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Practice Management

Let’s Talk Benefits: What You Need to Know Before You Hire

by Sheila Grosdidier, BS, RVT, MCP
    Doctors and techs

    It’s always best to start out right. For a veterinary practice and its team members, that means having all the proper documentation in place from the moment the practice offers a candidate a job. Documenting the offered pay, the position the employee is accepting, and the benefits that are available can save a lot of potential future headaches regarding misunderstandings about pay, benefits, and expectations of hours hired to work. This article gives a brief overview of some of the major issues surrounding employee compensation and benefits.

    The Basics

    An efficient way to ensure that an employee and a practice start their new working relationship with the same expectations is to make sure that the job offer is issued, in writing, in a packet that includes the following information:

    • Job title and description
    • Offered wage
    • Expected work hours
    • Paid time off
    • Health care coverage
    • Other benefits

    Establishing each employee’s compensation and benefits should not be a haphazard process. It should take into account state and federal requirements, the prospective employee’s skills and intended position, and the practice’s location and specific situation. As an employer, you should take the time to get acquainted with your state’s labor laws, as well as federal ones.

    Wages

    At the heart of every job offer is an appropriate, agreed-upon wage. It may be based on an hourly rate, a percentage of production, an annual salary, or some combination of these measures, but regardless of its form, it should be clearly stated in the written offer given to the person being hired.

    Determining a fair base wage for an employee should take the following into account:

    • Minimum wage, if appropriate
    • Overtime, if appropriate
    • Industry standards and costs to the practice (BOX 1)
    • The skills that the person is bringing to the practice
    • Job market/geographic location

    Minimum wage. Among its many other provisions, the Fair Labor Standards Act (FLSA) sets a national minimum wage and defines which employees are eligible for overtime pay. However, states often set their own requirements for minimum wage and overtime. The employer must follow the guidelines offering the higher wages and the overtime regulation that is most restrictive. Check your state’s Department of Labor Web site if you are unsure of what your state requires. BOX 2 contains a brief overview of FLSA minimum wage and overtime requirements. To obtain detailed information about the FLSA, visit the US Department of Labor Web site.

    BOX 1. What Do Your Employees Cost You?

    Figuring the appropriate wage when hiring an employee should not be a guessing game. Industry standards exist regarding what percentage of a practice’s revenue should be allocated to staff wages. If your staff wages exceed this percentage, you (a) have too many staff members, (b) are paying wages above the average, or (c) are not bringing in enough revenue to support these wages. If you are considering adding a new position, it is important to include all the costs to the practice. These include not only the hourly wage but also the employer’s share of FICA taxes, Worker’s Compensation costs, federal and state unemployment costs, and any other benefits that you provide, such as holiday pay, vacation pay, uniforms, and continuing education. When all of these costs are included in your calculation, you will find that they total about 20% or more of the wages of a new employee. Forgetting to include them in any projection will unexpectedly affect the practice’s bottom line.

    How much of your revenue should allocated to wages? Read "So, How is Your Practice Doing?"

    Professional skills. The prospective employee’s skill set should be reflected in his or her wage. For example, a licensed technician should receive a higher wage than a technician. Or, in a practice that has several receptionists, there may be three levels for the position: receptionist I, receptionist II, and receptionist III. The receptionist III position will be expected to have greater skills and therefore should receive a higher wage than the receptionist I position. To look at it another way, “you get what you pay for”—if you want someone with a higher skill set, you will likely need to pay more to find that person. The US Department of Labor Bureau of Labor Statistics can provide Census Bureau average wage data for positions in your area (here). However, when consulting these statistics, remember that a position title does not necessarily equate to the same position at every clinic, and the skills and education of the people included in these data are not available.

    Job market/geographic location. Of course, the job market also affects what you might offer for a specific position. In some communities, such as those with technician programs nearby, it is easier to find registered technicians. Often, new graduates prefer to work near home. In other communities, the practice will have to pay a premium to get a registered technician. The cost of living (reflected in the consumer price index) also changes between communities. What a receptionist must be paid to work in Chicago, Illinois, is greater than what the same receptionist will need to earn if he or she moves to Omaha, Nebraska.

    BOX 2. The Fair Labor Standards Act

    The Fair Labor Standards Act (FLSA) was enacted by Congress in 1938 and isenforced by the US Department of Labor Wage and Hour Division. Per the US Department of Labor, “The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime pay at a rate of not less than one and one-half times their regular rates of pay is required after 40 hours of work in a workweek.”

    Under the FLSA, an employee may be exempt from both minimum wage and overtime pay if his or her specific job duties and salary meet all three requirements outlined below. Sections 13(a)(1) and 13(a)(17) also exempt certain computer employees. Job titles do not determine exempt status.

    The three tests for exemption under the FLSA are:

    1. The salary test: The employee must earn $455 per week.
    2. The salary basis test: The employee receives a predetermined amount of compensation each pay period. The compensation cannot be reduced because of variations in the quality or quantity of work performed.
    3. The job duties test:
    • Executive duties. The employee’s primary duty is management of the practice or a department or unit. The employee customarily and regularly directs the work of two or more other employees and has the authority to hire, fire, advance, promote, or otherwise change the status of other employees, or his or her recommendations regarding the status of other employees are given particular weight. The employee should spend more than 50% of his or her time performing exempt work.
    • Administrative duties. The employee’s primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers, including the exercise of discretion and independent judgment with respect to matters of significance.
    • Professional duties. The employee’s primary duty is the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. The work is predominantly intellectual in character and includes work requiring the consistent exercise of discretion and judgment to analyze, interpret, or make deductions from varying facts or circumstances.

    In most smaller practices, employees other than the veterinarians are hourly, nonexempt employees. In larger practices with hospital administrators and supervisors, several positions may qualify as salaried exempt. Being a supervisor is not enough to qualify an employee as exempt from the overtime regulations.

    Be certain that your employees are classified correctly.

    Work Hours

    Of course, an employee’s wage also depends on the number of hours he or she is expected to work. A job offer should clearly state whether the position is considered full- or part-time and define how many hours the employee is expected to work within a set period (e.g., 1 week). If the employee is going to be paid on an hourly basis, the factors below must be taken into account when determining his or her expected work hours. Know that the FLSA requires employers to pay employees for any hours they work, regardless of whether the hours are authorized. If an employer finds that an employee is working unauthorized hours, he or she may counsel that employee not to work unauthorized hours in the future, but the employee must be paid for actual hours worked. It is important to keep accurate records of your employees’ pay history (BOX 3).

    BOX 3. Recordkeeping Requirements

    As an employer, you should keep accurate records of your employees’ pay history. These records may be required if you are ever audited by the Wage and Hour Division of the US Department of Labor or if an employee disputes his or her pay. The information that should be kept for each employee includes:

    • Name and address
    • Gender
    • Occupation
    • Date of birth if younger than 19 years
    • Hour and day when workweek began
    • Total hours worked each work day
    • Total daily or weekly earnings
    • Regular pay rate for any week when overtime was worked
    • Total overtime pay for workweek
    • Deductions and additions to wages
    • Date of payment and pay period covered

    Commuting time. The US Department of Labor requires thatif a practice has multiple sites, employees must be paid for the time spent commuting between sites during the day. This can be amended for employees who were hired with the expressed intention that they would work at multiple sites. If an employee leaves work for the day and an emergency requires him or her to return to work, the employee’s hours worked for the unexpected return to work should be calculated from the time the employee leaves home to return to work until the time when the employee arrives directly back home after working the unexpected shift.

    On-call time. Employees who are on call but can continue with their regular free-time activities because they can be reached by cell phone do not have to be paid for the on-call time. However, if the employee is restricted from activities because he or she must remain near a phone, the on-call time must be paid. The US Department of Labor has very specific requirements for how on-call time is paid. Be sure that your policy complies with these rules. Check out this tool to see if your on-call policy is accurate.

    Seminar attendance. Employees who are required to attend seminars (e.g., continuing education seminars) must be paid for their hours at the seminar. However, if attending the seminar is a benefit that the employee can decline without affecting his or her position within the practice, the practice is not obligated to pay the employee. If the employee’s attendance at the seminar is during hours he or she would normally work and the information that the employee obtains from the seminar will directly benefit the practice, then the employee must be paid for that time. Part of the determination of whether an employee must be paid while attending a seminar is whether the training at the seminar is directly related to the employee’s job. If it is not, then the employee is assumed to be attending for his or her own benefit, and the practice does not have to pay for the time.

    Meal and rest breaks. The FLSA does not require employers to provide either rest breaks or meal breaks for employees. However, some states have laws that require very specific times for meal and rest breaks. It is important to know your state laws and the FLSA and follow whichever is most strict.

    Most employers do offer employees breaks. When these breaks are short (usually lasting about 5 to 20 minutes), federal law considers them work time that must be paid. Bona fide meal periods (typically lasting at least 30 minutes) serve a different purpose than coffee or snack breaks and, thus, are not work time and do not need to be paid. However, if the employee does not receive an uninterrupted meal break—and how many times have you been too busy to break for lunch, or taken a half-hour break only to be interrupted by questions or phone calls that cannot wait?—then the meal break must be paid.

    More information on the topic of work hours is available from the US Department of Labor here.

    Health Care Coverage

    Have you ever had a candidate turn down your job offer because you could not provide the benefits he or she wanted? Or have you had an employee leave for another job because the benefits there were better? Hiring (and keeping) good employees requires providing good benefits. Other than paid time off, health insurance is a major benefit requested by employees. As the employer, you want to offer as much help with making this benefit financially feasible for both the practice and the employee. One way that you can do this is to request your insurance agent to shop health insurance benefits yearly to ensure that you continue to get the best rate for services.

    Keep your job offer packet up-to-date with the practice’s current health care and other benefits, and consider the following actions as ways to make your health benefits package more attractive:

    Offer health care savings accounts (HSAs). HSAs have become very popular for team members. These accounts allow employees to set aside money that can be used to cover the deductible portion of a qualified high-deductible health insurance policy. If you have a high-deductible health insurance policy at your practice, talk with your agent about offering an option for an HSA during your next open enrollment. This option does not cost you, the employer, anything, and it provides an additional benefit to your employees.

    Reward longevity. It is common for employers to give employees extra paid time off after they have been employed a certain length of time (e.g., 2, 5, and 10 years). A new trend in employer-paid health insurance is for the employer to pay a higher proportion of an employee’s health insurance the longer the employee has been with the practice. The employer can either increase its monthly payment toward the employee’s insurance by a set dollar amount or by a percentage that increases with longevity. This is a relatively inexpensive way to say “thank you” to your long-term employees.

    Add a cafeteria plan. What other health care–related benefits do you offer your employees? Consider your package carefully. “Cafeteria plans” (sometimes called section 125 cafeteria plans, after the relevant section of the US tax code) are a way of providing valuable benefits to your employees as well as tax savings to the employees and the practice. Benefits offered by a cafeteria plan often include dependent care reimbursements, medical reimbursement, and vision and dental care plans. They are called cafeteria plans because employees select from a menu of options and pay for their choices with deductions from their wages each pay period. Employees benefit because the money deducted from their wages is withheld before federal and state income taxes are deducted, and the employer benefits because the employee’s reduced taxable income reduces the employer’s payroll tax liability by eliminating the matching FICA (Federal Insurance Contributions Act) taxes.

    Although not necessary to the offer packet, COBRA plays an important role in health care coverage from the employer perspective as well (BOX 4).

    BOX 4. COBRA

    COBRA (Consolidated Omnibus Budget Reconciliation Act of 1986) requires employers to offer continuation of health insurance coverage to covered employees, their spouses, their former spouses, and their dependent children when group health coverage would be lost due to specific qualifying events. Examples of these events include a reduction of hours worked to the point where the employee no longer meets the requirements to receive the employer’s health insurance; termination of employment; the employee becoming entitled to Medicare; and divorce. As an employer, you may require the employee to pay not only the full cost of the coverage but also a 2% administrative charge. This benefit generally applies to group plans of employers with at least 20 employees. Your insurance agent can guide you through the process of enrolling eligible employees in COBRA. However, it is the employer’s responsibility to offer this benefit to the employee. The US Department of Labor has guides to COBRA for employees and for employers.

    Vacation and Personal Time

    As much as new hires want to know what they will be paid for working, they want to know what they will receive as paid time off (PTO). Although traditionally categorized as vacation, sick time, and personal time off, PTO is increasingly being offered as a single package for employees to use as they need. One advantage of PTO for managers is not having to ask why an employee wants the day off. It doesn’t matter; the time is taken from the bank at the employee’s discretion. PTO benefits offer more flexibility for employees to take time off to handle family issues, sick children, and personal needs. Just as employee vacation time often increases with the employee’s duration of employment, so should PTO. PTO can be earned based on hours worked or can accrue weekly or monthly.

    Many employers have a “use it or lose it” policy for vacation or PTO. Some employers allow employees to roll over a portion of earned but unused vacation or PTO each year. If an employer does allow the employee to roll some hours over to a future year, it is best to cap the amount rolled over and encourage employees to take time off during each year. Whether you choose “use it or lose it” or allow time to roll over, be sure to watch your state laws. Some states, such as California, consider earned vacation to be a form of compensation, and employees must receive the time off or be paid for any unused time off.

    Other Benefits

    Why should your potential new hire come work for you and not another practice? The answer may be in your fringe benefits. If you offer any of the following (or others not mentioned here), don’t keep them a secret—outline them in the offer packet.

    Employee discounts. Veterinary practices usually offer their employees discounts on veterinary services, prescription diets, and miscellaneous supplies available through the practice. IRS guidelines state that employers may provide employees a 20% discount on services, based on the price offered to nonemployee customers for the same service. Discounts on merchandise should be calculated based on the employer’s gross profit percentage times the price charged to nonemployee customers for the merchandise. (Detailed information on the IRS guidelines can be found in IRS Publication 15-B, “Employer’s Tax Guide to Fringe Benefits.”) 

    Bonuses. Bonuses offer another flexible benefit. Bonuses based on the performance of the practice compared to the same quarter in the previous year offer an incentive for the team members to provide their best services. For this system to be effective, it should be based on the performance, attendance, and dedication of each employee. Employees who have worked for the practice for less than 6 months, who are on a performance agreement, or who have been on a leave of absence during the time being evaluated are not eligible to participate.



    Want to know more about how to implement an incentive system? Read "The Power of Positive Reinforcement."



    Continuing education. Do you want a good “win-win” benefit for your employees? Offering continuing education (CE) keeps your employees’ skills on the leading edge of the latest techniques or processes in veterinary services, improves their job satisfaction, and benefits your practice. In some states, if being a registered technician is a requirement for an employee to keep his or her job, then it is the employer’s responsibility to pay for the CE required. However, everyone in your practice, including receptionists and kennel assistants, can gain valuable information and grow in their job skills through careful choice of CE opportunities. These opportunities can include seminars that are given in-house by an outside source or online webinars. Team members are paid for their time in CE activities regardless of whether they are in the clinic, online, or at a conference.

    The Offer Packet

    With the hours calculated, the wage determined, the benefits decided, and the PTO set, it’s time to document the offer using the following:

    Offer letter. The practice should prepare a “fill in the blank” offer letter template. This letter explains all the important information that has already been discussed with the successful candidate for the position. If you do drug testing and/or background checks, this document also states that the job offer is contingent on the results of these tests or checks. The offer letter should include the start date, position for which the candidate is being hired, hours expected to work, benefits, and payroll schedule information. Last, it should include a name and phone number for the new team member to call if he or she has any questions.

    Compensation statement. Do your team members know what it costs the practice to employ them? The compensation statement provides a detailed list of wages, compensation, and benefits the new team member is being offered. It also provides a visual representation of the costs to the employer, such as federal and state unemployment compensation, Worker’s Compensation benefits, and PTO based on the employee’s wages. Most employees do not realize the real total of wages and benefits that they are receiving.



    Download a sample compensation statement spreadsheet here.



    Employment contract. An employment contract is an agreement between a practice and an employee outlining all the important terms and conditions of employment. This agreement gives the dates that are covered, the employee’s job title and job description, and the compensation and benefits that the employee will receive. If the contract is created for an associate, it may include details about how the wages will be earned (e.g., based on production with a guaranteed base). Besides vacation and holiday pay, benefits might include uniforms, health insurance, a pension, and payment of professional licenses, dues, and CE. The contract should lay out expectations for standards of conduct and reasons and procedures for termination or nonrenewal of the contract. This contract should also include a confidentiality clause and, for most states, a covenant not to compete. Any contract should be reviewed by your legal counsel to ensure that it covers all the important employment issues and that it follows the laws of your state.

    Unexpected Perks

    The benefits of working at your practice need not be limited to what you put in black and white. Keep your employees happy and loyal by providing them with occasional surprises. These “benefits” do not have to cost a lot of money. For example, buy some retail, coffee, movie, or ice cream gift cards. Give them to employees who receive compliments from other employees or clients; draw a name at the team meeting; or put a small one in every employee’s paycheck one week. Food always makes a party. Show up with ice cream sundae fixings on Monday (to start the week off right), or bring doughnuts to the team meeting. Keep it unexpected, and the rewards will be greater. Happy employees extend their enthusiasm to their customer service. The team will be stronger, the practice will be more cohesive, and employees will remain with your practice. The value of providing your team with a variety of benefits shows that you put them first. What goes around comes around, and your practice will reap the rewards as well.

    ***

    A good employer desires to compensate his or her team fairly. Look for ways to compensate your team: pay fairly, train them well, and search for opportunities to enhance their benefits. Remember, benefits do not have to cost a lot to make your team happy. A combination of fair compensation and good benefits helps to build a satisfied team that will remain with you for a long time.

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