Fringe Benefits as ''Hidden'' Pay
Some interesting statistics were published recently on the high cost of fringe benefits. It was estimated that the average employee receives almost $100 a week in "hidden" pay in the form of fringe benefits. Vacations, holidays, sick days, and coffee breaks accounted for close to $36 a week per employee. Pensions, insurance, social security, and other non-wage benefits accounted for almost $63 a week per employee. The point that was being made was that these benefits are large and that they are hidden. It was suggested that employees be made aware of the dollar value of the benefits offered, through an employee booklet which might typically include a salary section and state: "Welcome to our employee family. As a valued member of this practice, you are entitled to important fringe benefits which are a 45% addition to your annual salary. Your annual salary is $10,000. Your personal additional benefits (pension plan, health insurance, social security, paid vacation, paid holidays, and paid sick leave) amount to $4500. Your total annual compensation is $14,500." Details of the various fringe benefits can then be given.
It is no secret that the chief beneficiary of pension plans is the employer in an orthodontic practice. The law requires that employees be included in the plan, but individual employee benefits are minimal compared to the doctor's benefits, and most young employees would gladly trade this benefit for additional current income. This attitude may change if the concept of lifetime employment is adopted in American enterprise. It is interesting that only 73% of orthodontists responding to the JCO Orthodontic Practice Study have a retirement plan, which is the most productive form of investment that most orthodontists can make.
Almost all orthodontists offer paid vacations and holidays, and over 80% offer paid sick leave. These are the more traditional fringe benefits. Nearly 70% of the respondents to the Study said they offer a uniform allowance; slightly over half offer health insurance; less than half offer tuition for continuing education. A few orthodontists hire only part-time employees and avoid most or all of the fringe benefit expenses.
Are fringe benefits worth the expense? That may depend on how much one values employees, how much one values low employee turnover, how much one wants to compete with other employers who do offer fringe benefits. One might occasionally be lucky and find a high quality employee who is more interested in the position and in the uniform than in salary and fringe benefits; but most of the high quality employees are rising to the surface of the job market like the cream that they are, and they expect salaries and fringe benefits commensurate with their ability to contribute to the success of the enterprise.
One reason for the low percentage of orthodontists providing health insurance may be because the employee's spouse has the coverage in his or her place of employment, and it would be foolish to duplicate coverage. Group health insurance policies can be written for small groups in such a way as to cover only those who need the coverage, and that makes good sense. Dental insurance is one form of health insurance that orthodontic offices should have and do not. The new tax law makes child day care benefits deductible, and it is likely that this may become one of the outstanding fringe benefits for the growing number of women in the work force with infants and young children. As the behavioral aspects of orthodontic practice management become more obvious, fringe benefits for continuing education may be expected to rise, although a great deal of this may be "in house" as much of the technical training is now. Uniform allowances are an excellent fringe benefit to provide and maintain office uniforms, and most orthodontists seem to recognize this.
There is evidence in the JCO Orthodontic Practice Study that practices that provide the fringe benefits have less turnover than practices that do not. Some practitioners claim not to mind turnover and some even encourage it. However, one could ascribe a substantial quantitative and qualitative cost to employee turnover, which might in sum exceed the cost of fringe benefits. In studying management, one is forced to believe that the office of today and of the future will achieve more success in financial and in human terms, if employees are a career-oriented, stable working team, dedicated to the growth and growing success of the practice. That dedication comes about in a number of specific and non-specific ways. One of the specific positive influences can be provision of an adequate salary, but loading up on those fringe benefits that are deductible to the practice and not taxable to the employee.
Each office will have to decide which fringe benefits are appropriate for it, and some offices may adopt the "cafeteria" plan in which a menu of fringe benefits is available from which employees may select a certain number which they consider to be appropriate for themselves. Whatever the plan, many employees are not aware of the dollar value of non-salary benefits. It certainly makes good sense to total it up for them.
