistant on leave, but knows she’s only needed for eight weeks.
  • You’ve hired a new treatment coordinator, and tell her that she’s on a 90-day probationary period, at which time you’ll revisit her compensation, pending review of her work.
  • You’re in the process of hiring a new hygienist, and have asked one of the candidates to come in for a compensated “working interview.”
  • You hire an associate to take patients two days per week. They’re currently working at another location, but when they’re working in your office they’re representing themselves as a team member of your practice, complete with practice uniform and using practice-provided tools.

If you answered “employee” to each of these scenarios, you are correct!

Employees vs. Contractors

The litmus test for determining whether a team member is a contractor or employee looks at the type of relationship between the employer and team member, terms of payment, and who controls the behavior of the team member. The amount of time the team member spends working each week or the duration of the time they spend working for you doesn’t really matter – if they’re coming to your office when you tell them to, to provide services related to the work of your practice, using your tools, wearing the required uniform, drawing a paycheck on the same pay cycle as you’ve set for your employees, and performing the work of the practice as a representative of the practice where you control how the work is completed, then that team member is likely an employee. If they’re working on projects for you that aren’t related to the work the practice produces (ex: a web designer creating your site, an IT person setting up your network, a carpenter hanging a door, an anesthesiologist who comes in a few times a month to assist a pediatric dentist with certain procedures, etc.), they have their own business card and email address, provide this type of work or service to other businesses, aren’t wearing your uniform, send you an invoice to bill you for services rendered, you pay them for the results of the work and don’t control the details of how it’s accomplished, and you have an actual written contract with terms of service – that’s a contractor.

Not every employment situation is black and white. However, there isn’t a penalty for classifying a team member as an employee when they could potentially be a contractor. On the flip side, there’s definite potential for liability to your practice if you classify someone who should be an employee as a contractor.

“But what about my contract employee…?”                                                            

Q: What do unicorns and “contract employees” have in common?

A: They don’t exist!

The term “contract employee” is an oxymoron. This designation is frequently used to describe someone who provides a service to a practice – serving in an employee capacity – for a short period of time or on a limited schedule. However, as previously mentioned, the relationship between the employer and the person providing the service to the employer is the controlling factor, not the amount of service they provide. You could have a new assistant for two hours and fire them… they’re still an employee, you still need to have their employment paperwork (W-4 and I-9) filed and pay payroll taxes for them. Unless you want to jeopardize the “at-will” employment status by creating an actual written contract for an employee (unwise, talk to your employment attorney first), this is not a classification you want to use. A service provider to your practice is either a “W-2 Employee” or a “1099 Contractor.” You can’t have it both ways.

What’s the Big Deal?

For starters, did you know that contractors can file unemployment claims? You may not be deemed liable for the chargeback after the hearing, but if a team member you’ve misclassified as a contractor separates from your practice and files for unemployment insurance benefits through the Texas Workforce Commission (TWC), your pay practices may be red-flagged and open to scrutiny via audit if that former team member is found to have been misclassified. You may also be selected for a random TWC or IRS audit, which would uncover these issues and open your practice up to further investigation in addition to fees, fines, and back wages and taxes owed.

What should you do?

If you think you may have misclassified team members as contractors when they should have been categorized as employees, talk with your employment attorney or CPA immediately. If you’re currently employing misclassified team members, the likely course will be to switch their employment status immediately and – depending on how long they have been misclassified – discuss a plan for rectifying your payroll issues.

“But I don’t want these employees to get benefits…” That’s fine! Include limitations in your total compensation policy that state employees who work under a certain number of hours per week are ineligible for benefits. You can also include a statement that requires 90-days of consecutive employment with the practice before employees who qualify with hours worked per week are eligible for other benefits, such as holiday pay or bonuses. This won’t remove your potential liability as an employer in the event of an Unemployment Insurance Claim with TWC, but it’s perfectly reasonable to deny short-term or extremely part-time employees the benefits your full-time, long-term employees enjoy.

Misclassification can be a serious problem that comes with hefty fines, back wages owed, back taxes owed, and audit potential. Talk with an advisor who is well-versed in federal and state payday rules to ensure your payroll system is compliant and you’re accurately classifying your team members.