Dodging the perils of ProSal
Little is guaranteed to associate veterinarians earning a base salary plus a percentage of production. Here’s how to make the best of this compensation situation.
Associate veterinarian compensation is increasingly becoming tied to revenue production. Simple salary-based pay is giving way to remuneration based on the associate’s speed, efficiency, and ability to market products and services. More private practices are taking compensation cues from veterinary consolidators and offering bonuses based on monthly, quarterly, or annual performance goals.
The trend toward ProSal associate compensation is not going to abate. And as is the case with so many changes in life, the best way to handle the new pay world is to fully understand its nuances and leverage that understanding to maximize your individual benefit.
The essentials of ProSal
First, let’s call ProSal what it is: a variable base salary with potential commission. Most such compensation arrangements include a “theoretical floor” base salary, a percentage “credit” toward a bonus above that base salary for goods sold and services provided by the associate over a certain dollar target, and a “target” for the associate’s generated revenue above which commission dollars will be paid a “bonus.”
With the ProSal formula, each associate is compensated individually based on how quickly and efficiently they work through their appointments, how high their average appointment transaction is, and how rapidly they can perform surgical procedures. The pay scheme is something akin to piece work: if the associate sews on lots of buttons and presses plenty of shirts, they earn more. If they sew slowly or don’t iron enough blouses, they get no bonus.
But while the commission compensation concept seems attractive initially, there are other realities that may not immediately appear obvious.
High producers and incremental incentivization
In my experience, efficient, hard-working associates perform glowingly every day, regardless of whether their pay increases by $7 for every Lyme disease vaccination they administer. So, why would a practice punish a high producer when some circumstance beyond the associate’s control cause their production to drop? Should a dynamite associate be penalized when ownership hires an extra doctor or another practice opens up nearby, thereby diluting the proven associate’s caseload? A smart practice owner would hike such an associate’s pay annually just to keep them from leaving.
The illusory guaranteed base salary
When a business signs a year-long lease, the landlord is entitled to a year of rent regardless of how well the tenant’s business does. If the lessee has a few tough months, the full year’s rent is still due. Associate contracts may look like they work similarly, but this is rarely the case. The “guaranteed salary” (whether accompanied by a ProSal bonus or not) is only guaranteed until the employer chooses to curtail the contract, which it can do merely by giving the associate a termination notice. So, although many veterinary associate contracts start by saying that they are for a term of 1 year, they only provide guaranteed pay for the “termination without cause” period—30, 60, or 90 days from the date ownership decides to fire the associate and rehire them at a lower guaranteed salary. Naturally, the associate can protest by finding a new job, but that new job has to be outside the contractually determined noncompete region.
In this way, the employer can force annual compensation downward. If ProSal is part of the pay formula and an associate continually fails to generate enough revenue to earn a bonus, the clinic can drop the guaranteed base salary simply by firing and rehiring the associate at a lower salary.
The more specific the credit list, the better
Most veterinary employment agreements nowadays are of the ProSal type. But what differs dramatically among these contracts is the degree of specificity they express describing when exactly an associate will receive production credit. Some contract language is unequivocal and inclusive such that the clinic is taking the lead to make sure the associate receives credit for every product or service they might sell.
Other employment contracts cover this key subject in a far more cursory way. And after the general language describing “production credit for services actually performed by the associate,” there is a caveat that the “hospital reserves the right to modify which items of goods and services qualify for production credit at any time without notice to employee.” Why doesn’t the contract just say, “we will pay you whatever we feel like…?"
Precious little is guaranteed in the ProSal compensation world. You can make the best of the situation by following these tips:
- Start salary negotiation by addressing the balance between the pay being offered and the contract’s noncompete details. Remember that the noncompete is a fixed distance for a substantial time—unlike the pay, which can be reduced on just a few months’ notice. So, request some proof that you will have enough cases to make it likely you will actually earn a ProSal bonus on a routine basis.
- Make every effort to avoid a contract term providing for “negative accrual” language, which allows the amount by which you miss the bonus target to be perpetually rolled over from contract year to contract year. Try to get a fresh start earning credit toward achieving a pay bonus at least as often as every contract year.
- Negotiate the most frequent bonus payouts possible. There is no reason to let your employer hold your money any longer than necessary. Getting bonus funds sooner rather than later lets you pay off credit cards more quickly and contribute to an IRA at the earliest possible time, maximizing your tax-deferred retirement nest egg.
- Before taking a job, make it a point to talk with associates already employed by the practice. Ask how often they fail to earn a bonus. Also, get their input on whether the practice needs more veterinarian coverage; if there’s barely enough caseload for existing professional staff, ProSal will result in every employed associate taking a financial hit.
Christopher J. Allen, DVM, JD is president of Associates in Veterinary Law PC, which provides legal and consulting services exclusively to veterinarians. He can be reached at firstname.lastname@example.org. Allen serves on the dvm360® Editorial Advisory Board.