The Bottom Line on Bottom Lines: What New Dental Associates Need To Know About Compensation Structures
May 16, 2023
Every spring, thousands of newly minted dentists leave behind their academic pursuits and venture out into the job market, looking for their first position in their chosen profession. There are many things to consider when evaluating potential opportunities – the role and responsibilities, opportunities for advancement, and personal or cultural fit, among other factors. But the bottom line for new dental associates often comes down to the actual bottom line – how and how much they will receive in compensation.
Compensation structures for dental associates come in many forms, most of which are more complicated – and less consistent – than a straight salary. Whether you are venturing out into the real world of dentistry for the first time or are looking for greener pastures, it is essential that you understand the common types of compensation packages in the industry, how they work, and their potential risks and rewards. Only then can you make an informed decision that will significantly impact your career trajectory and bank account.
Here are five associate dentist compensation structures you may encounter as you receive the multiple job offers a talented new professional like you will inevitably receive:
1. Salary-Based Compensation
Simplicity and consistency are the two main benefits of a salary-based compensation structure. You receive a fixed salary at an annual or monthly rate based on a full-time work schedule. Salary increases may be tied to performance metrics or other factors, and the salary may be accompanied by potential bonuses or profit-sharing/equity ownership opportunities. A salary-based structure is a good fit if you value a steady paycheck more than compensation that can fluctuate based on your performance or that of the practice.
2. Production-Based Compensation
If you are the type of person who will happily put in long hours and give maximum effort to your work, tying your compensation to your high-performing nature may be a smart move. Production-based compensation is based on the amount of work the associate dentist produces, such as the number of procedures performed or the billable fees generated from their services. The associate may receive a percentage of the billable fees generated from their work or a fixed amount per procedure. In either case, production-based compensation is adjusted for insurance discounts or other contractual payment arrangements. Compensation based on production is also generally paid at a slightly lower percentage than compensation based on collection, as the dentist has no exposure to collection issues and receives their compensation upon completion of the applicable procedure rather than upon collection from the patient.
3. Collection-Based Compensation
Unlike a production-based compensation structure, a collection-based compensation structure is based on the amount of money actually collected from patients rather than billable fees generated in connection with the applicable treatment. Obviously, the amount of collections for an associate dentist’s work is largely a factor of how hard that dentist works, but it also depends on patients paying their bills. While this structure is attractive for practice owners – the amount of money going out depends on the amount coming in -tying compensation to something beyond your control is not without risk. Nevertheless, if you are willing to wait and bear that risk, the compensation is generally slightly higher than production-based compensation structures. In an insurance based practice, it is important to note that there may be an initial lag in receiving collection based compensation while the practice waits for insurance reimbursements. Many associate compensation structures will, therefore, include some minimum compensation during this ramp-up period to avoid the associate essentially working without being paid.
4. Hourly-Based Compensation
This type of compensation structure is based on the number of hours worked by the associate dentist, and they are paid a fixed hourly rate. This type of compensation can be attractive to new associate dentists who are looking for a steady income while they gain experience and build their patient base. It’s also more common in certain dental specialties where cases tend to be longer term projects and thus compensation based on completion or collection would be impractical. In addition, where an office doesn’t have a full plate of overflow work, but rather is looking for the associate to grow a practice, an hourly arrangement can provide assurance that there is a minimum income available to carry the associate through the early leaner times.
5. Hybrid Compensation
A hybrid compensation structure is just what the name implies: a combination of two or more compensation models, such as a salary plus production-based compensation, or a minimum daily fee plus a percentage of collection. This can be an attractive option if you want the stability of a fixed salary but also want to be rewarded for your productivity and hard work. Many offices hiring new associates offer a minimum daily fee while you get up and running that is reconciled periodically with a percentage of collection. This allows you to receive at least some minimal compensation while you build a practice or while you wait for insurance payments to come in.
Bonuses and Equity-Interest Opportunities
As noted, any base associate dentist compensation structure can be and usually is accompanied by other income-generating opportunities. These include performance-based bonuses, commissions, profit-sharing plans, and equity sharing and ownership. These can be significant sources of income and should be taken into consideration when evaluating compensation structures. But these additional sources of compensation can be complicated, especially those involving potential equity or ownership interest in a practice.
It is therefore important that you consult with an attorney who has experience with dental practice compensation packages before accepting any position or compensation plan. Doing so can help you maximize your income and make your first position in the profession as lucrative and rewarding as possible.
We Focus on You So You Can Focus on Your Patients
At DDS Lawyers, we focus our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.
Please call us at (630) 833-5533 or contact us online to arrange for your free initial consultation.
Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices. This blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
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Specifically, the income threshold for single taxpayers is expanded by $25,000 and for joint filers by $50,000. The bill also includes a new minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income from one or more actively conducted trades or businesses in which they materially participate. 2. Expanding Section 179 Expensing The bill increases the Small Business Expensing Cap from $1.22 million to $2.5 million. It also brings back and makes permanent “bonus depreciation,” which allows for an immediate write-off of 100 percent (versus 40 percent) of the cost of new qualified property acquired after January 19, 2025, such as equipment, vehicles, and software. 3. 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For QSBS acquired after July 4, 2025, the holding period required to qualify for the QSBS gain exclusion drops from five years to three years. After three years, a 50% exclusion is available, increasing to 75% after four years, and reaching 100% exclusion after five years. 4. Enhancing the Employer-provided Childcare Credit Section 45F of the tax code, which is designed to incentivize businesses to invest in childcare, now provides qualifying small businesses (gross receipts of $25 million or less for the preceding five years) with a maximum tax credit of up to $600,000 per year on up to 50 percent of qualified childcare expenses provided to employees. This credit is effective beginning in 2026. 5. Employer-provided Student Loan Repayment Assistance The OBBBA makes the employer-provided student loan repayment benefit permanent, allowing employers to contribute up to $5,250 per year towards employees' student loans, tax-free for both the employer and employee. 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We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
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Think about why you would choose a particular location for your practice. Aside from the features of the space itself, it is likely because of favorable characteristics like foot traffic, accessibility, parking, and the lack of other similar practices in the surrounding area. If, after conducting demographic research and spending time and resources selecting the perfect location for your practice, your landlord could wipe out those efforts with the stroke of a pen by leasing space nearby to a competing practice, it could be a devastating blow. Negotiating an Exclusive Use Provision Most commercial leases are initially prepared by the landlord. As such, they are unsurprisingly skewed in favor of the landlord’s interests. It is unlikely that a landlord would voluntarily and preemptively tie their hands by limiting the pool of potential tenants. That is why the burden is usually on the tenant to push for and negotiate an exclusivity provision. When negotiating the terms of your dental practice lease (which you should only do with the help and counsel of an experienced attorney), the goal will be to get your landlord to agree not to rent space to other dental practice tenants. If your landlord refuses to limit their ability to lease space to other dentists generally and you nevertheless want to pursue the desired space, you may be able to be more specific and agree to a provision that restricts the landlord’s ability to lease to a particular competing specialty such as pediatric dentists, orthodontists, periodontists, etc. Protecting Yourself From a Landlord’s Breach of an Exclusivity Clause The contracts most likely to be broken are those with few, if any, consequences for violating their terms. That is why the value of an exclusivity provision is directly related to the price that the landlord will pay for entering into a lease with a competitor despite the clause in your lease. Given the potentially catastrophic impact of having a neighbor in the same building siphoning off your patients and diluting your hard-earned goodwill, that price should be significant. Several different penalties can serve to protect your practice from a breach of an exclusivity provision: Rent Abatement. One of the most straightforward and commonly used remedies is rent abatement. If the landlord allows a competing business to open in violation of the exclusive use clause, an abatement penalty can entitle you to a full or partial reduction in base rent or other charges. This abatement typically remains in effect until the violation is cured or the competing tenant leaves. The lease should specify the amount of rent to be abated (e.g., 50% of base rent) and whether the abatement applies to other charges such as common area maintenance fees or percentage rent. Termination Right. A strong lease will give the tenant the option to terminate the lease entirely if the landlord fails to cure the violation within a specified period after notice. This is a significant penalty that underscores the seriousness of the exclusive use protection. Liquidated Damages. Liquidated damages provide a pre-agreed amount that the landlord must pay if it breaches the exclusive use clause. This can be calculated based on the tenant’s projected loss in revenue, estimated lost profits, or some other measurable metric tied to the tenant’s business performance. Injunctive Relief. Ideally, the lease should give you the right to seek injunctive relief from a court to stop the violation of the exclusive use provision, such as requiring the landlord to terminate the lease or evict the competing tenant. Getting a landlord to agree to a strong exclusivity provision with equally strong penalties for breaches of it requires deft and persuasive negotiating skills, and is yet another reason why dental practice owners should never enter into or negotiate a lease without the assistance of experienced counsel. If you are considering a lease for your practice, please contact Grogan Hesse & Uditsky today at (630) 833-5533 or contact us online to arrange for your free initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
Recent amendments to the Illinois Dental Practice Act (the “Act”), which Gov. JB Pritzker is expected to soon sign into law, will make it easier for newly minted dental professionals to begin practicing while their license applications are pending. The amendments, which would take effect on January 1, 2026, establish the following criteria under which license-pending dentists and dental hygienists can practice under the delegation of a licensed general dentist: The Applicant has completed and passed the IDFPR-approved licensure exam and presented their employer with an official written notification indicating such; The Applicant has completed and submitted the application for licensure; and The Applicant has submitted the required licensure fee. Once obtained, authorization for dentists and dental hygienists to practice under these provisions can be terminated upon the occurrence of any of the following: The Applicant receives their full-practice license; IDFPR provides notification that the Applicant’s application has been denied; IDFPR requests that the Applicant stop practicing as a license-pending dentist/dental hygienist until the Department makes an official decision to grant or deny a license to practice; or Six months have passed since the official date of the Applicant’s passage of the licensure exam (i.e., the date on the formal written notification of such from the Department). IDFPR has yet to post anything on its website regarding these amendments, but we will provide an update if and when it does. If you have any questions about these new provisions regarding the employment of license-pending dentists and hygienists, please contact Grogan Hesse & Uditsky today at (630) 833-5533 or contact us online to arrange for your free initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
