Are you considering or wondering about an associate?  Are you in a quandary about associate compensation?  If so, maybe this pearl can help.

Compensation of an associate is simple when that associate is a partner.  The rule is that they get half of the yearly net (or 1/3 if three partners, etc.).  If the buy-in is for cash, this equal share applies immediately.

When the initial buy-in includes a salary differential, the partner still gets his/her equal share of the net, but receives less dollars/year than the original partner(s) until the buy-in of the practice is paid off, typically in 3-5 years, where hopefully the practice will increase its net.

BEWARE—taking on a partner, of any age, doesn't necessarily mean your net will increase.  You should never assume that the partner will help grow the practice, this is not a given—if you can’t afford a hit to your net up front, then you won’t in the future when it will be very difficult to change.

If you are an established orthodontist looking for an associate, it can be done in one of two ways:

1:  He or she can be hired as a yearly contracted associate, with a specific amount of days/year they must work for a specific amount of yearly compensation that is paid monthly.  The greater the amount of days worked, the greater the compensation.  Basically, it comes down to guaranteed per-diem compensation ($/year divided by Days/year).

2:  You can also pay them as per-diem associate, with no specific amount of days/year worked, but with a typical monthly schedule that can vary.

The per-diem compensation amount depends on numerous factors: your average per-diem production, your average per-diem collections, and your dollar net income.

To keep your associate productive (creating income-producing treatment) you must schedule him/her a full treatment day every day by making sure your receptionist keeps him or her busy.

You should try to have a production increase each year (fees, referrals, etc.), which will increase your daily collections and ability to pay your associate.  Of course, if you are semi-retiring, this is may not be possible.

If you have the usual 45% net, for the average $1,500,000 practice (who might need an associate/partner), your daily collections are about $10,000/day and your net is about $4,500/day.

Usually, an associate’s per-diem compensation is anywhere from $500 to $1,750 depending on their experience treating and years with your practice. 

Thus in this example, an associate that costs you $500/day will reduce your net by about 11%; an associate that costs you $1,000/day will reduce your net by about 22%; and, an associate that costs you $1,750/day will reduce your net by about 39%.

To have the best partner or association, you might want to employ the “Associate/Partner & Retirement” management kit.