When hiring a new associate, it’s important to explain the compensation package’s total value, including benefits and other perquisites. Many new graduates focus on salary and overlook the value of the benefits package, which would be a significant expense if they had to pay it themselves using after-tax dollars. As such, practices might consider providing potential new hires with spreadsheets outlining all the components of the employment offer and their dollar amount. This helps the new hire appreciate the cost of their employment to the practice.
Calculating Associate Compensation
Practice management consultants have historically advised practices to spend no more than 25% of a veterinarian’s gross revenue production for their total cost of employment. Recently, however, many practices have had to increase that value to as high as 27% to attract associates. In the U.S., employment taxes and mandated fees vary between states, with some states costing practices much more for each employee. In addition, every practice offers different benefits. This results in differing percentages being used to calculate compensation.
The 2024 AVMA survey of graduating seniors indicated that new graduates without an internship entering an equine associate position were offered an average salary of about $95,000. With internships under their belts, new equine associates can likely expect a starting salary of $100,000. The steep rise in salaries has followed the difficulty in attracting new graduates to the equine field, but many practices have struggled to increase fees sufficiently to comfortably pay these amounts until a new hire can bring in substantial revenue. As a result, hiring managers must clearly explain the connection between revenue production and compensation during employment discussions.
The Cost of Benefits
Benefits that practices can offer include state veterinary licenses, DEA licensing, professional liability insurance, veterinary association dues, health insurance, disability insurance, continuing education expenses, SIMPLE or 401(K) employer matches, paid vacation and sick leave, and paid parental leave. In addition, many practices include use of a practice vehicle, discounted care for personal animals, educational loan repayment, and an allowance for cell phone use and uniforms. These benefits all have an associated cost to the practice, which could total as much as $20,000, even before the employer’s cost of payroll taxes.
Production Bonuses
One way to ensure fairness for the associate and the practice is to offer a production bonus once the total cost of compensation has been covered at 22% of the individual veterinarian’s collected service revenue production. In other words, with $100,000 of salary and $20,000 of benefits, the total compensation would total $120,000. At 22%, the associate would be in bonus territory after producing service revenue of $545,454. With the benefit package’s costs covered at this point, the practice could pay any production bonus at a higher percentage than 22%.
Final Thoughts
When the employment relationship commences, the new associate should clearly understand the value of the total package, be aware of incentives to increase their revenue production, and have clarity about how they can earn future pay raises.
Related Reading
- The Business of Practice: Compensation for Equine Veterinary Associates
- Business Briefs: Are Practice Owners More Satisfied Than Associates?
- How to Achieve Your Compensation Goals in Equine Practice
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