What is a draw in a veterinary associate employment contract? A draw is related to compensation. Basically, it means how much money you are going to make each month in some way.
What Are the Different Kinds of Compensation?
Let’s kind of talk about the different compensation models and then when a draw would come into play. Usually, the vet would have a guaranteed base for at least the first year or two of their contract. It’s very unlikely that you would come into a new employment opportunity and just have straight productivity. In the veterinary arena, it’s almost always calculated through net-collections. Net-collections are any of the money that the practice receives for the vet’s personally performed services.
How Do These Compensations Put Into Practice?
Whatever they collect, that’s what would be considered net-collections for that vet. And one common way of doing it is, let’s just say you have a one-year guarantee, and the reason why they do that is it takes time to build up a practice. Now, I guess it depends upon what specialty you’re in, but for the most part, let’s just say you’re a general vet. You’re not just going to hop into practice and have an immediate client base. It takes a while to build up. So, they’ll give you a guaranteed base in year one. Then after year one, they’ll probably switch you to the productivity/net-collections model. And that’s when a draw would come into play. The veterinary industry utilizes the ProSal method commonly. And it’s kind of a methodology for a veterinary practice to pay their employees, which allows them at least a small profit margin.
And in that method, they will basically take a projection of what your net-collections would be. And the vet would then receive a smaller percentage of that per month. Then there would be a reconciliation or true-up at the end of the year. Let’s just go through some examples. Let’s say the vet is making 120,000 per year in their first guaranteed base year. And then they collected that amount as well.
While under ProSal, they would maybe knock it back to 80%. You would make 10,000 in that scenario per month. And so, they would say, alright, what is going to knock it back to 80%? And then the vet is going to get a draw of $8,000 per month. Throughout the year, they’ll make 8,000 per month. Then at the end of the year, they’re going to take whatever the total net-collections were for that vet versus what was paid out.
In that scenario, 8,000 times 12 minus 6,000. And then if there is a difference, meaning, if they collected more, they would then get a percentage of those net-collections. Now, the downside is if you are in a negative balance, meaning, if you collected less than they paid out, they generally are going to make you pay that back over time. And what they’ll normally do is they’ll take however much you’re in the deficit for. Let’s just say it’s $6,000. Over the next three pay periods, they might take 2000 out of your paycheck until you’re back to zero. Is that fair? It just depends. Obviously, no one wants to employ any employee that doesn’t cover their own salary and expenses.
What Is the Effect of This on Production?
Now, if there are some underlying problems as to why a vet is not as productive, this is big in the vet industry right now due to lack of staffing. If you can’t get the vet techs if you can’t get the front office staff, if they can’t have any efficient workflow, and the vet is doing all the things that they didn’t have to do before, that will slow them down, and their collections are going to decrease. Just a side note: you need to make sure there’s language in your employment agreement that states the veterinary practice will provide you with proper support to make your practice efficient. Back to the draw, it could change over time. Let’s say you had a 120 base, and then you moved into a kind of a decreased percentage per month as your draw, but then you collected 160,000.
Well, then they would probably bump up your draw to 120,000, and then they would do another reconciliation at the end of a year. There are a ton of different ways to calculate compensation in a veterinary associate contract, but that’s probably the most common way when it comes to productivity. I also find many vets are just paid a straight base no matter what for year one to year five. And that makes it simple, to be honest.
How to Get Out of a Veterinary Associate Contract
How can a veterinarian associate get out of a contract? So, you’re working for an employer, you’re unhappy, you want to leave. How do you get out of the contract? Your employment contract should contain four ways of terminating the contract.
Fixed Term 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.
With Cause Termination
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.
Without Cause Termination
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 that 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.
Important Things to Know About Compensation Before Signing a Contract
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 ProSal 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 on the cash nature of veterinary medicine, the percentage of outstanding collections 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.
If you do decide to terminate the agreement, make certain, and this is before you sign the contract, make certain it states that you’ll be paid any of the collected services for anything that you did while you’re there, even after the contract has been terminated. Having to get out of a contract is honestly just a kind of normal part of doing business. With all these enormous conglomerates gobbling up all of the vet-owned practices, I’d say there’s a lot of unease and unhappiness for many veterinarians at this point. And they may be in a practice that they’ve loved for ten years, and then the corporation sweeps in, buys it out, and things change immediately. And then they have to decide, alright, am I going to sign this new contract? Am I going to terminate the old one to leave?
There’s just a lot of turnover in that field right now. And figuring out the most effective way of getting out of your contract is very beneficial. Hopefully, that helps and gives you the little basics on how to get out of an employment agreement.
Veterinary Contract Questions?
Contract Review, Termination Issues and more!