Should a Veterinarian be Reimbursed for Moving Expenses? | Veterinary Practice Moving Expenses
Should a veterinarian be reimbursed for moving expenses? And the answer to this is yes, you should be reimbursed by your employer. You might be moving across the state, out of state, across the country, or wherever it may be from, if it’s a reasonable distance, your employer should provide you with some type of relocation reimbursement. It’s typically structured in one of three ways in your employment contract. So, you should read it carefully to know what steps you need to take to receive that reimbursement. The first way and I would say the most common way is it’s almost structured as a bonus. Sometimes they call it a relocation allowance, or relocation bonus, and they will just give you a flat fee upfront anywhere between 10,000 to 20,000.
Paid Moving Expenses?
The important thing to remember is that if it’s structured this way as a bonus in your veterinary employment contract, it would be considered income and therefore, your taxes will be taken off the top. So, you won’t be receiving that full amount. Whatever it is, if it’s structured as a bonus, just keep in mind you will have taxes taken off from that amount before you receive it. But once you receive those funds, then you can use them however you like, if it’s reasonable for relocation. The next way I typically see it structured is you provide your employer with receipts of anything that has to do with reasonable relocation or moving expenses, and then they will reimburse you directly. It’s typical. There’s normally a max of how much they will reimburse. And again, it’s normally between 10 to 20,000.
And then, you don’t have to get prior approval, you just need to give your receipts. And then the third way is probably the least common I’ve seen in veterinary employment contracts, but that’s where the employer would pay the moving expenses or like the moving companies directly. And most of the time, if it’s that scenario, you do have to get prior approval from the employer that they’ll reimburse those companies. That’s kind of the third way. Again, you have to read your employment agreement to know, do you need prior approval? Is this going to be a lump sum that they’re going to give you and how that’s kind of structured?
And then lastly, I want to discuss, if you are granted relocation, expenses, allowance, reimbursement, or however it’s structured, there’s always some type of payment like a payback provision or forgiveness period. Typically, it’s anywhere between one to three years, you have to work for this practice or clinic. But if you terminate your employment with them before the end of that time, you will either have to pay back the full amount of relocation expenses that they’ve reimbursed or given you or sometimes they’ll prorate it per month of your employment. Let’s just say, for example, you must work for the company for three years. If you terminate your employment with them before the three years, it’s prorated. So, if you work for one and a half years, and terminate your agreement, then you’ll likely have to pay back half of those expenses or allowance and give up any accrued PTO. So again, you want to keep that in mind. Whenever you sign these contract agreements, you’re looking to the future. You’re going to be able to fulfill this contract because if you’re not, you really want to seriously consider taking that amount of money at the beginning.
Business Expenses and Pet Insurance
What business expenses should be covered in the veterinary employment contract? There are many things that could be covered, but I’m going to go over the basics and the most common ones we see.
Continuing Education (CE)
The most common one is continuing education. Normally, there is an allowance, so a max amount that you can get reimbursed for, and it’s anywhere from 2.000 to 4,000, depending on how specialized you are and where you are in the country. How much would your practice pay out for that? Continuing education expenses could include books, conferences, and travel expenses to conferences. The list kind of goes on from there, but you are normally given some type of continuing education or CE or CME allowance annually because you must keep up with those in order to keep your license.
Licensing, Dues, and Professional Membership
So, continuing education is the first one. The second most common likely is your licensing and dues and any type of professional membership, so AVMA membership, there are lots of local memberships that you could join, and sometimes they’re spelled out exactly which memberships your veterinary clinic or practice will pay for. And sometimes they leave that discretion to you. It’s very important that you read your agreement so that you know what sort of business expenses, and you know exactly what is going to be reimbursed. So, membership should absolutely be included, dues and licensing fees, so your state veterinary license and your renewals are important if you’re licensed in more than one state. Occasionally, both of those would be covered. You may need a DEA license and those can get expensive.
If you do, then that would be covered as well under your reimbursement. Now, sometimes these are capped at a certain amount. Sometimes they’re grouped in with your CE allowance. They’ll just say like 4,000 for all those ancillary or business expenses. It just depends on your agreement, but they should be listed there. And it depends on how they’re paid out, but they should be reimbursed in some way because you’re not getting any sort of tax incentives if you are paying those out and they do add up in their annual fees.
So, over time, that’s a lot of money coming out of your pocket. Another thing that’s common is relocation expenses. If you’re moving to a clinic or a practice from out of state or cross country, typically, you will be granted some type of relocation allowance or reimbursement, and that’s anywhere from $10,000 to $20,000. Again, it’s structured differently, depending on if you’re joining more of a corporate practice or private. Sometimes they have to reimburse the companies directly for your moving expenses. Other times they’ll just give it to you in a large amount and just expect that it goes towards relocation expenses. If they structure it more like a bonus, it is taxed as income.
So, just be aware of that. If it says $10,000 for relocation expenses paid out in one lump sum, you won’t be getting that full 10,000 because taxes will come off the top before you receive that. That’s just something you need to keep in mind. And then I would say almost always malpractice insurance is covered. And as you know, it’s normally through the AVMA and that’s also either reimbursed or they will go ahead and take out the policy in your name. So, this is kind of a rundown of the typical business expenses. Some veterinarians do travel a lot, so travel expenses are typically covered if you’re mobile and this can even mean providing you with a vehicle or giving you some type of maintenance fees, reimbursements, gas, or something like that.
And then also, I guess if you’re mobile, you’re typically granted some type of cell phone reimbursement because that’s going to be important. You’re going to need that in order to provide those services. So, that’s just kind of a rundown of the typical business expenses that are included in a veterinary contract for employment.
How should you negotiate a veterinary associate contract? There are lots of things to consider when you want to negotiate your contract or what we call an employment agreement. The first thing you want to understand is how much leverage you have and what I mean by leverage, I mean, are you just out of your schooling? Do you have any experience? Are you specialized? If you’re specialized and there are very few of you in the veterinary industry, then you have more leverage. But if you’re just out of school for general veterinary practice, you might have a little less leverage. And then also, if you’ve been practicing and you have a substantial client base and you have lots of years of experience, then you may have more leverage in relation to that.
Information on Base Salary Negotiation
Once you understand how much leverage you have, then you need to understand what you should be asking for. The first thing I always see our clients want to negotiate is their base salary. Base salary or base compensation is just the flat, you’re going to get every month upon continuing your employment. The problem with this is normally how veterinarians are compensated is not only just through their base compensation. You’re also normally compensated through collections. That’s the typical sort of layout of compensation for really any type of veterinarian. Even if you’re specialized, it’s normally base compensation, and then there’s a part of collections. So yes, the base compensation is important, but there are so many other aspects to an employment agreement. Your percentage of collections can be huge. You want to fight probably for a larger percentage of collections over just a base salary because the base salary will never change unless you renegotiate in the future. But if you have a substantial client base and you know that you’re going to be bringing those clients in, you will want a higher percentage of your collections which you can make well over your base salary. It’s something to consider. I know base salary is the big number on an employment agreement, but you also want to think about collection percentage as well, because you can make a lot more money with a higher collection percentage if you know that you are going to be bringing in those clients.
Now, if you are right out of school and you do not have an established client base, and maybe you’re not replacing someone at a veterinary practice or clinic, they’re just expanding. It’s going to take you a while to build up that client base. Then you, in that situation, might want to fight for a higher base compensation or salary for a year or two, so that you can establish, as I said, that nice client base. Other things that can be more detrimental to you than even the compensation are those restrictive covenants. And what I mean by restrictive covenants are non-compete clauses, and non-solicitation clauses, but specifically the non-compete. Right now, the veterinary industry is booming and practices that are bringing on and employing veterinarians are protecting their interests.
And so, sometimes these non-competes can be unreasonable and can attach to many locations or just many miles from one practice. So, you really want to consider that because if you are establishing a client base, you’re working hard, you’re bringing in clients and then you decide to leave the practice or they decide to terminate their employment with you, you could have a serious problem. You might not be able to practice in the area. You could even have to up and move your family. Non-compete clauses are extremely important that you want to negotiate in your initial employment agreement. And a lot of times, it’s overlooked because it’s something way in the future. And you’re excited about this prospective future employer or you’re right out of school and you really want to start earning money.
And so, that’s what you’re really focused on, but non-competes are those sneaky clauses in employment agreements that can really hurt you in the future. I would say more than anything, a non-compete agreement is something that you should always negotiate. Now, they’re normally a mileage from specific locations that you can negotiate. And then also, for a specific period, they can be anywhere from six months to three years. And I would always try to negotiate that amount of time down and then always the miles down. When you’re negotiating how many miles, you also need to consider, can you find work outside of that restricted area without having to up and move? And then you also want to know what’s restricted. Sometimes the non-compete clauses specifically for veterinarians may just say that the practice of veterinary medicine, which is very general, and if you’re specialized, I would negotiate that it’s only within your specialty.
So, non-compete clauses want to negotiate those, most important. Non-solicitation clauses just mean you can’t solicit clients or employees coming with you. And sometimes that period can be negotiated down to six months or a year before you can reach out directly to those clients or to those employees. Then you have your sort of ancillary benefits. Your continuing education, typically you’re given an allowance every year, which is anywhere from 2,000 to 4,000 typically within a veterinary practice. You can negotiate that money because if you don’t, then you must pay for your continuing education to keep your license. So, that’s something I would negotiate as well. And then also any sort of dues, fees, licensing, all those costs really add up.
And we don’t think about that when we’re just looking at the base salary and how much money you’re going to make, but these sorts of costs can be negotiated at the beginning. And then it’s really going to save you a lot of money in the end, and a lot of headaches as well.
Tax Implications of Breaking a Veterinary Contract
How can a veterinarian associate get out of a contract? So, you’re working for an employer, you’re unhappy, and you want to leave. How do you get out of the contract? Your employment contract should contain four ways of terminating the contract.
4 ways of Terminating a Contract
- One, if there’s a fixed term, meaning, it’s a set amount of time and there’s no language that states it automatically renews for successive terms, let’s just say it’s two years, you finish those two years, it doesn’t renew, the contract terminates, you can move on. That’s the first way.
- The second way is mutual agreement. At any point, either party can say, look, this isn’t working. Let’s just wash our hands of this relationship and move on. That does not happen very often, but that’s another way.
- The third way would be with cause. If one party is in breach of contract, the other party can provide them with written notice. And then normally, they’d have a short period to fix whatever the alleged breach is. That’s usually somewhere between 15 to 30 days. And then at the end of that period, if they did fix the breach, then they couldn’t terminate the contract immediately. If let’s just say the vet has bonus productivity calculated quarterly, the employer just either refuses to pay or has been slow to pay or whatever, the veterinarian provides them a written notice. And then they have 15 days to fix it. If they don’t fix it within those 15 days, then the vet can terminate the contract immediately at their option.
- And then the last and most common way to terminate a contract is without cause termination. Without cause termination simply means either party can terminate the agreement at any time, for any reason, with a certain amount of notice to the other party. For most vets, it’s somewhere between 30 to 90 days. And that’s just the most common way. I mean, probably 9 out of 10 contracts are terminated in that way if you’re a vet. There are plenty of ways to get out of a contract. Now, what are the repercussions if you do end up leaving and terminating the agreement? Well, many contracts and this is mostly for the initial term, as I said before, let’s just say you have a two-year initial term. If you receive a signing bonus, relocation assistance, probably licensure, malpractice, or some benefits, there may be language in the contract that states, if you leave within that initial term, you must pay back a portion of that signing bonus or that relocation assistance, or maybe you’re not eligible for productivity bonuses or something like that.
So, investigate the language of your contract and see, alright, if I do terminate the contract early, what are the repercussions? What do I have to pay? What do I have to pay back to them? Or what am I losing out on compensation? A lot of vet clinics use the pro-Sal method and in that kind of model, you’re paid basically on your production. And so, you need to be very careful that if you do terminate the agreement there’s language in the contract that states you will be compensated for any of the services that you’ve rendered that haven’t been collected. In veterinary medicine, you don’t have, at least generally don’t have kind of the same log time as a physician would have where maybe they do services.
And the vast majority wouldn’t be paid out for 60 to 90 days. Just based upon the cash nature of veterinary medicine, the percentage of collections that are outstanding is much less than other specialties, but you still don’t want to miss out on that. I’d say veterinary insurance for individuals is becoming more popular. And so, the average count’s receivable cycle is somewhere between like 30 to 90 days for that. Think about this: if you’re paid on productivity on just what your net collections are, and then you terminate the agreement and you have a bunch of net collections outstanding, and the contract states, you’ll only get paid up to the date of the contract terminates, well, you just work for free for a month or two, so nobody wants to do that.
Consultation with Chelle Law
When your veterinary contract is analyzed by an experienced attorney, you will find financial benefits which end up outweighing the cost of the review. Leave it to the experts. If you are in need of assistance with a veterinary agreement or contract analysis schedule a Veterinarian Agreement Review with Chelle Law today!
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