There are roughly two optometrists per ophthalmologist in the U.S., so they are in good supply and ready to recruit. The base wage for an optometrist are relatively stagnant compared to the rising wages of an ophthalmologist, but just how much should you offer your new associate?
At Caro & Associates, we are experts in accounting and bookkeeping services for optometry practices. We understand that you want to pay your employee enough that they will be reliable and work hard for you, but if you pay them too much they may become comfortable and lack the motivation to progress. Commission can incentivise your associate to achieve high standards, but how do you get the right balance? We’ll take a look at the three options below.
1. Salary only
A fixed salary provides your employee with consistency. They will know exactly how much they will be bringing home each month and can plan their living expenses around that figure. Associate Optometrist fixed salaries start at around $70,000 and can reach up to $110,000 or more. You need to calculate how much the business can afford to pay your employee and factor in any included benefits, licensing, malpractice insurance and other extras. Consider how much revenue your associate would need to bring in to be cost-neutral, and how likely they are to gross more than that figure. You don’t want to be paying them more than they are bringing in and running at a loss, and you also have other overheads to consider. Ideally you do not want to be paying your optometrists any more than 20% of the dollars generated by your practice. The average optometric net is around 30%, so paying your optometrists 20% each would leave 10% for the practice, which would then be used to pay the owners. Contact us at Caro & Associates for help with your calculations and our professional advice.
2. High salary with low commission
Possibly the best of both worlds, your employee has some salary reassurance with a guaranteed income, but also has the incentive to be more productive and earn more. You may want to fix the salary somewhere around $55,000 and then offer a 30% commission on the revenue they gross collect over and above their cost neutral figure. This is a lower risk option for you as the CEO and more likely to generate a decent profit.
3. Low salary with high commission
You may consider taking even less risk by offering your employee a low fixed salary but giving them the chance to earn a greater commission. An example would be a starting salary of $45,000 and commission of 50% over their cost neutral figure you have calculated. The associate has the chance to earn an excellent salary if they are business minded, motivated and eager to work hard, while you, as the employer, are only committed to pay them $45,000 until they start bringing in a profit to the business.
Giving your associate optometrist the choice can be a good indicator of their initiative. An associate that opts for a salary only pay may be a great associate but not have the necessary drive and mindset to one day become a small business owner. Optometrists who are future business partner material are more likely to choose options 2 or 3.
Read here to find out more from Healio’s Principles of optometrist compensation.
If your medical practice always seems behind on work and payroll is always over budget, you might have a problem with your capacity or staffing plan. One of the key behaviors that separates good optometric practices from great optometric practices is a good staffing plan.
The Protecting Americans from Tax Hikes (PATH) Act of 2015 requires Forms 1099-MISC reporting non-employee compensation (NEC) in box 7 to be filed by January 31.
If your current goal is to maximize your optometry practice’s bottom line, then it is vital to regularly assess the information you have on hand to make important strategic decisions.