Friday, August 19, 2011

Why You Should Consider Fee-for-Service

More and more, these days, mental health clinics are choosing to pay their employees on a fee-for-service rather than salary basis. The main difference is that salaried employees are paid by the clock hour, while fee-for-service employees are paid by the billable hour. Fee-for-service staff also may not receive benefits, though more companies are beginning to offer benefits to fee-for-service staff who meet minimum weekly averages.

Employers prefer the fee-for-service system for the same reason that employees prefer to be salaried - fee-for-service staff only get paid when the client shows up! 

However, there are actually some reasons to consider working fee-for-service, especially if benefits are included (or available through a significant other). 
  1. Even salaried jobs have productivity requirements! If you're salaried, there is usually a minimum number of billable hours that you are expected to generate weekly. At both of my jobs, the requirement for salaried staff is 65% - that's 26 billable hours for a 40 hour position. Some agencies offer bonuses for exceeding the minimum on a monthly or quarterly basis - but take hours out of the bonus "bank" whenever the minimum is not reached. 
  2. The hourly rate is higher for fee-for-service work. Since they're not paying you for non-billable hours, agencies can afford to offer more for billable hours. If you're motivated, and know how to keep your numbers up (to be discussed in a later post), that means you can end up making MORE money working fee-for-service than on a salary.
  3. Fee-for-service jobs offer more flexibility if you want to work less than 40 hours a week (though many also have a weekly minimum - at my fee-for-service job, there's a minimum of 8 hours per week).
Of course, there are some caveats to consider before accepting a fee-for-service position:
  1. Does the agency have enough clients to keep your schedule full? Be sure to ask about the size of the population, the turn-over, and rate of new clients being referred. If possible, try to speak with a current fee-for-service employee of the agency to find out whether they have difficulty booking enough clients. 
  2. Do you budget money well? Keep in mind that most fee-for-service employees are not paid for vacations (though some are). You have to save some money through the year to cover the time you want off, and calculate your annual income based on the number of weeks per year you plan to work (e.g., 49 weeks if you want 3 weeks vacation). 
  3. What is the average show rate, and how does it vary over a typical year? You have to plan for a certain percentage of cancellations and no-shows, which may spike around holidays, pay-days, and inclement weather.
In the current economic climate, job-seekers need to consider all possibilities, so I would encourage you to think about whether fee-for-service might be an option. It's not for everyone, but depending on your personality and finances, you may find it a better fit than a salaried position!


  1. I have a question about fee-for-service legality. Due to a clerical error (made by our billing company, not myself), an insurance company is refusing to pay for sessions I've billed over the past several months with a particular client. Because of this, my employer told me I will not be paid for those sessions. I've been researching all day but cannot find any information about the legal responsibility of paying FFS employees when the insurance company does not pay out.

  2. FFS is flexible and sure the hourly rate/wage is higher, but it's an inconsistent pay check. You do not get paid for no-shows. Therefore, your gains and losses have a similar pattern to that of a salesperson.. inconsistent and unpredictable. Second, you are not offered benefits (401k/403b, dental, medical).. so don't get sick! Third, it offers no continuing education coverage (pay out of your own pocket to keep your license). Basically, FFS offers no security and the gains are not guaranteed to exceed a 9 to 5 position. You will have to budget well to put enough funds away for retirement AND a rainy day, while balancing your day to day expenses.

  3. Starting in 2018, employees will be unable to deduct their expenses related to employment. As a fee for service "employee," you are now essentially a contractor without the right to deduct your business expenses (such as licenses, malpractice insurance.)