By Katherine Vessenes, JD, CFP®

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Doctors, I'm sure you've looked at your employment contract and were probably taken aback with all the legal jargon. There are so many pages of information which can be so hard to understand. I find a lot of doctors, particularly young doctors, are exhausted and so burnt out that the first contract that comes their way, they just want to sign and be done with the pain.

I'm going to ask you to wait, take a deep breath, and make sure this is a good deal for you. I've seen doctors sign contracts that were not in their best interest, which is why we review contracts for all of our financial planning clients.

Not only do we review the terms of their contracts and go through what could be the red flags, but we also want to talk them through something they don't teach you in school- how to negotiate the agreement and get a better deal.

Today is going to be primarily about base pay, bonuses, restrictions, arbitration clauses, and general tips. In our next episode, we're going to be talking more about employee benefits.

Base Pay

A lot of times, doctors think this is the most important part of a contract. I've actually seen contracts where the base pay was higher than another contract, but the other contract might be better due to other benefits.

One thing to keep in mind about base pay, especially when it's your first job, is that base pay sets the bar for the rest of your career. We want to get the base pay in your first job as high as possible. It will make it easier to negotiate higher pays as you shift jobs and grow in your career.

Make sure you know how the pay is calculated. Sometimes this can be very misleading. As you're going through the interview process, ask your recruiter what a doctor in your position is making in 10 or 25 years. I’d also recommend asking colleagues. I would check with other doctors in your specialty and ask them how much they made when they first started and how much they are making now. They may not tell you, but most doctors are so generous with this information you shouldn't hesitate to ask.

Hopefully you are seeing some decent raises when you ask around. Sometimes raises are written into the contract, sometimes not. This can be a good or bad thing depending upon the situation. Once again, know what the raises are based on. Can they be decreased? I have seen more contracts recently that, although they’re written very carefully, could have your pay decreased if certain objectives are not met or the hospital/clinic is not as financially sound. That's a big shock. Years ago, we would never see that, but it's possible now that you could be looking at a situation where an employer might want to reduce your salary. If this is the case, you definitely want to know this up front.

I mentioned earlier comparing contracts. Whether you have one contract or five, you should not just compare your salary contract to contract, but you should also compare it to other doctors in your specialty and in your location. This varies tremendously.

MD Financial recently purchased compensation data from the Medical Group Management Association (MGMA). They are the gold standard when looking for benchmark data on doctors’ salary. If you’d like to know more about how your salary compares to that of your peers, feel free to reach out to us.

Bonuses

The next thing that could be in your contract is bonuses. There are numerous different types of bonuses that could be included. I’ll run through some of the most common. If your contract does not have any bonuses listed, you will likely want to negotiate some. This is especially important if the employer deems there is no room for negotiation on base pay, you might be able to negotiate more bonuses.

Signing Bonuses: Technically a signing bonus means you signed the contract in May and you're going to start in July, so you should be getting that check that day that you signed. That is a signing bonus in legal parlance. What I'm finding though is a lot of doctors’ contracts will say they get a signing bonus, but they don't actually get it till they're 90 days into the job or something else more similar to a retention bonus.

Sometimes signing bonuses have forfeiture clauses. If you receive a bonus but don’t stay with the employer for a year, or whatever term the contract states, there's a claw back provision and you must pay the bonus back. Make sure to know if this is included in your contract. It could be a very unpleasant surprise if you run into it later.

Signing bonuses vary a lot among the specialties. If you are in a higher earning specialty like radiology or orthopedic surgery, these bonuses can be quite large like $50,000 or $75,000. If you're primary care you might see something closer to $10,000 or $15,000. There are a lot of different factors going to play, but make sure you know how yours works.

Retention Bonuses: These are typically pretty straight forward. If you are with the company for a specific amount of time, you will receive a bonus. If your contract has a retention bonus, make sure the years and bonus amounts are listed. Sometimes there are multiple bonuses over multiple years, sometimes there is only one bonus for one length of time.

Relocation Bonuses: Up until a few years ago, relocation bonuses or moving expenses were not taxable. This is no longer the case. They are now taxed like any other bonus. Keep this in mind when negotiating as you will want to be able to cover your moving expenses as well as the taxes you will pay on this.

Other Bonuses:Other types of bonuses are typically goal or productivity based. Did you attend enough meetings? Did you do outreach to the community? Did you hold special events? Did you get good patient reviews? There are many different objectives that they can be based on. Ask more questions about what they are and how they work. What's a typical bonus for most doctors here? What would be likely for me to expect? Find out how often these bonuses are available and the conditions. As these can vary a lot, you’ll want as much information up front as possible.

Restrictions

Something that can be “make or break” on a contract is whether you can moonlight. This is commonly the restriction that our clients are most worried about. There are certain healthcare systems that are very strict about not allowing this. They have clauses that state you may not practice medicine anywhere else. Other systems have no problem with moonlighting.

To be fair, the reason a lot of employers put these clauses in contracts is they don't want you to be working at some other clinic and have that patient sue you, run through money there, and then sue your main employer for damages. It could be very expensive for them. I understand the thoughts behind it, but nowadays most doctors are moonlighting or have side gigs.

If you already have a side gig or think you might be interested in one in the future, make sure you know what is allowed with your contract. Find out upfront what their policies are on your side gig and your outside work. Very often they will allow it, if it's approved in advance. The last thing you want to do is void your contract because you didn’t have your side gig approved.

Another common clause is a breach of contract clause. In the legal industry we call this a liquidated damages clause. Essentially it says if either one of us breaches this contract it's going to cause financial harm to the other party. We have no idea what that financial harm is today, we don't even know what the breach is, but if you do breach it, we're going to agree up front that you're going to owe us X amount of dollars.

Make sure to understand the restrictions of your contract. Ask questions for clarification, if needed. You do not want to end up surprised later and have to pay out thousands of dollars.

Arbitration Clause

Almost all doctor contracts nowadays include an arbitration clause. This is to help in dispute resolution. There are three ways to legally resolve disputes:

Trial: This is a familiar method. It can be very expensive and time consuming for all parties involved. Once a decision is made, there can be appeals.

Mediation: Both parties sit down and review the issue. Attorneys are usually involved. Together both parties come up with a solution and contractually agree to resolve their differences. This is usually less expensive and less emotionally draining than a trial.

Arbitration: Like a lawsuit, you have arbitrators who hear the evidence and make a decision. Unlike a trial, there are no opportunities for appeal. It is typically faster and cheaper than a trial.

As the name would suggest, an arbitration clause states that in the event of a dispute arising, both parties agree to arbitration. I’ve seen this become a problem for some doctors. What I usually recommend for my clients is they write in a clause that says before we arbitrate, we both agree to try to settle our differences with mediation.

General Tips

First of all, get your entire contract in writing. If they've sent you an e-mail about the contract, but it’s not written in the contract, ask them to add it in. Maybe you got clarification on a side gig or approval of moving expenses via email. Maybe they told you verbally that bonuses happen every year. Have them put it in the contract. At the end of the day, only those things that are in that contract that you both signed, matter. You can’t enforce anything else they promised you if it’s not in the contract.

When it comes to negotiation, you have the most power you will ever have before you sign a contract. I have had a couple of doctors sign the contract and then send it to me to review. Which is great, but there’s nothing we can change at that point.

I always suggest doing negotiations in person if possible or, at the very least, over a Zoom call. Never do these via email or text messages. You want the opportunity to assess body language and make sure there aren't any misunderstandings.

Whatever you do, do not agree on the spot. The first offer out-of-the-box usually leaves something on the table. There's usually some money, some benefits, something on the table. You should tell them what you like about the employer and then that you need some time to do some research, review, and talk to your advisors. Don’t respond to pressure in the moment; that's when bad decisions are made.

Now, at your next meeting, after they had their initial offer, you want to go in with a list of questions and priorities. See if you can improve on certain things in the agreement to sweeten the deal. Sometimes they won't give on salaries, but maybe you can get an extra week of vacation or maybe you can get some sign on bonuses. Having a list prepared and remembering your priorities will help you feel more confident and comfortable.

I know for most doctors, contracts are confusing. You went to medical school not law school! Hopefully this helps you feel a bit more confident. Be sure to catch our next podcast episode where we go through employment benefits. We want all doctors to feel confident and secure in knowing that they've made their best choice.

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Remember that you can send us any questions at: Info@MDFinancialAdvisors.com

Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 600 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at Katherine@mdfinancialadvisors.com.