Inflation and pay rises
Featured Products Promotional FeaturesPosted by: Dental Design 15th July 2022
This year has witnessed crises upon crises, from the Russian assault on Ukraine, to steadily rising inflation and the reeling aftermath of the COVID-19 pandemic. Undoubtedly, many households are feeling the strain of these difficult times. There may have been some relief provided by the Spring Budget,[i] where it was announced that there would be a temporary cut to fuel duty, an additional £500 million for the Household Support Fund and VAT relief for energy saving systems. However, with inflation rising to 6.2%,[ii] many individuals will struggle to feel the effects of these measures.
Company owners are also faced with difficult decisions. Andrew Bailey, the Governor of the Bank of England, suggested that workers should not demand large pay rises, in a bid to help control inflation. Mr Bailey, whose base salary for 2020/2021 was somewhere around £575,538, noted that it would be “painful” for workers, but a “moderation of wage rises” is needed to recalibrate soaring inflation.
If employers were to follow Mr Bailey’s advice, then they may face issues with employee retention, and during a time when recruitment in the industry is at its most precarious. Following Brexit, COVID-19 and issues with recruitment to the NHS, onboarding new dental professionals has been problematic across the country.[iii] Even prior to these issues, recruitment for dental nurses in particular was already in crisis, with many leaving the profession due to feeling underappreciated and underpaid.
With inflation hitting a 30-year high, many employees will start feeling the effects of the cost-of-living crisis, and may approach the subject of pay.
Balancing interests
Staff on the National Minimum Wage (NMW) will have appreciated a 6.6% boost in basic pay, which came into effect on the 1st April 2022, rising from £8.91 to £9.50.[iv]
As a result, a dental nurse working 40 hours per week on NMW, for example, would see a wage increase of almost £1,228 this year. However, the average base salary for a dental nurse is currently £10.77,[v] suggesting that this 6.6% rise is unsustainable for practices who do not pay their staff over the NMW. So, if you’re an employer with a large number of employees, analysing yearly salary raises and getting it right will be a challenge.
Practices will also encounter a financial squeeze this year, another result of the rising energy and material costs, as well as the overall knock-on impact of the current cross-continental economic challenges. Many practices are likely to still be in recovery from the effects of the pandemic, too. So, in the face of these various issues, how can you ensure the expectations of your employees are met?
Evaluating your employees based on merit and performance may be one good way to navigate this issue. This will help minimise the company’s expenses whilst still rewarding staff members who go above and beyond in their role. This can aid in employee retention, as your best performers will appreciate the acknowledgement and know that they are valued. Furthermore, it highlights your expectations and may help other employees consider areas where they can improve.
Implementing a profit-related bonus scheme is another idea you could consider. As this will be tied to revenue growth and is paid quarterly, your business can more effectively maintain Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA). This is a great structure to implement right now, since you can retroactively apply it to the last 12 months and pay employees a bonus immediately, rather than waiting another quarter. This plan will help your team work together to accomplish set goals, and share in the growth and success of the practice.
On the razor’s edge
The mounting recruitment crisis in the dental field and the rising inflation is undeniably causing concern amongst your employees. It certainly is a balancing act; ensuring that staff members are recognised for their hard work, whilst maintaining your company’s EBITDA. We find ourselves in unprecedented times; there are many questions raised with very few obvious answers.
If you’re unsure of how to proceed, it may be helpful to get in touch with a professional for relevant guidance and advice. The team at Dental Elite are experts in a range of areas in the market. With their proficiency and know-how, you can take the right steps for your practice and your employees. The going is likely to get tougher as we move through the year, so it’s crucial to be prepared for these conversations with your employees.
For more information contact Dental Elite. Visit www.dentalelite.co.uk, email info@dentalelite.co.uk or call 01788 545 900
Author: Luke Moore is one of the Founders and Directors of Dental Elite and has overseen well in excess of 750 practice sales and valuations. With over 11 years working in the dental industry, Luke has extensive knowledge in both dental practice transfers and recruitment and understands the complexities of NHS and Private practices.
[i] GOV.UK. (2022.). Spring Statement 2022: documents. [online] Available at: https://www.gov.uk/government/publications/spring-statement-2022-documents [Accessed 21 Apr. 2022].
[ii] www.ons.gov.uk. (2022). Consumer price inflation, UK – Office for National Statistics. [online] Available at: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/february2022#:~:text=historic%20modelled%20estimates.- [Accessed 21 Apr. 2022].
[iii] King, T. (2022). Problems recruiting associates are now endemic. British Dental Journal, [online] 232(1), pp.7–7. Available at: https://www.nature.com/articles/s41415-021-3828-8#ref-CR16637 [Accessed 21 Apr. 2022].
[iv] GOV.UK. (2022). Pay boost for millions as National Minimum and Living Wage rates go up from 1 April. [online] Available at: https://www.gov.uk/government/news/pay-boost-for-millions-as-national-minimum-and-living-wage-rates-go-up-from-today#:~:text=Millions%20of%20UK%20workers%20will%20receive%20a%20pay%20rise%20from [Accessed 21 Apr. 2022].
[v] Dental Elite Goodwill & Benchmarking
