Welcome back to The Designer Practice Podcast, and I'm your host, Kayla Das.
Are you a therapist looking to hire therapists into your practice or a therapist looking to be hired into a group practice? If so, you may have wondered what is a fair therapist payment split.
Although there's no specific rule for how much or how little therapists should be paid when being hired by group practices, there are some reasonable guidelines that can help you determine what fair therapist payment splits may look like, and some considerations to think about when either setting therapist payment splits or accepting one as a therapist.
Unfortunately, throughout my business coaching career, I've heard too many stories of unfair expectations of therapists in group practices. And I hope that this episode will help provide some insight into the makings of an equitable and fair therapist payment agreement between practitioners and group practices.
In saying that, I do think that most practices make the decision on a payment structure innocently and without the intention of being inequitable in any way. In fact, I've noticed that many group practices make the decision on their payment structures and their therapist payment splits before they even make any decisions about the hiring process or the benefit-split ratio, which we'll discuss later in this episode. Unfortunately, this often leads to practices sticking to a payment structure, even if the payment structure is not quite fair.
In addition, as many therapists are much more familiar with being an employee versus being an independent contractor, it's actually quite common for group practices to view the contractor from the mindset of an employee instead of an independent contractor, which has many implications.
And I actually have an episode, all about that. It's episode 38 of the Designer Practice Podcast called Employee vs. Independent Contractor: Which is best for your practice? So, I encourage you to listen to that as well with respect to implications and so forth.
But the most common issue that I see associated with pay splits is expecting independent contractors to do work outside of what they're getting paid, whether it's attending unpaid seminars, workshops, meetings, events at the direction of the practice. It could be finding clients to bring into the practice or even asking independent contractors to work on a sliding scale or for free.
However, unlike employees, independent contractors are not being paid for their time and such expectations are often viewed as unfair and inequitable.
Now, before I get too far into today's episode, I want to give a disclaimer that the information in this episode is based on my experience working with therapists as a business coach, and is also derived from my own opinion, as there is no true rule or guideline, although sometimes I wish there were, for how to set up therapist payment splits.
This episode-- I consider as a guide, but it is not professional advice, as again, it's based on my own experiences and what I believe to be true.
Therapist Payment Splits
So, I don't want to assume that everyone even knows what a payment split is, so I'm going to provide a short definition of what it means. Therapist payment splits is an agreed upon amount that both a therapist and the group practice decides on for each session that a therapist conducts and how much each party gets paid when that session is completed.
For example, if a therapist and a group practice agree on a 60/40 split, this usually means that the therapist receives 60% of the cost of that session while the practice receives 40% of it. Traditionally, the first number is what the therapist gets, and the second number is what the group practice gets. However, I have seen people mix up the numbers where one party says it's a 60/40 split, and from the point of one party, they actually mean the practice gets 60% and the therapist gets 40%. But traditionally, it's usually what the therapist gets, then it's what the group gets. However, it's very, very important that both parties understand exactly what each party means when they say that split. So, it should be in the contract. It should explicitly state who receives, again, in this example, the 60% and the 40%.
Benefit-Split Ratio
So let me explain what a benefit-split ratio is.
The benefit split ratio is the difference between the number of benefits given to an independent contractor and the payment split that both parties receive. In theory, the more that a practice provides to a therapist, the more the split the practice can take.
Some benefits may include the marketing conducted within the group practice so that clients are available for independent contractors. In my opinion, this benefit is actually essential because at minimum, the practice should be making an effort to bring in clients into the practice. Unfortunately, though I have heard of stories on more than one occasion where practices are actually asking independent contractors to bring in and find their own clients and still give the practice a split. Which in my opinion, is very unfair, especially if the practice does not provide other benefits to the therapist.
Later in the episode, I will give an example where this could be considered fair, as long as both parties are satisfied with that agreement, but generally the group practice should be at minimum paying for the marketing and bringing in clients instead of expecting independent contractors to do it for them.
I do want to give a disclaimer here though, that as an independent contractor, you are not guaranteed clients long-term. So, if you are a group practice owner, just because you are doing marketing doesn't mean you have to fill an independent contractor's schedule. But you need to be paying for the marketing and providing the clients in order for you to get a split of any of those sessions. Hope that makes sense.
Another benefit would be the practice gathering, managing, processing, and distributing payments from the client to the practice and to the therapist. This may include processing direct billings with insurance, or just processing credit cards and payment methods accordingly.
Also, providing office space for free of use to therapists so that they can see their clients, especially the clients that you are providing. However, you may even decide to allow therapists to use a space for clients that they're seeing in their own private practice or with other independent contractors. Some people feel a little bit more wary about this, but again, this is a benefit that you're providing, which also means you could likely get a larger payment split with the clients that you provide.
Another benefit is the practice offering free regular clinical supervision or case consultation so that the therapist can enhance their practice and improve client care. This can also be seen even more valuable to new therapists on a provisional or qualifying status who require clinical supervision hours for their regulatory body.
Also access to the company's practice management software such as Jane App, for case note documentation, booking, and video capabilities for virtual sessions and so forth. Also, access to a receptionist or administrative professional for incoming and outcoming client appointments.
The practice offering perks within the office for the therapists and their clients, which may include, but not limited to having a mailbox or being able to use the practice's address on forms within again the clients that they have within the practice, or maybe you may allow them to use that address for outside agency clients as well, like clients in their own practice.
It may have a fully equipped kitchen for lunches, bottled water, coffee for clients when clients come into the building to create that wonderful atmosphere. All of the decor that you have in your office space, all of these things promote a better experience for therapists and clients.
Also offering access to ongoing educational opportunities paid by the practice, whether it’s having people come in on a regular basis that all of your practitioners can access. Or providing an educational fund to contractors who stay in the practice for a specific amount of time. I will give a disclaimer on this though. If you have a specific educational fund, you do want to make sure that your contractors have worked for you for an X amount of time or work with so many clients because you want to be careful that you're not hiring people to come in to use educational fund and leave again. So, there should be like a minimum amount of hours or a minimum amount of time that they're in the agency before they get access to it. But having access to it is definitely valuable and motivational.
And, there are so many other benefits that I could probably keep listing. But really the more you provide, the better it is.
So, when thinking of the benefit-split ratio, it's realistic to think that the more that the practice provides its contractors, the more of a split it would get, especially as most, if not all of these examples have a cost associated with them from either financial perspective. Or an effort-time perspective.
Let me give an example. If a group practice owner hires someone to do the billing, that costs money. So that's a financial impact to the agency. However, if a group practice owner decides that they're going to do the billing themselves, that might cost less financially than having an administrative assistant do the work. But the practice owner's effort is still valuable and it takes away from them making money in other areas of their practice. So overall, the billing is still a benefit regardless of the time or a money perspective.
Common Therapist Payment Splits
So, I often get the question, what is common therapist payment splits?
The most common therapist payment splits that I often hear in the field is either an 80/20 split, a 70/30 split, or a 60/40 split. Of course, as I mentioned before, the contractor receiving the first number, which in these cases is the higher amount of the split per session. However, I have heard of 50/50, 40/60, and even a couple times a 30/70.
Unfair Splits
Now, in my opinion, unless the practice is providing a boat load of benefits, including almost everything that I've mentioned previously, I think a 30/70 split where the therapist receives 30% and the practice receives 70%, is very unfair. For example, if the practice charges 150 session and again, doesn't provide a whole lot of benefits outside of bringing in the client and the therapist only receives 30 of the profit, that means that the therapist walks away with $45 and the practice gets $105.
For an employee who is getting paid at a full-time basis, this may seem great. For an independent contractor though, who lives from session to session. It's quite unfair, especially where the therapist has to also write their case notes unpaid on their own time afterwards. As well as they often have overhead associated with their practice in some way, especially if the practice isn't providing everything else to them.
Fortunately, I will say though, it's only been a couple times I've heard of the 30/70 split, so it doesn't happen as often, but in my opinion, I think it's quite unfair unless there is a lot of benefit to being in that practice.
Another scenario that I've heard of in the past, which again, in my opinion is unfair is asking or requiring independent contractors to work on a sliding scale or for free. Although usually the sentiment of providing sliding scale or free services comes from the practice owner really wanting to provide accessible services for clients. And I totally understand that. That might be great if you have students coming into your practice.
However, requiring independent contractors to work this way is quite unfair, and it's because we don't know everyone's life experiences. And depending on what the person has agreed upon in the contract, that's what they expect to get paid for every session. And they may not be able to afford adding, you know, 1, 2, 3 free or sliding scale clients into their schedule.
This is where I think the employee versus independent contractor mentality comes in. If someone is getting paid as an employee in an agency and still receiving a paycheck, regardless of what the practice decides that they will charge per client. It would be okay because a therapist at the end of the day is still making predictable living. Obviously, they can do their case notes afterwards, it's still get paid for it. However, as independent contractors do not get paid outside of their one-to-one sessions, asking someone to do even one free session a week can drastically impact our livelihood.
We don't know if people are living paycheck by paycheck. We also don't know if next month there's going to be as many clients coming through the door. And this is why it's really important, if you are a group practice, to be quite predictable into what you expect your independent contractors to accept as well as to understand that free or sliding scales may not necessarily be realistic for most people.
Now you may be wondering if someone didn't want to do a sliding scale or free sessions. Can't they just tell the group practice owner that they don't wanna do it? From my experience, although some therapists feel comfortable bringing this up with practice owners, especially if they have a close relationship with that person. But more times than not, I hear therapists say that they are so worried that they'll get let go if they bring it up to the group practice owner. They might like the practice overall, but they do find that this part is quite unfair. And they feel that if they were to be let go, that would actually have more hardships and implications on their livelihood.
So, there is an inherent power imbalance, both perceived and actual. So, more times than not, therapists stick it out until resentment gets so strong that they just decide to leave or find another group practice to work with.
Resentment
And if you are a practice owner, the last thing you want is therapists to resent working at your agency. It promotes a negative work environment. There's less productivity. Unhappy therapists lead to unhappy clients. And overall, as a practice owner, it could lead to detrimental effects on your practices, efficiency, effectiveness, and overall reputation, both internally and externally.
So, by setting fair therapist payment splits, you are much more likely to have therapists feel valued and less resentful working with you.
Setting Fair Therapist Payment Splits
Okay. Now let's discuss setting fair therapist payment splits. As I mentioned previously, there isn't a specific formula or guideline that you can follow. However, the more you provide the therapist or independent contractor, the more realistically you should be able to take as a practice owner.
So, for example, if you only provide therapists with marketing and clients, but you offer no other benefits, they have to use their own practice management system, but to process their own payments, they have to do all of those other things outside of that, maybe they're paying to be also at your practice for office space. Or they're completely virtual, so they don't even have access to an office space. You might choose a 80/20 split. Or in some cases, even a 90/10 split, especially if you're charging them office space on top of the split.
However, if you provide everything under the sun and the therapist at the end of the day has zero overhead from working with you, and maybe you even allow them extra perks that help them with their own private practice, especially if your practice has a really great reputation and it has consistent clients coming in and out through the door, people are always going to be filled up. You could realistically ask for a 60/40 or even a 50/50 split.
However, whether you are the group practice owner or the therapist, prepare to negotiate the terms of the agreement, unlike when hiring an employee, contractors have all right and responsibility to negotiate the terms as do practice owners.
Unfortunately, I've seen and heard of group practice owners being offended by being asked to negotiate the terms, as well as therapists worried about losing a possible contract due to negotiation. This again, would be an employee mentality in my mind. As we are all accustomed to, this isn't meant to be a slight to anyone. However, negotiation is a name of the game when it comes to independent contractor world, and at the end of the day, either party still has the right to walk away if the terms are not mutually beneficial. But there should be some willingness or openness to be able to negotiate: what do I need? And this isn't always paid either.
So, for instance, let's go back to those benefits we mentioned before. Maybe you as a practice owner definitely want to do a 60/40 split. There's absolutely nothing someone can say that won't have you change that amount. What other benefits, can you provide the therapist that make it more worthwhile?
So, this is where we could think about the negotiation, is like maybe the therapist is a new therapist and they need clinical supervision hours to get fully registered, and to move away from the provisional or qualifying status. That is something you could provide that's beneficial to them because they don't have to go outside and pay someone else to do that.
So, again, going back to negotiation, although I want to recognize a negotiation for either side can feel uncomfortable. It's much easier to negotiate the terms before the contract agreement has been signed than after. So, and again, this is for both parties. This isn't just the practice owner. This isn't just a therapist. But it's a lot easier to sit in that room and negotiate instead of sit there after and regret what you had signed.
Okay, now I want to go back to the marketing example I mentioned in the benefits-split section of this podcast episode. Although I believe that at minimum practices should be providing marketing, there may be a situation where a therapist brings their own clients to the practice that could be considered fair to both parties.
So, let's say that you have a practitioner who has existing therapy clients in their practice, but they realize that they really dislike the billing process. They don't really want to keep the cost of practice management software. There's just so many benefits that you could provide, and they just would rather to move away from doing those things on their own. You may have a therapist come to you or you can even also offer new independent contractors the ability to bring existing clients should they want to, to the practice.
Going back to if a therapist comes to you, they may say, Hey, is it okay if I bring my clients with me so I can use your billing services and all this? In this case, a therapist is asking the practice owner and the expectation is not on the therapist to bring the clients, especially long-term, right? They're not long-term going out and find clients for you. Even if you offer that, ensure that it's like an offer and not necessarily like we expect it because I think there's a difference between an expectation and an offer. And it would be even more equitable and fair if the practice owner then offers the therapist a higher percentage of the payment split for the clients that they bring in, because the practice themselves didn't go out and find them. But the practice also benefits from the existing relationship that the therapist has with that client.
So let me give you an example. Let's just say that you have agreed that all the clients that are given to the therapist by the practice is paid at a 60/40 split. However, if someone brings in clients, you may say, I would give you an 80/20 split since I didn't actually go out and find these people. But then the 20 split also helps pay for your practice management software and any other benefits that you provide. That can seem as quite fair and equitable because now. You know, you are still getting the benefits because you're going to have to pay for that practice management software anyway. You're probably still paying for the space or whatever other benefits you're giving. But now you get some benefit, but you also recognize that you didn't do the work to get this client. So just having them in your practice is great, especially long-term because we're saying, 80/20 split, but that is 80/20 split per session. So, if this person already has an existing relationship with a therapist, then it's really good because they're probably going to keep seeing this therapist.
So, an offer versus an expectation may be where it is fair, but also respect when someone doesn't want to do that.
Conclusion
So, there you have it. These are my thoughts and considerations on creating fair therapist Payment splits, regardless of whether you're the contractor or group practice, know that most of the time an unfair payment split is not intended to be unfair and inequitable. It's usually developed with little guidance or direction, especially at the beginning of the process of what is a fair payment split?
Usually, and I see this in social media groups all of the time, is people saying what should I charge as a payment split? And I will say more times than not, you'll see people say 60/40 as the most common, but that's only fair if you're providing a lot of benefits, right?
So, I think that there's little direction in our field about what is considered fair. So, this is my purpose of today's episode, is to think about some of these things. I also think that almost all of us started off as employees initially. So we do come from an employee mentality. It's ingrained in us, especially when we used to get paid, you know, $20 to $30 an hour as a therapist, as an employee. Anything above that seems really high. I know, myself included, when I was starting to get paid in private practice, $150, for one session that seemed like it was very, very high.
But the difference between a contractor than employee is that contractors have so much more overhead and costs associated with being a contractor, including the unpredictability of getting clients from any group practice. Like of course, unless the group practice has a very good reputation bringing in clients all the time. Often independent contractors still have to supplement their income outside of the group practice, whether it's in their own private practice, whether they have a side hustle, whether they take a side job, or they work for another group practice. So, making more per hour helps balance out the cost and the unpredictability that may arise with receiving clients now or in the future.
The one other thing that I didn't mention in this episode is how much each session is. So, for instance, if a group practice is charging $200 an hour, that's a lot different than if they're charging $100 an hour.
So, a 60/40 split for $200 an hour is going to be a lot more than a 60/40 split for a hundred dollars an hour. So even though when we talk about the splits, there's so many other considerations to think about, both as a group practice owner as well as a therapist coming in and accepting a position within a group practice.
Anyway, I hope that this episode was helpful. If you did find it helpful, or the Designer Practice Podcast overall, I would appreciate you sharing this with anyone you know who you think might need to listen to this episode or the podcast.
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Until next time. Bye for now.
