When a medical practice considers a budgeted addition of staff, the vast majority of the focus will remain on the obvious cost: salary. This many dollars a year for a new receptionist, this many dollars more for a medical assistant. The numbers seem simple enough. But anyone who’s ever run a practice knows that salary is just the tip of the iceberg when it comes to the ultimate costs of staffing. There are countless other incremental costs associated with bringing on an employee that go unnoticed, and untallied, in most budget discussions.
Incremental costs create a cumulative effect, and this is why practices operate on tighter margins than expected all too often, even when their revenue growth suggests otherwise. Knowing this information puts practice managers in a position to better understand their realities for staffing needs, when to bring people on board and when certain at-home options may actually be best for everyone involved.
The Real Estate Component No One Talks About
Every single person working in your office needs a place to sit. And whether you lease space or own your practice, it costs money. Depending on area, the average space in a medical office costs a certain dollar amount per square foot annually. Each employee needs at least 100 square feet for their desk, their storage, any communal spaces required.
This translates to thousands of dollars a year, minimum, for the space for each employee. In expensive real estate markets, it can be even higher. And that’s just for office space. This doesn’t include utilities, internet, phone lines, and other downstream costs associated with that real estate space. For a practice looking to bring on yet another employee but space is tight, it might not even be worth the expansion or moving, which is an expense too!
The Equipment and Technological Costs That Never Fail to Increase
Employees need computers and phone systems. They need headsets and monitors and keyboards and all equipment and setups necessary to do their jobs. To stock one new employee adequately is a huge start-up cost. Then comes the software licensing, probably every employee needs either new access to something or an upgraded version of something else in a medical office setting, for practice management systems, electronic health records systems, billing systems and more.
Many of these licenses are user-based fees, every user is one additional recipient added monthly or annually to receive services for a fee. Then comes maintenance and replacement. In computer settings alone, one employee gets significant upgrades every few years, or completely replaced, and then the accessories break or need to be updated earlier than anticipated. In just five years alone, an employee’s cost based on technological setup can easily exceed thousands outside of initial investment.
Where Benefits Come In, Which Adds Significant Cost
One full-time employee medical benefits package represents thousands annually depending on plan tier level and whether or not it’s for family or personal coverage only. If an employer offers paid time off, that’s essentially still paying someone despite them not coming into work for 10 or 15 days over the course of the year. Retirement contributions, if offered through practice, represent another level of expense.
Combine all of these in addition to salary and it equals so much more than just a person’s salary; for example, that medical receptionist they pay $40,000 may ultimately equate to $60,000+. For smaller practices that barely stay afloat as it is, this difference between salary versus fully realized employee costs is what makes the bottom line determined for affordability to hire, or not. This is where options like outsourced medical office help become attractive, as they eliminate many of these overhead expenses while still providing the support practices need.
The Time Lost Through Training
No one is fully productive immediately upon hire. Even someone with extensive clinical or administrative experience needs to learn the ropes at their new position, new systems and procedures, with training offered through senior members who must sacrifice their own working time to teach them up to speed.
For administrative roles especially, it takes at least three months, if not more, before someone is capable of completing their full caseload. That’s three months of lost productivity which anyone fails to account as a dollar figure hire but should. Essentially that someone is being paid without contributing equally, and simultaneously holding others back from completing their roles as all hands must be on deck to train. That’s time lost that no one can ever get back.
Costs of Turnover When People Leave
Tenure statistics for employees are decreasing in the medical fields, which means increased turnover. When someone leaves, there’s the cost of hiring employees anew, which means job postings which cost fees, time spent reviewing applications and interviewing potential candidates, and potentially fees through a recruitment agency if the practice takes this route.
Then there’s lag time while everyone else has taken on additional responsibilities and those who had originally departed are still missing from payroll, and general collaborative functions, not offering 100% customer service/office satisfaction. Then there’s additional training for the new hire. One instance alone can cost thousands with administrative positions; therefore high turnover means increased costs that reinforce budgetary concerns.
Payroll Taxes
Employers pay payroll taxes which employees never see including workers’ social security unemployment tax (federal), medicare unemployment tax (federal), plus state unemployment taxes which are separate from federal unemployment taxes. This tax percentage alone totals anywhere from 10% to 15% of what employees never see.
There’s also workers’ compensation insurance, varies upon geographic location/person in classification, as well as professional liability insurance premiums which all increase based upon staff headcount. All of these required taxes are mandated at minimum state levels; while they might not seem like much on an individual basis, combined they add up.
The True Cost of Employment
When all is said and done with supplemental wages for any employee, including workers instead of dollars, the actual headcount contribution costs significantly more than anticipated to run a practice, by an average difference well over $20,000, than what anyone discusses during budgetary considerations. This stark difference has gone undiscovered through informal convening, and it’s no wonder why practices implement hiring with extreme caution these days when considering how best to operate with less instead of more.
