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Compensation and Hiring Decisions - what you need to know

Updated: Nov 21, 2023

If you’ve tried to hire over the past several years, I’m sure you’re very aware of how difficult it has been to hire. Between finding quality candidates and figuring out how much you can pay them, the decision to hire or grow a practice can be a daunting one.

First, you need to ask yourself, is it the right time in my practice to hire someone new? There are several things you can be mindful of to help you make the right decision.

Overhead and payroll expenses are going to increase more than you realize.

If you hire someone as a W2 employee, you are going to need to add this employee to your software subscriptions, pay payroll taxes and any benefits you’d like to offer, and you may even need to evaluate your space for expansion of available time slots. Some of these expenses (like payroll taxes) can be avoided if you hire contractors, but depending on what you’re envisioning for the future of your practice, contractors may not be the best idea. There are a lot more rules around control and management of duties, and based on your location, laws in your state can make adhering to the rules and building your practice even more difficult.

Growth and hiring is not always the answer.

If you already have five clinicians and none of them are at expected capacity, it is NOT the time to hire someone else to ‘fix’ your cash flow woes. By hiring someone new when your existing staff isn’t full, you’re compounding your cash flow problems. The goal is to get the majority of your current staff full before bringing on someone new. This will help minimize the cash outflow impacts of a new employee. Developing and measuring metrics related to your staff capacity is integral in the success of your practice, especially when you’re in a growth or transition phase.

How much can I even afford to pay them?

This is a difficult question to answer, and depends on your location and type of practice. There is no one-size-fits-all answer to this, except to say that you have to be more conservative in pay than you may be comfortable with. The reason is, when you add wages, payroll taxes, and benefits, what you intended to be a 45% pay split could actually be closer to 53% due to the payroll taxes and benefits related to payroll. When you’re looking at what you want to pay a clinician, you have to take all those additional expenses into consideration so that you don’t find yourself in an unsustainable payroll situation!

I often hear, “These practices over here are offering a 70% split - how am I supposed to compete with that at 55% for a licensed clinician?” That’s a great question, because it does seem insurmountable. But ultimately, the practices that are offering 70% are potentially not going to be sustainable for the long term and most will often realize their mistake far too late to save their practice. The way you compete is to provide a stable work environment, with reasonable compensation splits, useful and valuable benefits, and the ability to promote growth and well-being in your practice. Overextending the practice finances to pay above what is financially sustainable will ultimately fail everyone involved!

Truthfully, compensation and hiring decisions are not to be made lightly, and must be thought through very carefully and intentionally. Payroll is one of the only expenses in a practice that cannot be decreased easily if you realize too late that the amounts are too high. By decreasing pay, you run the risk of losing clinicians and creating more problems within the practice. The practices we see that are surgical in their hiring and don’t fall into the trap of offering too much too soon, are some of the most successful out there.

If compensation has you worried, or if you simply aren’t sure if you’re on the right track, we’ve got you covered! Check out our course Group Practice Navigator: Compensation Strategies and walk away with the knowledge and tools you need to take care of your team while ensuring the sustainability and profitability of your practice. Learn more about this incredible resource HERE.


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This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney or advisor regarding your particular facts and circumstances. GreenOak Accounting is an accounting firm that specializes in working with counselors and therapists in private practice. We provide monthly accounting & bookkeeping services, 1-time services and online courses. For more information on our specialized services for therapists please visit


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