Compensation and Employment

Compensation and Employment J.M. Roesner DVM DABVP Loving Hands Animal Clinic 13775 Hwy 9 Alpharetta, Ga joanne.roesner@lovinghands.com

Thank you to our sponsors

Net Cost to the business of an employee • The number I am thinking when we discuss compensation • Understanding this allows you to better negotiate • Not just gross salary

Pre Tax Compensation • Enhanced monetary value over post tax dollars • Understanding gives advantage in negotiating • Does not cost payroll tax to employer • Does not cost income tax to you

Payroll Taxes • FICA = Federal Payroll Tax • 7.65% cost to employer • 7.65% cost to employee • FUTA = Federal Unemployment • 0.67% of employees 1st 7k earnings • SUTA = State Unemployment • 2.7% of 1st 8.5k

Example: • HALFTIME new graduate in 2000 at straight percentage of 20% of gross • Generated ~ 220k gross production • Paid gross salary of 44k for half time hours • Cost to business of 44k is 54k

Example: Net Cost to Business EXAMPLE: Half time DVM @ 20% straight percentage (in year 2005) compensation: Gross (yearly) 64,000 FICA FUTA 5,760.00 SUTA Worker Comp 750.00 Health Insurance (Kaiser) 1,500.00 Retirement Matching (Variable) Continuing Education 1,000.00 Professional Liability 303.00 DEA Registration 260.00(3 years) Dues & Fees 750.00 Licensure (GA) 200.00 Discounted Pet Care (Variable) ~ 1,500.00 Subscriptions N/A Uniforms 250.00____________________ 74,773.00 Net cost to business

Negotiating • EACH of pretax contributions is a negotiating point for you as a potential employee • Consider the importance of each category to you and maximize meeting your needs • Negotiating each point and having an agreement will prevent misunderstandings (e.g. you assume DVM personal pet care or boarding is free… I do not)

Production to justify compensation • What production is required to justify a given gross compensation? • At 20% 44l x 5 = 220k (5 = 1  .2) • Total cost to business is really 54k… 54k x 5 = 271k not 220k • Inversely real % to employee in the preceding example is: 54k 220k = 24.7%

Make a list prioritizing needs, wants, desires, and goals and use that in your negotiating Why do YOU work?

Understand risk is compensated

Systems of Compensation • Straight Salary • Straight Percentage of Production • Base salary plus production bonus

Prioritizing • Choice of compensation system should maximize your needs • There is no “best” system for everyone • Choice will vary with both the individual AND the practice • Rank your needs and evaluate how they are met by each system

Straight Salary • Predetermined amount at set intervals • Predictable • Doesn’t vary with production • Employer carries all risk • Compensation typically lower than production systems • No external incentive for production on employee • No direct consequence for not charging for goods or services

Straight Salary is worth considering if: • High need for predictable compensation • Low production practice (ie practice character would limit your gross production) • New graduates early in practice careers • Consider negotiating a change from salary to other systems later as you mature

Straight Percentage • Compensation is a negotiated % of gross production for a given interval • Often 18% - 25% (20% - 22% is common) • Income is variable • Employee assumes some risk • Inherent motivation to produce and charge for services • MUST understand what categories are included in gross • MUST consider what business is willing to do to assure production (e.g. Staff:DVM ratio, new client acquisition • Ask to see clinic production and DVM production

SPLIT RATE • Variable rate • Medical/Professional Services 23.5% • Rx 7.5% • Food, sundries 0% All considerations of straight percent apply

BASE PLUS Production Bonus • Hybrid • Risk assumed by both parties • All considerations of straight percentage apply • Advantage is some predictability • Disadvantage is often lower overall compensation than straight percentage • Know what happens if you fall below base production (ie does it come out of next bonus the next time you exceed base production)

Intangible Compensation • Mentoring, is learning valued • Reputation • Moral & Ethical alignment • Stimulating case load • Level of autonomy in case management • Human resource support • Technological support

From the Employers Perspective • What do you bring to the practice? • Understand mentoring has value to you and cost to me • Goodwill and reputation of practice enhances your resume and took years of work to develop • Staff and equipment I provide benefit you as well as the practice • I expect you to promote the practice and participate in community service • Medical and Ethical expectations: • Are you willing to work to learn? • Will you seek assistance when over your head?

Negotiating • Win/Win, save face • Legal limits • Always propose. Ask, don’t demand • Offer concession in another area to offset high value area • Have a list of your priorities before you job hunt • Sell Benefitsnot Features • Have proposals worked out • Overcome some objections in original proposal

Negotiate ethically. Your reputation follows you.

Contracts • Review by an attorney • Review by trusted other in the field • Clarify points of uncertainty • Write things down even people of the highest integrity forget things

Compensation and Employment