First Month: Payroll

Art Associates. Carrying on your first month. In your first month, you're going to have to process payroll, which means you're going to get your staff paid. If there's one thing you don't want to get wrong, that's it. Because how quickly can you lose the confidence of your new team if you don't get their paycheck in their account on time when they need it? So this one is critical. Now what I want to cover in this module are just some of the, I guess the concepts, some of the elements that you need to understand when it comes to the subject of payroll in your dental practice. So number one, like I said, get your staff paid and paid on time. Number two is employees can be classed. They are classed as either exempt or non exempt. And if you're talking with a labor attorney, you will hear this. And this relates to overtime. They're either exempt from having to pay overtime or they're not exempt from overtime. And you have to pay them if they work overtime hours. Every state has different overtime laws. In California, by default, it's eight hours in a day. So if somebody works nine hours in a day, even though they work less than 40 hours in a, in a given week, you have to pay that one hour of overtime because it's on a daily basis. Some states, as far as I'm aware, are on a weekly basis. So you need to understand what the overtime laws are in your state and you can talk with a labor attorney for that. But it's important to recognize that generally speaking, at least this is the advice I get from labor attorneys is that almost no buddy working in your office is going to be exempt. With a few exceptions, a dentist, if you have an associate in your office, they can be exempt. As a professional, I've seen that in pretty much every state. In fact, I've never really seen overtime ever paid for a doctor. If you have an office manager, then an office manager could possibly be exempt. Now, an office manager isn't just the person at your front desk. You can't just call somebody an office manager. No. The state defines what is classified as an. As a true office manager. This is somebody who makes hiring and firing decisions and other really important decisions without the guidance of you, the owner. And that's a tall order because that's not happening in most dental offices. So by most definitions, an office manager is not considered exempt. Neither is a hygienist. Again, I've gotten different opinions, but what I sort of arrived at the conclusion because of the majority of opinions or one I hear from labor attorneys is that a hygienist is not exempt from overtime. So it's really important that you don't consider somebody treat somebody as exempt when the state is going to come and say that they're not. And remember, most states are going to. They're going to rule in favor of the employee because then what happens is you get penalized and you have to pay all this back pay and it's at the overtime rate with some penalties and a lot of lawsuits. In fact, the majority of lawsuits are labor and time lawsuits in a dental practice. So just be very careful with that. Probably better that they don't work overtime or if they have to work overtime, because you've got great production that you're going to do clinically and it's going to earn income for your practice and you need them there. That's okay, go ahead and do that. But just make sure that your staff always let you know ahead of time when they believe that they're going to have to clock overtime. Because it's one of the most milked systems I find in dental practices is overtime too many hours buffering or cushioning the hours submitted. And oftentimes doctors don't view the payroll reports. And so it goes on years and years and years and adds up to hundreds of thousands of dollars. So be very mindful of that. Number two is hourly and salary. A lot of people get confused this a little bit with the exempt and the non exempt. But a lot of people think, well, if I pay somebody salary, I don't have to pay them overtime. That is absolutely not true, at least in most states and definitely not in California. You could pay somebody hourly. You could pay your assistant hourly or you could pay your assistant on a salary basis. Same thing with your front office. Same thing with your hygienist. You could do. You could pay them however you want structurally, but doesn't mean they're exempt from paying overtime. So you still have to have an hourly rate in order to calculate the time and a half typically is what it is for overtime and pay them the overtime which would be in addition to their salary. That's why generally speaking, I find it's just simpler to pay everybody on hourly. Now there's exceptions to that, but just pay everybody on hourly because you have to know what their hourly rate anyways is when you're calculating overtime pay. Consult with the labor attorney on a lot of this. This is just my experience in interacting with dentists and dealing with the HR issues that they deal with and dealing with Talking with labor attorneys and whatnot. All right, employee handbook. Make sure you have one and a good one, and that a labor attorney, preferably a dental labor attorney, has reviewed and approved it, and that all of your staff, including new staff in the future, have signed an acknowledgement receipt that you know that they have it, that you've given it to them. Within the employee handbook, it should be a discussion about paid time off, which is vacation and sick pay. And you don't want to be just loose on this and just sort of gunslinging different amounts with this employee versus this one. You want a policy that is consistent across all of your staff. It just creates the right environment for people to feel like they're equally treated and doesn't sort of create a lot of the drama that can often arise among teams when they feel that they're being treated unfairly. So make sure you have a good policy on what your vacation and sick time is, how to cruise. I highly recommend you allow it to crew over time rather than getting a lump sum of hours. Let's say it's 80 hours or two weeks, a lump sum at, you know, on the first of the year, because then if they leave or quit on the third of the year, you owe them that amount because it's showing up on their payroll information that they have that much accrued, that much vacation pay that has not been paid. So better let them accrue maybe a couple hours per paycheck so that if they do leave early on, you only have to pay the amount that they've accrued. And there's a lot we could go into on that subject that's going to be outside of the scope of our Associates on Fire program here. Consult with the labor attorney on that. But please just have a system in place that is. That is consistent throughout the practice. And you're going to find when you buy dental practice that so many of these sort of legacy doctors don't have a real good algorithm in their practice to be managing. They're not managing it like a business. They're just managing it sort of very, very loosely. All right, next are direct deposits versus manual checks. Please move to direct deposits and get away from manual checks. Anything where you can just sift out all of the manual unnecessary work like writing a bunch of checks every two weeks is really. That's just almost goes without saying. And yet I still see a lot of practice where they're handwriting all of their payroll checks. So be on direct deposit. Next is you need to have a time between the end of the pay period. And when the checks are deposited or the check direct deposit lands in your staff's personal checking account. Because the payroll companies, because you need time to aggregate the hours, give it to the payroll company, the payroll company needs time to process it. And then the banks usually need two business days or three business days in order to make the direct deposit. And so I recommend that you have a week. So for example, you might have the end of the pay period on the 8th of the month with the direct deposit to be scheduled on the 15th of the month. Problem is sometimes when you go to buy a dental practice is the doctor's been having only a day or two in between, especially if they're handwriting checks. And now you've got to go create a week. And that first paycheck from the staff is going to be smaller because you had to create that week gap between the end of the pay period and the direct deposit date. They just have to bite that bullet. You just got to deal with that. You got to get your systems right on day one. So I recommend that week, the second payroll of the month, you could have it end on the 23rd with the Paycheck being deposited on the last day of the month or the business day beforehand, which is the next bullet point. Here I recommend payroll on the 15th and the last day of the month or the business day before. Now here's a really important concept. As you saw in my prior module, I recommend you file as an S corporation. As a corporation, you have to pay yourself as an employee. And the way you structure your own payroll has a significant effect on what happens with your taxes, with your budget, with your 401k, if you or when you eventually have a 401k. So have a good system. Meet with your CPA around how you want to design your own payroll for you. Lastly, I want to talk about the process of submitting payroll. Payroll is one of the most common areas where embezzlement occurs. And it's also one of the reasons why labor costs, which should be around 27 to 28% for a general dentist ends up being 35% or 40% is because the doctor doesn't have a good visibility on the payroll. And it's often wrong, manipulated or embezzlement even occurs by excessive hours that were never actually worked. So here's the process I recommend, number one, is you have a trusted team member assemble the hours and enter them into the payroll system. But they don't process it yet. Instead, once they're done, they provide a report Typically called a pre processing payroll report, and they give it to you to review. I do the same thing here at practice cfo. I get this report and I can see everybody's name.

And the payment for that pay period. And honestly, it doesn't take me more than three minutes. I just review it. I say, yep, yep, I know who's here and who's not. And I see that it looks reasonable. I don't necessarily tabulate exactly the hours for everybody. I take about three to five minutes on this. Looks good. I give the green light to go ahead. So you review the hours and the pay and approve them if they appear accurate. Then that person, that trusted person, processes the payroll. And after it's processed, payroll reports are going to be posted and you can then verify or review those payroll reports one more time. Now that's important because if you just review it before payroll is processed, numbers could be changed and you would never know about it. That's why you need to review it after as well. The single most important thing is that your front office or this trusted team member knows that you have eyes on it. You are looking because statistics have shown that when people believe that somebody else is looking, that that prevents the vast majority of errors. I mean, of fraud. But speaking of errors, it also just helps reduce errors as well. So also be sure to review the paid time off for reasonableness, not just the hours. Have a strong payroll platform. Typically a strong one will use technology to force this workflow. So it's not a manual process. A lot of payroll companies have the ability to create all of this digitally, so there's no paper printing or anything like that. Your payroll is vital in your practice. Please understand the way the payroll system works. Know that labor is going to be your biggest cost structure. So you want to have a good grip on what's happening. Review it well and have a good platform to run it for both your sake and the sake of your staff members.