I wanted to share a couple of insights about Office Managers (OMs) when it comes to salary and bonus structures. The first part of this perspective is all about HR compliance. The second offers up a number of components that you should keep in mind before implementing a bonus or commission structure for your team.
In this short blog, I will illustrate two critical parts of compensation plans through the lens of the OM position. Those parts are 1) HR compliance following federal law and 2) getting the most from a bonus or commission structure.
Exempt vs. Non-Exempt Status
From an HR point of view, If you intend to pay your OM a salary or a salary + bonus/commissions, please make sure that your office manager qualifies under the FLSA (federal rules) to be classified as an exempt-from-overtime employee. Many, if not most, OM’s meet the qualifications, but as many as 40 percent do not!
The smaller your operation, the less likely it is that your OM can be classified as an exempt employee, paid a fixed salary, and denied overtime payments. You’ll find an overview of the employee exemption question on our blog here, as well as a deeper dive on the subject here.
Overtime and Bonus Payments
From a business perspective, and from working with dozens of great practice coaches, we know that a stand-alone commission program in return for a single output may not serve you well in the long run.
Always make sure that you set multiple benchmarks for your Office Manager to achieve in order to get the bonus. These benchmarks should include the things that ensure you, as the owner, get taken care of when it comes to the bottomline.
One excellent example of this is to require that they maintain, and then eventually lower, the cost of labor. Why lower? Well, math is the answer to that.
If you incentivize your office manager to perform better in terms of any revenue-generating task — filling more appointments, increasing referrals, getting more patients to accept complete treatment plans, etc. — and they succeed, then your gross income will increase. If you are able to increase revenue without increasing your labor costs, this will automatically lower your percentage of labor costs. But you need to be careful not to incentive a singular performance goal at the potential expense of other important metrics.
For instance, if your OM realizes that they can easily meet their performance goal by having all of your employees work additional overtime, you may see your revenue increase due to this effort, but you will also likely see an increase in your costs. This could actually wipe out any real benefit to you as the practice owner, though your OM will still be entitled to receive their bonus.
It’s for this reason that you will need to revisit the program and make regular adjustments to its terms when it comes to controlling costs or filing chairs. That way, you can be sure that your practice actually benefits from the overall result of an OM reaching their performance goals in order to secure a performance-based bonus.
Other benchmarks you might want to look at could include things like requiring an increase in successful referrals from existing patients or curtailing employee overtime while also continuing to increase overall revenue.
To this end, make sure that your bonus program is flexible and that you and your OM understand that the program will change from time to time.
Finally, the last thing you’ll want to keep in mind is that you also need bonus policies in your employee handbook. Bonus policies address who qualifies and, most important, what disqualifies an otherwise qualified employee from the program. For instance, your handbook policy on bonuses should make it clear that employees will not receive bonuses while out on leave or after they are terminated.