Compensation via a production pay model (ie, payment based on services rendered or products sold) has become increasingly popular in veterinary medicine, with ≈54% of clinicians and 69% of new graduates receiving production-based compensation.1
With time-based salary compensation, a specified dollar amount is paid per time period (ie, hourly, annually). In contrast, production-based compensation is complex and varied. Following are the author’s key factors to consider when evaluating a production-based compensation offer.
1. Compensation for Services & Product Sales
It is important to consider which services and product sales will be included in the compensation package. With a production pay model, clinicians typically receive a percentage of all medical and surgical work performed, including examinations, diagnostics, treatments, and prescriptions. Although a 48% commission rate has been common for preventives, pet food, and prescriptions, this rate has decreased, with a percentage of only the original cost of the prescription now going to the clinician and no credit given for prescription refills or nonprescription pet foods.2 Included services can also vary, including hospitalization of a sick patient, cost of anesthesia, and filling in for colleagues.
Although compensation that accurately reflects every aspect of clinic work can never truly be achieved, it is critical to understand what will be compensated and to negotiate anything that seems unreasonable. For example, anesthesia during a dental procedure should be included in production compensation, as clinicians are legally and ethically responsible for monitoring the patient under anesthesia. In contrast, compensation might not be given for a nail trim performed by a technician without input or oversight from the clinician.
There may not be total agreement with how each procedure or product is handled, but it is important to feel there is overall fairness.
2. Negative Accrual
In a production pay model, compensation is typically salary based, with a bonus given when production exceeds the base salary. Negative accrual occurs when the amount produced does not cover the base salary for a given period of time, often because the clinician has been out of office for an extended period (eg, vacation), and the difference must be covered to be eligible for another bonus.
Negative accrual is controversial and not used in all practices. If an offer includes negative accrual, it may be possible to negotiate removal.
3. Practice Management
When considering a job offer, it is important to understand how decisions are made and their potential impact on earnings. With production-based compensation, it is often believed that the responsibility of earnings is placed solely on the clinician (ie, produce more to make more); however, clinicians do not have full control over earnings from production pay. Practice management determines fees and scheduling, hires and trains staff, designs and implements product marketing, and creates and maintains practice culture. Clinicians rarely have significant input in these areas and may have decreased production as a result.
Conclusion
Production pay models have many benefits, and it is important to understand and evaluate any offer or contract that includes production pay to ensure the terms are clear. Considering the terms of the offer, the job, and the clinic can help weigh the positives and negatives.