[ALISON PIDGEON]
This is the Practice of the Practice podcast takeover with Alison Pidgeon and Whitney Owens, episode number 704.
[WHITNEY OWENS]
Hi, this is Whitney Owens hanging out with Alison Pidgeon. Before we get started in today’s episode, we wanted to let you know about a special webinar that we’re going to be hosting on May 3rd at noon, Eastern time, ‘How to delegate in your group practice while working less and making more.’ We’re going to give you all the tips and tricks that Alison and I have learned over the years so that we don’t have to work so much in our practice and so that we can enjoy the profits even more. To register for that webinar, head on over to practiceofthepractice.com/delegate.
[ALISON]
Hey Whitney, how you doing?
[WHITNEY]
Doing good girl. How are you?
[ALISON]
I’m good. What’s going on in your world this week?
[WHITNEY]
Yes, well, you probably can still tell I’ve been sick for a little bit of time, so my voice is still getting back at it. So recovering from that and also planning the Faith in Practice Conference. This podcast will come out after, but we are recording before and so spending a lot of time and energy, but I’m getting really excited about hanging out with some really cool people in a few weeks.
[ALISON]
Yes, me too. I will be there. So it’ll be awesome to be in person.
[WHITNEY]
There are going to be a good number of group practice owners there. So I love picking the brains of group practice owners and usually group practice owners are just legit a lot of fun.
[ALISON]
Yes, I agree.
[WHITNEY]
Cool. Well, I’m excited about today’s episode because we’re going to handle a question that I feel like I get all the time about why have W2 employees and how is it helpful in your business? Do you feel like you get that question a lot?
[ALISON]
Yes, people seem to be mystified that I would choose to have W2 employees when I don’t have to. So I will just preface this by saying that I had 1099 contractors for a long time, I think four or five years. There’s definitely pros and cons and we’re not necessarily saying that W2 employees is the choice for everybody. Like you can certainly decide what works for you and your practice and the boss that you want to be but Whitney and I have both had W2 employees now for a while, and we see many more advantages in our own practices with W2 employees. So that’s what we were going to talk about today, because it’s like bit more complicated than hiring contractors.
[WHITNEY]
For sure, for sure. Well, I thought it’d be fun to first dive into what it was like when we had 1099s and what led to our decisions on making that transition. So Alison, you want to share a little bit about what your practice was like when you had that model and why you chose to make a transition?
[ALISON]
Sure. So I’m in Pennsylvania and it’s very common that practices around here will have contractors. It’s actually rare that a private practice would have W2 employees. So it just seemed like a good choice. Once I consulted with a lawyer to have contractors, it just seemed simpler. There was less startup costs and so that’s how we got started. Then we built up the practice over four or five years to about 12 clinicians and was just having a lot of trouble hiring. People didn’t necessarily understand what it meant to be self-employed. They didn’t want to be self-employed. People wanted benefits.

I would literally interview people and they’d say, oh wow, I’d love to come work for you, but I really need health insurance. So that’s really what made the decision for me to switch over so that I could offer benefits and help with retention and recruitment, because what we found was they got a taste of being self-employed in the practice and then maybe after a year or two, they’d be like, oh, well I can just go do this myself and they would leave. So we had a retention issue and then we also had a recruitment issue and definitely having the W2 model has improved that quite a bit. What about you, Whitney?
[WHITNEY]
Well, thanks for sharing your story. That’s awesome. So I started with 1099 simply because it seemed like the easiest model and that’s what everybody else was doing. I had two people that I hired as contractors and then I was going to hire my virtual, first I actually did try to hire a virtual assistant and unfortunately that situation didn’t work out. So then I was like, okay, well I guess I’ll hire somebody locally that can work from home like my own virtual assistant. When I went to hire her, I ran it by my attorney as we all should do and the attorney was like, oh, I’m pretty sure she would be a W2, like the way that you’re treating her, the way you’re asking her to do specific things for you and the way she’s tracking her time, all that. I was like, oh.

Of course he brought up the importance of like, it’s helpful for her to be a W2. She doesn’t have to have her own liability. She gets a paycheck, her taxes are taken out, like you’re actually doing something nice for her too. I was so intimidated by the idea of hiring a W2 but I went on ahead and I hired her and it was okay. It went well and then I wasn’t necessarily going to change my model at first with the 1099s but I just started finding that the chemistry of the team wasn’t going well, people weren’t necessarily wanting to do peer consults. Sometimes they did. Sometimes they didn’t, we couldn’t have consistent staff meetings because I can’t force them to come to staff meeting and they can do whatever they want with their clients.

I wasn’t really in control of, for example, I like people showing up 10 minutes early to see their clients. I got a high standard. I want you to be prepared. You shouldn’t be rolling in right when your client rolls in, but my contractors did and they wore whatever they wanted and there was nothing I could do about it. Then it really came to a head when there was some confusion over the office furniture, because technically if we want to get really technical, which is what I do, because I’m a technical person, the sofa is an item that you need to do your job. So my attorney had said, yes, they should provide their own furniture because they are doing their work, you’re providing the space, but they need to have their own supplies.

Then I had another contractor sharing the space and the first contractor got mad at me because she didn’t want someone else’s client sitting on her sofa. I was like, what? This is crazy. I can’t just let one person use that office because what a waste of space. So I just realized there was so much division on people having their own stuff, their own businesses, managing their own time that I wanted to bring further community. I wanted to share resources and I wanted to do things for my employees which I couldn’t do before. Like you were talking about benefits, but like there’s also bonuses and outings and all those things that you really can’t do as easily with contractors. So I made that transition. I think if I remember correctly, we talked about this at Killin’It Camp when we met for the first time. We talked about, because I had just done the transition and you were about to do the transition.
[ALISON]
Oh, was that in 2019.
[WHITNEY]
I think so.
[ALISON]
That’s interesting because I feel like that’s one of the reasons I hear people ultimately deciding to have W2 employees, because they want more control over the quality and the brand and that thing. You can definitely have that with W2 employees.
[WHITNEY]
So what have been some of the, well, first of all, let’s talk about the transition. I know you had a lot of people to transition over, so what was that like for you?
[ALISON]
I had 12 therapists at the time. We did it on the new year. So that way it was really clean for tax purposes. Although you don’t have to do it that way, it’s just ended up being the timing that worked out. So as of December 31st, they were done being contractors, January one, they started to become W2 employees. I ended up paying them ahead for all their work as a contractor. So that way for tax purposes, it was all in the prior year. Then we had them start keeping their time and doing payroll at the beginning of the year. So I think one thing too, that I wanted to mention is when we made the transition, I know a lot of people get scared if they have an existing practice of contractors and they want to switch them over that people are going to leave or like everybody’s going to leave and I did not find that to be the case.

I had a couple people who left and in the work I do with other people doing consulting, I find that obviously they signed up to be a contractor and if they’re not going to be a contractor anymore, that may not work for everybody. But ultimately what happens is then the people you’re able to attract, there’s such a larger volume of people who want to then come work for you because you’re able to offer W2 employment that it really outweighs sort of the initial drop off of a couple therapists. So that’s what I found to be true. Like if I could hire one or two therapists a year prior to that, that would’ve been really good. Now in 2021, we hired like 10 or 12, I think.
[WHITNEY]
That’s pretty rocking.
[ALISON]
So that was huge
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[WHITNEY]
I want to echo what you just said that typically when I also consult people on the transition, yes, they might lose one person, but a lot of times it’s someone that wasn’t the right fit for their culture anyway. It’s so important as group practice owners that we don’t create a business to meet the needs of all the people that work for us. Even though we want that to naturally occur, you create a business that works for you, adheres to your values and what you want it to look like. That will attract the right people.
[ALISON]
Absolutely.
[WHITNEY]
My transition [crosstalk] transition was a lot easier because my 1099s quit or left when I told them we were going to do this. I’m really glad because they weren’t all right fit for the practice. So then I got to start at square one when I hired my first W2 clinician and thank goodness, knock on wood, she’s still with me and it’s been fantastic. We also find that the profits, I’m thinking about her specifically, she had at a risk. She was like a risk manager at a local hospital when she came and worked for me and she has told me before, gosh, I get to work 24 hours a week and I make almost just as much as I did work in 40 hours a week at the hospital. So we do find that to be two practices, even though the money looks less, it actually ends up being more and the profits in your business end up being more.
[ALISON]
I’m going to talk about that in a minute, but before we do that, can I just ask you when all your contractors quit, were you freaking out?
[WHITNEY]
Yes.
[ALISON]
How many people was it?
[WHITNEY]
I only had two, so it was small. I was in the process of hiring my third person literally the day. I should remember it so clearly in my office, someone came in and resigned and I was in the process of doing three interviews later that day. So thank goodness one of those worked out and that’s the one I just mentioned that’s still with me today, but oh my gosh, when she put in her notice, I balled my eyes out, ran outside called my admin, well, I can’t believe it. Then I did the stupid mistake that a lot of group practice owners do, which is take on more clients to make the practice sustain until you can hire more people and that didn’t go very well.
[ALISON]
Yes, I feel like that’s always like a knee jerk reaction that people think of and they think that’s what they need to do, but really what they need to do is calm down and hire more people
[WHITNEY]
Yes, definitely.
[ALISON]
So we were talking about profitability and financials of having W2 employees.
[WHITNEY]
Yes. So one of the things we get this question a lot, so I want to address this, a lot of people feel like they have to offer all this stuff up front. I know for you did offer a lot upfront. You had a bigger ecosystem than I did when I started my W2 practice but yes, you don’t have to offer a bunch of stuff. You do not have to offer PTO unless your attorney says so. In some states you do, but in most states you don’t have to offer all that. You don’t even have to do workman’s comp to hit a certain number of people. So when I made that transition, all I did was pay them by the hour to do their work. That’s it, just like when you go to staples and you work by the hour. I worked at a paper store in grad school, I got paid by the hour. Then as you grow, you can start to work on some of those other things. But I think a lot of people get scared to make the transitions. They think, oh, I’m going to have to give them a salary. No, you just pay them when they bring in money. Or I have to do benefits. No, you can do benefits later. In fact, some states won’t even let you do benefits until they hit a certain status.
[ALISON]
I’m always amazed at how people don’t realize that, again, this varies by state because different states have different labor laws, but like in Pennsylvania, in order to have W2 employees, all I really need is to run payroll and have workman’s comp insurance. Outside of that, there’s no requirements. So I think when you break it down like that, for people they’re like, oh, okay, that doesn’t seem so bad. Then obviously you can offer all kinds of benefits and if you do, it makes you a lot more competitive as an employer. But the other thing you can do as well is add benefits and stages. Like we started out offering health insurance and PTO and that stuff and there was just like a lot going on with the transition. I was like, I can’t even think about starting a 401k plan right now. Let’s just wait till next year and then we’ll start that. That’s what we did and it was fine. So yes, that’s the other thing to keep in mind is like, just because you’re doing W2 employment with benefits doesn’t mean you have to offer this amazing comprehensive benefit package on day one. You can work up to it.
[WHITNEY]
Totally agree.
[ALISON]
Do you find that people want to come work for you because you offer W2 employment benefits?
[WHITNEY]
I thought it would be more that way. Maybe my most recent hire was excited about that. I do find that a lot of them are not all that concerned about the benefits, I mean, they like having them if they, but most of them don’t even work full time. They see 20 or 25 clients a week and you’ve got to, at least in my state with my broker that I spoke to, they’ve got to work at least 30 hours a week. That can include some admin time. So a lot of them don’t want to push themselves to see 25 to 30 clients a week. So they don’t qualify. They get it through their spouses but what I have found is I feel like the W2 brings a better culture to the practice and so having that improved culture, like a family feel has made people want to come and work for us.

In fact, like we did a Christmas party at Elizabeth, which is this fancy restaurant in town. Really I just do all the things I want to do. I used the company dollar for it. I wanted to go eat there for Christmas. So we all went and ate there and they all brought their spouses and it was just like, wow, this is such a cool thing. Now we can share that with people like, “Hey, if you work for us, you get to do things like this,” and then they want to have that experience.
[ALISON]
I think that’s such a good point. So for you, it sounds like maybe the retention and the culture being really great is the main reason why you have W2 employees. That’s definitely part of it for me, but I think the other game changer really for me, was the hiring aspect in offering benefits and being able to recruit people much more easily.
[WHITNEY]
Definitely.
[ALISON]
So I think that if anybody’s having struggles hiring, which is another thing that we hear all the time from folks in this current hiring environment, definitely consider if you’re not already doing W2 S switching over, and if you already have W2 employees look into offering benefits. It might not be as expensive as you think it is. I was pleasantly surprised when I started looking at health insurance, how affordable it was. We actually have a really great gold standard plan. My own family uses it. It’s really good insurance, not as expensive as buying insurance on the healthcare exchange. So it might not be as expensive as you think it is to have W2 employees.
[WHITNEY]
Yes, I definitely agree with you on that. Like I said earlier, we have found that practices with W2 just tend to make more profit on the way the money shakes out, the way the taxes shake out. You’re doing something kind for your people to be paying all those taxes and helping them in that way. They really just don’t have to think about all the other things. They can just get their paycheck and have their accountant run it and it’s real easy, or even do it themselves. The other thing that I’ve really liked about having a W2 practice is I have more money, not only to do benefits and outings and stuff, but I have more money to invest in delegating. I can provide a lot more admin support when I have a W2 practice than when I had a contractor practice, because there’s more money just in general, to be able to pay out the admin staff. Do you find that to be the case?
[ALISON]
Yes, definitely. I found too that it’s just more predictable how much money is going to come in. Because for my full-time staff, they have to work so many hours a week and they only get so many weeks of PTO a year. So I can forecast out how much revenue they’re going to generate for the practice instead of a contractor, who’s like, oh, I’m going to take this long vacation or I’m going to not work for a month because I want to go do this thing. It’s just like, oh my gosh, how am I going to pay my rent now because I thought you were going to be working and now you’re not. So I think that’s the other thing that really helps with the financial profitability is the consistency.
[WHITNEY]
Definitely.
[ALISON]
So do you want to tell us about the webinar one more time, Whitney?
[WHITNEY]
So we’re going to be doing a free webinar on May 3rd at noon, Eastern time, all about delegating in your practice, working less and making more. To get registered for that webinar, head on over practiceofthepractice.com/delegate. Alison and I are going to teach you all of our tips and tricks that we’ve learned and that we teach others, but also be available to answer your questions about running a group practice.
[ALISON]
We’re also going to be talking about Group Practice Boss, which is our membership community for established group practice owners. If that is something that sounds interesting to you, if you can’t make the webinar, you can always register and watch the replay later. Or you can also check out our Group Practice Boss community, all the details on practiceofthepractice.com/grouppracticeboss.
[WHITNEY]
Definitely. Yes, we’re actually doing another launch for that May 3rd through the 6th. So the 3rd and 4th will be when we do our early bird special. So if you don’t make the webinar, make sure you do go and you register on the 3rd or 4th because you can get a membership for $129 a month instead of $149 a month. But the amount of knowledge, webinars, community that you’re going to get from joining that membership community far outweighs what the cost ,is what most people tell us. So we’re looking forward to hanging out with you at the webinar, Alison, and really getting to know other group practice owners and Group Practice Boss.
[ALISON]
It was great talking to you as always, Whitney.
[WHITNEY]
You too, girl
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Thank you so much for letting me into your ears and into your brain. Have a great day. Talk to you soon.

Special thanks to the band Silence is Sexy for that intro music. This podcast is designed to provide accurate and authoritative information in regard to the subject matter covered. It is given with the understanding that neither the host, the producers, the publishers or guests are rendering legal, accounting, clinical, or other professional information. If you want a professional, you should find one.