As you work through the details of establishing a dental practice, one of the key considerations you’ll encounter is determining whether to hire additional dental staff as contractors or employees. There are distinct legal and contractual differences that could have significant legal implications. 

As your business begins to grow, so will your need for professional support, including dentists, dental hygienists, and specialists. Identifying the pros and cons of each type of employment when you create your business plan will help streamline the process and eliminate potential employment violations. 

What Defines an Employee?

An employee is hired on either a part-time or full-time basis and fulfills the tasks defined in the job description. Employees agree to work the specified number of hours and accept the designated hourly wage or salary for which they are compensated on a regular pay schedule. 

What Are the Advantages and Disadvantages of Hiring a Dental Employee? 

When you hire an employee for your dental practice, you’re responsible for managing tax withholdings and employment benefits, including health insurance coverage, paid vacation days, sick leave, and retirement contributions. Your practice is also legally accountable for employees’ conduct during working hours. 

Advantages of Hiring Dental Employees

Hiring an employee provides multiple advantages for your dental practice. Consider the following: 

• Dedicated, long-term employees help build your practice’s brand and reputation. 
• Reliable employees contribute to establishing patient trust in your practice. 
• Employees can create a cohesive company culture. 
• You maintain consistent service quality and control over job duties and hours. 
• As an employer, you can set the standard and train employees to follow specific protocols. 

Disadvantages of Hiring Dental Employees

You’ll also need to consider the challenges of hiring an employee to enable you to make an informed decision. 

• You are required to manage employment-related obligations, such as payroll taxes and workers’ compensation. 
• The employer must continue paying regular wages and providing employee benefits, regardless of revenue. 
• The legal considerations involving termination can be complex. 
• You’re responsible for training and supervising employees. 
• Dental employees follow a set schedule that prevents the same degree of flexibility offered by dental contractors. 

What Designates an Independent Contractor? 

Independent contractors work within the parameters of the agreed-upon contract; however, as autonomous entities, dental contractors establish their work methods and set their hours, delivering greater adaptability. Contractors provide their tools, and they are responsible for managing their own insurance and tax obligations. 

What Are the Advantages and Disadvantages of Engaging a Dental Contractor? 

As with hiring employees, there are distinct advantages and disadvantages to engaging independent contractors.

Dental Contractor Advantages

While dental contractors’ fees might surpass the salaries of their employee counterparts. The overall financial savings can be significant when you consider the following: 

• Bookkeeping time savings 
• Responsibility for payroll taxes, including Social Security, Medicare, and workers’ compensation 
• Fewer legal ramifications, as state and federal employee protection laws don’t apply to independent contractors 

Another notable benefit of hiring independent contractors is the dental practice is generally not vicariously liable for their actions. However, there are always exceptions. For example, a dental office that doesn’t adequately check a contractor’s credentials and references may be found negligent or if the activities the contractor was hired to perform are inherently dangerous.

The flexibility dental contractors provide allows you to manage temporary needs effectively. You might also appreciate the specialized services a contractor offers that others in your practice may not have. 

Dental Contractor Disadvantages 

While there are substantial benefits to hiring independent contractors, it’s also worthwhile to consider the disadvantages that accompany this type of employment. 

As mentioned above, contractors’ rates are typically higher than employees’ wages to balance the lack of benefits. Following are a few more challenges you may experience when hiring independent contractors: 

• It could be more difficult to create a cohesive team environment. 
• You might experience scheduling dilemmas, as contractors may have to juggle availability between multiple clients. 
• You may find it difficult to monitor quality and consistency.

Prevent Misclassification of Independent Contractors

One of the foremost setbacks your dental practice could encounter is an audit that uncovers the misclassification of 1099 contractors and W-2 employees. You could face serious legal and regulatory repercussions if you mislabel an independent contractor who should be classified as an employee. The IRS, Department of Labor, and state agencies levy staggering fines for inaccurate designations. In addition to civil penalties, you could also be criminally charged. Noncompliance encompasses multiple areas, including:

• Violating the Fair Labor Standards Act by failing to pay minimum wage and overtime
• Failure to withhold and forward payroll, Social Security, and Medicare taxes
• I-9 violations for misclassified independent contractors
• Unpaid workers’ compensation and unemployment benefits
• Failure to provide employee benefits, such as health insurance, retirement, and paid leave

The twenty-factor test the IRS uses to determine the appropriate classification provides an overview for you to distinguish the differences between employees and independent contractors. Correctly identifying who is performing the work helps prevent legal problems down the road. 

With so much at risk, it pays to review your personnel expectations to ensure you adhere to proper hiring practices.

Select the Option That Works Best for Your Dental Practice 

The IRS provides resources to help you distinguish between dental employees and dental contractors. The literature defines the legal expectations and responsibilities of each scenario to assist small business owners with tax and labor law compliance. 

However, it is critical to consult with a Cleveland attorney who’s experienced with navigating the complexities of managing a successful dental practice. Contact Brenden Kelley Law at (216) 644-3359 to evaluate your options and assist you with making the personnel decisions that best serve your unique circumstances and protect your business.