Ready to sign an employment contract? Remove your compensation blinders.
Imagine you’ve been working at the same practice for five years. Since the beginning of your second year, you’ve been paid using a production-salary formula outlined in your contract. The first year under this production scheme, you received a bonus check of a few hundred dollars for exceeding your production goal. The following three years, you received only your base salary, and your boss said you’d failed to meet your contractual production goals. “You’re accumulating a deficit,” he explained. “In a way, you owe the practice money.”
Doubting the veracity of this statement, you pull out your contract and pore over the compensation clause, but it’s so convoluted you reach out to a legal consultant to translate how your boss calculates bonuses and deficits. When your consultant asks for copies of the personal production statistics you’ve received from the practice over the years, you say you’ve never received such a thing. When the consultant asks what your employer uses to calculate your pay, you again have nothing to offer. The production-salary formula is so complicated you’ve always just left the math to management.
At your consultant’s request, you politely ask your employer for copies of the production figures used to calculate your pay for the past four years. He responds with incredulity, accuses you of betraying him and asks you to resign immediately.
Oh, that never happens!
Oh, but it does! And when it does, the associate departs the practice bearing the full weight of the employment contract’s noncompetition terms. The unemployed associate now must try to find a job far from home without the aid of a positive reference—all because the former employer was almost certainly in breach of contract and very likely in violation of labor and tax laws.
What can you learn from these hapless associates? Plenty. Use these five steps to help you avoid a similar situation.
1. Never enter into a compensation formula you don’t fully understand.
Most practices use fairly straightforward production-salary formulas, regardless of whether they include accumulating deficits—this is when failure to meet a production goal rolls over into subsequent contract years. Look for a clearly stated and easy to comprehend production formula—for example, your employer will use a set 22 percent of generated revenue to determine your annual pay if the amount is more than your set base salary. Ask that the contract include two example calculations—one in which you exceed the production target and one in which you do not, including the impact of that event on subsequent years’ calculations. If a practice won't agree to simplify the compensation formula language or provide these examples, it may be wise to pass and move on.
If a practice won’t agree to simplify the compensation formula language or provide these examples, it may be wise to pass and move on.
2. Look closely at the description of the goods and services included in calculating your production.
Does your production (or gross revenue or generated revenue) include goods and services you recommend, such as prescription medications, flea and heartworm products and routine blood testing? While these items don’t seem to amount to much individually, they can collectively add up to a whole lot of lost “associate production” if they’re left out of the production calculation. If you and the practice owner both agree to exclude important “production-credit” salary computations, take a close look at the percentage of generated revenue outlined in the employment contract.
3. Ask for production reports in your production-salary agreement.
Our office routinely hears from associates who must wait interminably for their “numbers,” never receive them at all or get production figures with no supporting information about which goods and services the calculations include.
To avoid these situations, ask your potential employer to include a provision in your contract that requires the hospital to provide detailed production information monthly or quarterly. Ideally, this information would include your production figures, and, upon request, the invoices of clients whose animals you treated so you can confirm that the total includes all the services and inventory items for which you earned production credit. Remember, a receptionist’s crediting mistake or software glitches can be just as costly as questionable accounting behavior.
While some employers may balk, stand firm on a written contractual commitment to provide this personal production information. This doesn’t just protect you from honest mistakes and intentionally inappropriate reductions in gross revenue—it enhances the effectiveness of the production-based pay concept. After all, how can you feel appropriately incentivized if you don’t get to see your “numbers,” or your numbers are only marginally accurate?
4. Don’t back down.
If your pay is based on information available only to your employer, the clinic may well be in breach of contract. While hourly employees have a state labor board that looks into time card improprieties and other payroll anomalies, contract employees are generally on their own to make sure they’re receiving the money they’re owed.
Legal remedies for illegally underpaid contract employees exist, but those workers often must gather information on their own. Make it easy on yourself with a contract that requires compensation transparency. Then monitor your practice’s compliance with your agreed upon compensation formula.
5. Make assumptions about bosses who try to guilt you.
If your employer loses it when you ask for your production figures, there’s likely a reason—either somebody’s hiding something, or the accounting system is hopelessly screwed up.
If the employer promises to get your figures but fails to do so after multiple requests, there’s a good chance you’ll never see them. And if managers say they are “incensed” or “feel betrayed” by your request, then dollars to donuts there’s a major problem, and you owe it to yourself to investigate it further. Or, at the very least, you owe it to yourself to demand a new agreement with a stipulated salary.