Multiple pay types. One payroll system.
Running payroll for a small dental practice means making specific informed decisions: how you pay each staff role, including how you calculate and pay bonuses; what compliance obligations apply to your practice as a healthcare employer; and how you pay yourself as the owner-dentist. Make these decisions correctly to help set the direction for every payroll cycle that follows.
SurePayroll® By Paychex is built for small dental practices running multiple pay rates and worker types.
Pay types and worker classification in a dental practice
The pay structures and classifications you determine for each role directly affect your largest expense category. An article published by the American Dental Association recommends keeping staffing costs to 23 to 26% of collections, excluding dentist compensation.
Your dental practice may use up to four pay types: hourly, salary, production-based, and hybrid. How you classify each exempt and non-exempt role under the Fair Labor Standards Act (FLSA) determines which rules apply.
Most dental assistants, front office staff, and hygienists are non-exempt, so overtime rules usually apply to all three roles regardless of how you structure their pay.
Hygienists generally require the most from your payroll setup. How you structure hygienist compensation affects more than compliance. It affects your ability to attract and keep a role that is increasingly competitive. Dental hygienists play a growing role in small practices. Employment of dental hygienists is projected to grow 7% from 2024 to 2034, much faster than the average for all occupations, with about 15,300 openings projected each year, according to the U.S. Bureau of Labor Statistics.
Classify and compensate hygienists correctly and you build a payroll structure that supports one of your practice's most competitive clinical roles.
Hygienists often earn production-based pay — a percentage of the collections they generate — as their primary wage, sometimes with a guaranteed hourly minimum. A hybrid arrangement, also common for hygienists, sets a fixed hourly rate as the primary wage and adds a nondiscretionary production bonus tied to a collections target.
Executive or administrative roles, such as office managers, may be exempt from overtime only if the salary clears the federal threshold and the role's responsibilities qualify under one of the FLSA duties tests.
You withhold federal payroll taxes, including federal income tax, Social Security, and Medicare, from every employee in your practice. State tax withholdings vary.
Your practice may include associate dentists. You’ll classify them as employees or contractors based on the working arrangement, not the label. If you direct the schedule, provide the equipment, and the associate works exclusively in your practice, those factors may indicate employee status under the Department of Labor FLSA economic reality test or the IRS common law test.
Misclassifying an employee as an independent contractor may result in back taxes and penalties from both the IRS and the Department of Labor. If you’re not sure about the classification, consult with an employment attorney.
Overtime and production pay: How the math works
Production pay in a dental practice can take two forms. The form you use determines how you calculate overtime under federal employment laws. The calculation is different for each.
Production pay as the wage
When a hygienist earns a percentage of collections as her wage, with no separate hourly base rate, you calculate her regular rate by dividing total production earnings by total hours worked in the workweek.
Say your hygienist generates $1,350 in production pay in a 45-hour workweek.
- Regular rate: $1,350 ÷ 45 hours = $30 per hour
- Overtime hours: 5 hours over 40
- Overtime premium: $30 × 0.5 × 5 hours = $75
- Gross Total: $1,350 + $75 = $1,425
The wages you pay reflect straight-time earnings plus the half-time overtime premium based on the regular rate for that workweek.
Production pay as a nondiscretionary bonus on top of hourly pay
When a hygienist earns an hourly base rate plus a production bonus tied to a collections target or percentage threshold, that bonus is nondiscretionary. You must factor it into the regular rate before you determine the overtime amount. You cannot treat it as a separate payment, not included in your overtime calculation.
Say your hygienist earns $22 per hour, works 45 hours, and earns a $300 nondiscretionary production bonus for the week.
When a production bonus covers more than one workweek, a monthly bonus, for example, you must apportion it back across each workweek before recalculating overtime for those weeks.
A monthly bonus earned across four workweeks gets divided into four weekly allocations. You then recalculate the regular rate for each affected workweek and apply the overtime premium to any week where hours exceed 40.
You confirm time and attendance records and production figures each cycle. SurePayroll processes payroll for practices with multiple pay structures, including production-based and hybrid arrangements.
In a dental practice, most production bonuses are nondiscretionary. You can treat a discretionary bonus — unexpected, not tied to a performance goal, not announced in advance — as outside the regular rate calculation, and different withholding rules apply.
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How to pay yourself as a dental practice owner
How you pay yourself depends on how you organized your practice. The tax rules for owner compensation follow from that.
If you’re a sole proprietor, you take an owner’s draw rather than a salary, and you pay self-employment taxes on a quarterly estimated basis.
If your practice is an S corporation (S-corp), you pay yourself a reasonable salary and withhold payroll taxes before taking distributions. The IRS requires your salary to reflect reasonable compensation for the services you perform in the practice. You can determine that figure yourself or work with a financial professional.
Process your salary through the same payroll system you use for your staff. Semi-monthly and monthly are most common for practice owners but consider your billing cycle and cash flow before finalizing that decision. You withhold and remit payroll taxes on your assigned schedule, and you file Form 941 quarterly to report wages paid and taxes withheld that quarter.
Run your salary and your staff payroll through one system. SurePayroll calculates withholding for both, files on your schedule, and generates the quarterly Form 941.
Compliance considerations for dental practice employers
As a dental practice employer, you manage two separate compliance environments – one for patient records, one for employment data. Employment law governs wages, withholding, and new hire reporting, while HIPAA governs the clinical side. Keep the two environments structurally separate with appropriate access controls, storage practices, and retention policies for each type of record.
On the employer side, most states require workers' compensation, and the rate classifications for hygienists, dental assistants, and front office staff differ. Confirm which workers’ comp requirements apply in your state before your first hire.
New hire reporting and state tax registration apply in every state where you employ staff. If your practice has hygienists or assistants working across state lines in a second location or a mobile clinic, multi-state compliance obligations follow.
A payroll system designed for healthcare employers helps you manage new hire reporting, tax deposits, and state filings on your schedule.
"Payroll takes less than 5 minutes every other week to process — could not ask for a better product!" - Tony, Trustpilot review
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This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up to date
