Create a Sustainable, Competitive Pay Structure for Your Practice

One of the most frequently asked questions I receive from group practice owners is about creating a pay structure that is both sustainable and competitive. Finding the right balance can be challenging, especially when comparing W2 employment to 1099 contractor roles. Here’s a guide to establishing a W2 pay structure that supports your team and aligns with industry standards.

View a brief video from Carla on the topic of sustainable pay practices for group practices

Understanding the W2 Pay Rate for Group Practices

For W2 group practices, a general rule of thumb is to set the clinician’s hourly pay rate at 45-55% of the average per-session income. To calculate this, take the average rate you receive per session over an extended period—ideally a year, but six months can also work if that’s what’s available.
At Ignite Counseling Colorado, for instance, we’re an insurance-based practice, which means our average session rate includes various insurance reimbursement rates. Let’s say, for simplicity, the average rate comes to $100 per session. A clinician’s hourly rate, then, would fall between $45 and $55 per hour. This rate reflects a balance between offering fair pay and maintaining sustainability for the practice.

Comparing W2 Employment to 1099 Contractor Rates

A common concern I hear from practice owners is how to compete with higher contractor rates offered by some tech companies, which may pay $90 or more per hour. It’s essential to clarify the differences between W2 employment and 1099 contractor roles with your team and applicants. Unlike W2 employees, 1099 contractors are responsible for 100% of their taxes, must manage their own schedules, and submit invoices for payment. W2 employment, on the other hand, shares the tax burden between employer and employee and provides benefits like unemployment insurance, paid time off, and sick pay.

Highlighting Total Compensation for W2 Employees

When discussing pay with potential and current employees, emphasize the concept of total compensation. Although a clinician’s hourly rate might be set at $50, W2 employment often includes additional benefits that enhance the overall package. These may include:
- Paid Time Off (PTO)
- Sick Pay
- 401(k) Contributions
- Health Insurance Reimbursement
When added together, these benefits make the total compensation for a W2 role competitive, especially when factoring in the shared tax and benefits burden.

Establishing a sustainable pay structure that is both fair and competitive is essential for a thriving group practice. By understanding industry standards and clearly communicating the value of W2 employment, you can create a structure that attracts and retains quality clinicians.

Have questions about setting up a competitive and sustainable pay structure for your team?

If you’re looking for guidance on establishing or refining your group practice’s pay structure, schedule a consultation with me. Together, we can create a framework that meets both your financial goals and your team’s needs.