From the desk of STAC Bizness Solutions CEO, Shawna Aho

For dental practice owners, staffing costs have become one of the biggest financial challenges in recent years. With wages rising due to inflation, labor shortages, and increased competition for experienced dental staff, many practice owners are feeling the pressure of mounting payroll expenses.

While investing in a high-quality team is essential for delivering exceptional patient care and maintaining a thriving practice, escalating payroll costs can eat away at profitability and put your business at risk.

So how can you determine whether your payroll expenses are reasonable? And if they’re too high, what steps can you take to control costs without sacrificing the quality of care or team morale?

In this post, I’ll break down how to evaluate your staffing expenses, what benchmarks to consider, and practical ways to manage payroll while keeping your team motivated and your patients satisfied.

The Growing Cost of Dental Staff: Why Payroll Is Rising

If you feel like payroll costs are getting out of control, you’re not alone. Many dental practices are struggling to keep up with wage increases while maintaining profitability. Several factors contribute to the rising cost of dental staff, including:

Inflation and Cost of Living Increases

As the cost of living rises, employees demand higher wages to keep up with housing, transportation, and daily expenses. Many dental professionals—especially hygienists and assistants—expect regular pay raises to match inflation.

Workforce Shortages and Competition

The demand for skilled dental professionals is outpacing supply. Many regions are experiencing shortages of dental hygienists and assistants, leading to increased competition for qualified candidates. To attract and retain top talent, practices often have to offer higher wages, better benefits, or signing bonuses.

Changing Employee Expectations

Today’s workforce values work-life balance, professional development, and competitive benefits more than ever before. Practices that fail to offer competitive salaries, health benefits, retirement plans, or flexible scheduling may struggle to retain staff.

How to Determine If Your Payroll Expenses Are Reasonable

While increasing staff salaries is often necessary, there is a point where payroll expenses can become unsustainable. The key is to ensure that your payroll costs are within industry standards while maintaining a strong, efficient team.

Here are a couple ways to evaluate whether your payroll expenses are in line with acceptable levels:

Calculate Payroll as a Percentage of Revenue

One of the most common benchmarks for dental practices is payroll as a percentage of total revenue.

• Industry Benchmark: Most general dental practices aim to keep payroll costs (including salaries, payroll taxes, and benefits) between 25% and 30% of total revenue.
• If your payroll expenses exceed 30%, it may be a sign that your staffing costs are too high and need to be adjusted.

Compare to Industry Averages

Review compensation reports from sources such as the ADA (American Dental Association) or dental staffing salary data on websites like Salary.com. These resources can provide insights into typical wages for dental hygienists, assistants, front office staff, and associates.

If you’re paying significantly more than the industry average, it’s important to evaluate whether those wages are necessary to attract top talent or if adjustments can be made.

4 Ways to Control Payroll Costs Without Hurting Your Practice

If your payroll expenses are higher than recommended benchmarks, it’s important to take action before your practice’s profitability suffers. However, cutting staff or wages without a plan can backfire, leading to lower morale and a decline in patient care quality.

Here are some smart ways to control payroll costs without sacrificing efficiency or team satisfaction:

1. Optimize Scheduling and Staffing Levels

One of the most effective ways to reduce payroll costs is to ensure that your practice is appropriately staffed for demand.

• Evaluate Patient Volume: Analyze appointment data to determine peak hours and slow periods. Adjust staffing levels to match patient flow rather than keeping a full team on the clock at all times.
• Cross-Train Employees: Having staff who can perform multiple roles allows you to maintain efficiency without hiring extra employees. For example, training front desk staff to assist with sterilization during slow periods can reduce the need for additional hires.
• Use Part-Time or Per-Diem Employees: If your patient volume fluctuates, consider hiring part-time or per-diem staff to avoid overpaying for unnecessary hours.

2. Improve Efficiency with Technology

Investing in the right technology can help reduce labor costs by streamlining operations and reducing the need for extra staff.

• Use Automated Scheduling and Billing Software: This can reduce the workload on front office staff and improve efficiency.
• Implement Digital Patient Forms: Reducing paperwork can save time and allow staff to focus on higher-value tasks.
• Utilize AI and Chatbots for Customer Service: Many routine patient inquiries can be handled with automated systems, reducing the need for excessive front desk staffing.

3. Offer Competitive Benefits Instead of Higher Salaries

If you’re struggling to keep wages under control, consider offering valuable benefits that improve job satisfaction without significantly increasing payroll expenses.

• Health and Wellness Benefits: Offering health insurance, dental benefits, or gym memberships can improve employee retention without requiring excessive salary increases.
• Flexible Scheduling: Many employees value work-life balance just as much as salary. Offering four-day workweeks or flexible scheduling can be an attractive alternative to pay raises.
• Retirement Plans and Bonuses: Instead of permanent salary increases, consider offering performance-based bonuses or matching 401(k) contributions, which can be more cost-effective.

4. Regularly Review Compensation and Performance

Payroll expenses can spiral out of control if salaries are increased without reviewing performance or business needs. Implementing an annual performance review process can help ensure that wage increases align with individual contributions.

• Reward employees based on performance rather than across-the-board raises.
• Set clear benchmarks for productivity and efficiency improvements to justify wage increases.
• Regularly review compensation data to ensure that salaries remain competitive but not excessive.

Some Final Thoughts…

As a dental practice owner, managing payroll costs is one of the most critical factors in maintaining a profitable and sustainable business. While rising wages are a reality, taking proactive steps to optimize staffing, improve efficiency, and offer competitive benefits can help you control expenses without sacrificing the quality of care.

By regularly reviewing payroll as a percentage of revenue, benchmarking salaries against industry standards, and implementing smart cost-saving strategies, you can ensure that your practice remains financially healthy while keeping your team happy and motivated.

If you’re struggling with payroll costs, now is the time to evaluate your current staffing structure and explore new ways to optimize efficiency. If you’re not already working with us, the Team at STAC Bizness Solutions stands ready to help! By taking a strategic approach, we can work together to strike the perfect balance between financial stability and exceptional patient care.