Physician Assistant Sign-On Bonus (Will You Have to Give it BACK?)
Does a physician assistant have to pay back their bonus if they terminate their employment agreement early? The answer to this is it’s likely. Now, again, every employment agreement is different but from our experience and most employment agreements that we have reviewed over the years, normally when there’s some type of bonus. And when I mean bonus, I’m talking about a sign-on bonus, commencement bonus, any type where you get a bonus upon signing or upon starting your employment, there’s normally some type of payback provision or payback language or forgiveness of the amount language in your employment agreement. So, you always want to make sure you read your benefits carefully.
Two Ways of Bonus Repayment Structure
When you’re offered these big sums of money upfront, it’s very attractive, but you want to make sure that you read the whole employment agreement because there is normally some type of language in there which requires you to pay back either the full amount or prorated amount. Let’s talk about that. Normally, there are two ways that this is structured. The first way is, if you terminate your agreement within a specific period, it’s normally anywhere between one to three years, and it will say in your employment agreement if you terminate your employment before then for any reason, you’ll have to pay back the full amount. Now, what’s dangerous about this and what you should look out for is when they say the full amount, when you receive that bonus, it’s considered income and therefore taxes are taken off the top. Let’s just say the bonus is 10,000, you’re not going to receive the full 10,000.
You’ll receive the amount of money minus any taxes. And when you have the language in your employment agreement that says if you terminate it before this specific period, you have to pay back the full amount, they mean the full amount. So, you want to be careful there. Now, it’s always best if it’s prorated, which means for every month, it’s normally a month. We’ll just say that for every month that you’re employed, a fraction of that amount is forgiven. So, if you’re there for, let’s just say the forgiveness period is one year and you’re there for six months, well, therefore, you’d only have to pay back half of that bonus. That’s a little bit more reasonable and fairer. I would always try to either have it prorated or have that restricted period go down to one year. I’ve rarely seen an employer go down lower than one year. And the reason why this is is to keep you. It’s like a retention incentive. Other topics of interest include:
- Should a Physician Assistant be Reimbursed for Moving Expenses?
- What Benefits Should be included in a Physician Assistant Offer Letter?
Relocation Allowance Structured as Bonus Repayment
The other thing you want to keep in mind is relocation expenses or a relocation allowance if it’s structured like a bonus, typically there always is some type of payback language in there or a period until it’s forgiven. So, you want to double-check that as well. So, relocation allowance, relocation bonuses, commencement bonuses, signing bonuses, and sign-on bonuses, look for that language. If you’re getting one of those, I’m almost positive that there’s somewhere in there that says that you must pay it back if you terminate your employment early. And then lastly, probably a little bit rarer is if you get any type of bonus for student loan forgiveness, I have seen that they may give you a lump sum upfront to pay back your student loans. And if you leave within a period, you must pay that back.
Basically, anytime your employer wants to hand you a big sum of money, there’s normally going to be some type of requirement. And it’s normally that you stay employed with them for a certain period. Otherwise, you’ll have to pay that back or a portion of that. These things can get a little stressful, so it’s always good to advise an attorney.
Should a physician assistant be reimbursed for relocation expenses? The answer is yes, you should be reimbursed. If you are moving to a new area, out of state, across the state, or across the country, you should absolutely be reimbursed for those relocation expenses. However, it can look unique in your employment agreement. There are lots of different ways to structure this and I’ll go through the most common ones that I have seen. I’ll start off. The first way is probably the most common; it’s considered a relocation bonus, or they’ll call it a relocation allowance. And what this looks like is you’re normally offered anywhere from 10 to 20,000 upfront, the company will just, or your employer will pay you directly that amount of money.
And then you take that, and you use that for your relocation expenses. This however, because it’s considered a bonus and it’s really structured like a bonus, it’s considered income. Therefore, it’s taxed as income. You need to realize that if this is sort of the structure within your employment agreement, you’re not likely to receive that full amount. Taxes will be taken off the top. And you’ll want to also look at your employment agreement, especially if it’s structured this way. There’s normally some type of language in your employment contracts that state if you terminate your employment early within a one to three-year range, you will have to pay back that amount either in full or prorated. So, you want to be careful and make sure that you know what you’re signing, and you know what you are required to pay back if you terminate your employment early.
So, that’s the first way, a relocation allowance. The second way is relocation reimbursement. They’ll give you a max of 10,000 or 20,000, they will reimburse you. And so, you will hire your movers or whatever you need to relocate, then you’ll take those receipts and invoices, and you’ll hand those to your employer, and then they’ll reimburse you directly for those. This also can be considered a bonus sometimes. So, you want to be careful. And then also, even if it’s structured this way where they’re reimbursing you, there’s normally some type of language that states that you have to stay employed for one to three years. Otherwise, they’ll make you pay back either a prorated amount or the full amount. You want to be careful about that too.
And then also, when you must provide receipts, you want to make sure you read your employment agreement very carefully or get prior authorization because you don’t want to spend money on relocation expenses only to find out that that’s something that’s not covered under your employment agreement and your employer will not reimburse you for those. So, that’s the second way. And then the third way, I would say it’s probably the rarest, but it is common. Your employer will pay directly to the moving company or whoever the company that’s helping you relocate. You must get prior authorization and then your employer will pay them directly. Again, even with this sort of situation, how it’s structured in your employment agreement, there’s normally a max. Again, anywhere from 10 to 20,000, and then there’s always normally something in there where you’ll have to pay back those expenses that they’ve reimbursed if you terminate your employment early. Just some tips: it’s helpful to try to renegotiate that time down.
So, before you sign your employment agreement you can try to lower that time. I always try to negotiate for one year. I don’t like them to go for much more than one year. And then also, if they’re not willing to do that, then to prorate it. For each month that you stay employed, a fraction of that amount will be forgiven. That way, if you stay with the company almost up until that date, but God forbid something happens and you need to move, leave, or terminate your employment, you don’t have to pay back the whole amount. To me, that’s more reasonable. You want to try to negotiate down either the time that the amount is forgiven or ask for it to be prorated. You also need to take into consideration when you accept a relocation allowance or bonus, that it’s taxed as income, and most of your employment agreements will state that you have to pay back the entire amount or the entire amount is prorated, even though you didn’t receive the full amount.
Because again, remember that if it’s structured like that, taxes will be taken out of that amount. So, you’re not actually receiving the full bonus. Sometimes you can get it negotiated where it says minus any taxes incurred. But normally, your employer will not want to put that language in there. So, it’s better to just go for the shorter period of forgiveness or tap it prorated.
When to Get Out Upon Termination of the Physician Employment Agreement
Can a physician assistant break their contract? The answer is yes, they can. However, if breaking their contract means that they’re breaching it, they’re not adhering to the terms that they agreed upon, they may have some legal or financial consequences that you will want to consider before making that decision. So, before you break the contract, there are normally lots of different ways that you can be led out of your contract. You always want to go to your employment agreement and read it very carefully. There are normally many clauses on termination. Your employer can terminate your agreement for cause if you have violated some policies, you’ve lost your license of practice, or you’re convicted of a crime. There’s normally enumerated the list there.
And if any of that happens, then your employer will terminate the agreement. Another way you can be let out of your employment agreement is a without cause termination. Most employment contracts and you want to read yours carefully, will have a clause in there that says you may terminate your employment without cause. It can be for any reason or no reason at all upon giving a certain amount of notice. The range can be anywhere from 60 to 90 days. Occasionally, if you’re in a rural area or a high-need area, sometimes it can go up to 120 days. If you want out of your contract, you need to give written notice and it needs to be given properly. Again, this can be a little unique to each situation, so you want to look at the employment agreement and it will state how you need to give proper notice.
It’s usually always in writing, it can be hand-delivered to certain personnel, sometimes it must go through certified mail, other times you’re able to email it to certain personnel as well. So, just make sure you give your notice properly and you give your notice at the appropriate time. Like we talked about, it’s normally 60 to 90 days and then you can be let out of your agreement, that’s the best way to do it. However, even if you do it this way, there still might be some financial consequences. If you received any type of sign-on bonus or relocation bonus or reimbursement, those types of bonuses when you’re given a lump sum upfront whenever you’re starting your employment, normally have some sort of requirement that you must complete a certain period with the company. This is normally anywhere from one to three years.
And if you terminate your employment for any reason within that time, you may have to pay back that entire bonus, or you may have to pay back the bonus at a prorated amount which means however many months you’ve been there, a portion of that amount is forgiven. You always want to be careful that you’re not just breaching the contract. Again, because even if you breach the agreement, there may be something in your contract called liquidated damages or something about damages. Meaning, if you break this agreement and you don’t give proper notice, you will have to pay your employer tens of thousands of dollars. So, this is something you always want to look out for. I do see this in about 50% of all the contracts that I review, so you want to be careful. Breaking a contract is serious. So, I always recommend consulting an attorney. That’s something we do here at our firm to make sure that you are terminating your contract properly.
When to Terminate the Medical Contract
What are some red flags in physician assistant contracts? Sometimes the red flags are the words on the page, but other times red flags are missing. I’m going to kind of go over the most common red flags that I see. The first one would probably be unreasonable non-compete clauses. Depending on your state, most states’ non-compete clauses for healthcare providers are enforceable, but you do want to check your state law. If they are enforceable, you want to check is it reasonable? What I mean by that is, normally, a non-compete clause will be anywhere from one to two years. I always try to advocate for at least one year only, not over a year.
One year, it should be, or less. It could be six months, that would be great. And then you want to look at the restricted area. Typically, it goes by miles and it kind of depends. You must take into consideration where you’re located and what your makeup looks like. Like, are you in a rural area? Are you in a city? And then you want to see, okay, is this mileage unreasonable? Really anything over 30 miles is going to be, in my opinion, unreasonable. And I would try to negotiate that down. So, we’ve talked about how long they’re for, and then how much is included in that restricted area from competing with your employer. The other thing you want to look for is how many locations does that restricted radius apply to? This is a little tricky and a lot of times employers try to slip this in there.
They may say or have language in there that states any location of the practice with the company, or they’ll say any location you provide services at. That means if you fill in for a provider that’s on vacation, you’re a non-compete clause now attached to that location. Let’s just say you have 10 miles from your primary location, but now you could have 10 miles attached to multiple other locations. This is dangerous especially if let’s say the company expands while you work for them. And it could knock out a huge chunk of the state. You may have to move if you decide to end your employment. So, overly restrictive non-compete is a red flag. The other thing you want to look for in a non-compete itself is what services are you restricted from?
Consultation with Chelle Law Attorneys
A contract attorney is extremely helpful at this stage of the process because he or she can make sure that everything that you have negotiated so hard for is truly added to your new contract. They will check the contract line-by-line to verify that your employer has met the terms that you believe they have. The negotiation process can be lengthy, and no one wants to give up the ground that they have fought so hard to win in the first place. Thus, it just makes sense to have an attorney look over everything when it is completed.
Our bottom line is to help physician assistants get the salary and benefits that they deserve, and we will fight for that mission.
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