Staff costs are most practices' largest controllable expense, and the last few years have pushed them structurally higher rather than cyclically higher. Employer National Insurance sits at 15% on earnings above a secondary threshold of just £5,000 a year, and the National Living Wage rose again on 1 April 2026. Neither is reversible, and neither shows up as a decision anyone made. It shows up as a ratio that has moved.
The staff-cost ratio is total employment cost divided by fee income. Two details decide whether the number tells you anything.
First, employment cost is not gross pay. It is gross pay plus employer National Insurance, plus employer pension contributions, plus agency and locum cover, plus the cost of overtime and unsocial-hours premiums. A practice tracking gross pay alone is understating its people cost by roughly a sixth.
Second, associates belong outside it. Associate fees are a variable cost that moves with the income they generate, so folding them into the same ratio hides the number you can actually manage. Track the employed team — nurses, reception, practice manager, employed hygienists and therapists — against total fee income, and track associate cost as its own percentage line alongside it.
The figures below are illustrative but the arithmetic is the arithmetic. Take a mixed practice with fee income of £900,000 and twelve employed staff on total gross pay of £252,000.
Now apply the 1 April 2026 rates. The National Living Wage for those aged 21 and over rose from £12.21 to £12.71, the 18-to-20 rate from £10.00 to £10.85, and the under-18 and apprentice rate from £7.55 to £8.00. Say six of the team are at or near the adult minimum on 30 hours a week, and two trainee nurses aged 18 to 20 work 37.5 hours:
That is £9,434 of additional cost, taking employment cost to £285,000 and the ratio to 31.7% if fee income is flat. Just over one percentage point, and every pound of it comes straight off profit. It also ignores the knock-on cost most practices meet a month later: restoring differentials for the senior nurse who is now paid barely more than the trainee she supervises.
The number that belongs in a hiring decision is not the salary. Take a full-time nurse at £13.50 an hour, 37.5 hours a week:
If your practice team is enrolled in the NHS Pension Scheme rather than a workplace scheme, the employer contribution rate is 23.7% of pensionable pay plus a 0.08% scheme administration levy — nearly eight times the auto-enrolment minimum, and a materially different hiring calculation. Get the correct figure into the model before the offer goes out, not after.
No single decision does it. An extra part-time receptionist during a busy patch, a retention pay rise, overtime that becomes routine, a role never re-scoped after someone left, a nurse kept on full hours through a quiet quarter — each defensible, each small, and three years later staff costs have climbed several points as a share of fee income while profit fell by the same amount. The drift is invisible month to month. It is obvious on a quarterly ratio chart, which is the entire argument for plotting one.
Payroll is also where compliance risk hides. Underpaying the minimum wage through unpaid handover time or uniform deductions is an HMRC matter regardless of intent, and hygienist and associate arrangements carry their own status risk — see employment status done right and how we handle dental practice payroll.
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Most healthy practices run employed staff costs at somewhere between a quarter and a third of fee income, with the exact figure depending heavily on your NHS-to-private mix and how much clinical work the principal does personally. The absolute number matters far less than the direction of travel. A practice at 31% and stable is in better shape than one at 27% that was 24% two years ago, because the second is drifting and has not noticed. Plot four quarters against your own history first, then compare with dental-specific benchmarks — general small-business ratios are not a useful comparison for a practice.
No. Associate fees are a variable cost that rises and falls with the income those associates generate, so including them in the same ratio masks the employed-team cost you can actually manage. A quarter where an associate bills more will show associate cost rising and the combined ratio looking worse, when nothing has gone wrong at all. Track the employed team — nurses, reception, practice manager, employed hygienists and therapists — as one percentage of fee income, and associate cost as a separate line. Two numbers, watched separately, tell you which lever to pull.
Employer National Insurance is charged at 15% on earnings above a secondary threshold of £5,000 a year, offset by the £10,500 employment allowance. On top of that, the National Living Wage rose on 1 April 2026 from £12.21 to £12.71 for those aged 21 and over, from £10.00 to £10.85 for 18 to 20 year olds, and from £7.55 to £8.00 for under-18s and apprentices. On a twelve-person practice payroll of £252,000, the April 2026 rises alone add roughly £9,400 once employer NIC and pension are counted — a little over one percentage point on the staff-cost ratio.
For a member of staff in a workplace pension scheme, budget for about 14% on top of gross pay. A full-time nurse on £13.50 an hour works 1,950 hours a year for gross pay of £26,325; employer National Insurance at 15% above the £5,000 threshold adds £3,199 and auto-enrolment pension at 3% of qualifying earnings adds £603, giving a total of £30,127. That is before uniforms, CPD, indemnity, the £108 GDC annual retention fee for dental care professionals, and holiday cover. Staff in the NHS Pension Scheme cost considerably more, because the employer contribution rate is 23.7% of pensionable pay plus a 0.08% administration levy.
Almost certainly yes, provided the practice employs staff other than a single director. The allowance is worth up to £10,500 for 2026/27 and is set against your secondary Class 1 National Insurance liability, so it reduces the employer NIC bill rather than the pay bill. It is claimed through your payroll software as part of the Employer Payment Summary, which is why it is quietly possible to have gone a full year without claiming it — nothing prompts you. Check your last EPS submissions, and if it has been missed, claims can normally be backdated for four tax years.
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