A perfect storm for dental associates? Alan Suggett’s opinion piece

Here’s an excerpt from the most recent UNW Dental Bulletin written by Alan Suggett and his team. I see little evidence to the contrary, in fact things are getting worse for some but not for all.

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alansuggett@unw.co.uk

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A perfect storm for dental associates?

A number of unconnected events have made me think a “perfect storm” could be approaching for dental associates.

What are these events?

Feedback from the NHS pilots is that associates are having to work harder for less pay.

Under the current contract I have seen a decline in pay rates amongst my associate clients over recent years. Histori- cally a “50%” deal has been the norm. Nowadays 50% of a £20 UDA rate rather than 50% of the practice rate is most common.

Fewer opportunities to “escape” being an associate by either buying a practice, or a share of one (i.e. by buying into a partnership). Corporates are hoovering up practices, particularly IDH with large practices and other national cor- porates (such as Apex), or regional groups buying smaller practices. Also there are more entrepreneurial princi- pals who are keen to acquire larger shares in practices rather than allowing an associate to buy in.

Goodwill values are high – because of competition between buyers for all sizes of practices, sale values continue to be high.

Bank funding is more difficult to obtain. Although it’s fair to say that banks are keen to lend to dentists (far keener than to lend to other business sectors!), there are still a couple of potential problems. Firstly most banks require a significant deposit – not many associates in my experience have tens of thousands of pounds available. Secondly shorter repayment periods for goodwill funding which one of the major lenders has introduced, and even shorter still if the EFG scheme is used. It can be a big problem repaying loan capital out of profits which have been taxed at 40% (or perhaps 45%), made even worse if the repayment period is shortened.

So… ... reduced pay, less opportunity to buy practices which cost more (if you can find one), and harder to borrow the money and pay it back!

It could get even worse, just think of those young dentists becoming associates. I recently became aware of the deal being offered to new associates by one of the large corporates. A very low salary, paid under PAYE rather than on a self employed basis!

And finally... … the new NHS contract could be framed in such a way that self-employed status of associates is lost.

I don’t like ending on a low note – so what consolation can I give to associates?

Not much – other than the fact that, in these very difficult economic times, compared to other professions, on balance you are still better off than most other graduates.