Compensation in Physician Contracts
Key Takeaways
✅ Know exactly how much and when you’ll be paid, vague wording will cost you
✅ Understand the difference between gross pay (before taxes) and take-home pay
✅ Base salaries offer stability, but formula-based pay is becoming more common
✅ Always compare offers with specialty benchmarks before negotiating
What Does “Compensation” Even Mean?
You’d think “compensation” just means your paycheck. But nope, it’s more than that. Your contract might mention base salary, productivity bonuses, incentive pay, or even signing bonuses. Each one has its quirks.
Your contract will list your gross salary; that’s before federal taxes, state taxes, retirement contributions, and other deductions. What lands in your bank account will be far less. Don’t let those numbers fool you.
How Do Employers Typically Structure Physician Pay?
Most contracts will describe your pay in one of three ways:
- Fixed Salary: Predictable pay every month, giving you stability
- Formula-Based Pay: Tied to your productivity, like RVUs or collections
- Hybrid Model: A mix of both, often starting with a fixed salary that shifts to productivity pay after 1-2 years
Seems simple, but here’s where details matter.
- Will they pay you monthly or biweekly?
- Does your paycheck hit on the 1st and 15th or some random day?
- Are bonuses paid quarterly? Annually? Or never, because the “goal” was impossible to hit?
Ask. Don’t guess.
How Often Will They Pay You?
The contract should tell you two things clearly:
- How much you’ll make
- How often you’ll get paid
Most contracts outline payment in one of these ways:
- Annual Salary: $250,000 per year
- Monthly Salary: $20,833 per month
- Biweekly Salary: $9,615 every two weeks
Seems like a small detail, but timing matters. Getting paid monthly means you may have to budget carefully during those long weeks between paychecks.
What’s “Gross Pay” and Why Does It Matter?
That big number on your contract ($200,000, $300,000, or whatever) isn’t what you’ll actually take home.
Here's what comes out first:
- Income Tax
- Social Security
- Medicare Taxes
Your net pay (the money you actually get) will be noticeably less.
Your actual take-home pay could be 30-50% less depending on your tax situation.
Fixed Salary vs. Formula Pay: What’s the Difference?
A fixed salary is steady. It’s predictable. If your contract says $20,000/month, that’s what you’ll get.
Formula pay, though? That’s more like, “You’ll get X% of what you bill after expenses.” Some physicians thrive on this. Others hate it because the numbers can swing wildly.
Which One's Better?
- Fixed pay = Security, good for early career stability
- Formula pay = Potentially higher income but requires strong productivity
Why Are Employers Moving Away from Fixed Salaries?
Employers are increasingly nervous about paying fixed salaries to new doctors. Why? Because they can’t predict your productivity yet.
If you’re starting in a new practice, they don’t know:
- How many patients you’ll bring in
- How fast you’ll work
- Whether reimbursement rates will match their expectations
This uncertainty is why more employers are shifting away from fixed salaries and shifting to formula-based compensation.
This means part of your income may depend on your productivity, things like:
- RVUs (Relative Value Units)
- Collections (how much the practice actually gets paid for your work)
- Bonuses tied to quality metrics or patient satisfaction
Should You Negotiate Your Base Salary?
Yes. Always.
Think of it this way; the worst they can say is no.
Here’s how to do it without feeling awkward:
- Start with Research: Gather salary data for your specialty and location
- Ask the Right Questions: Instead of demanding a higher salary, ask, "Is there flexibility with the base pay?" or "What factors influence salary adjustments?"
- Link Salary to Value: Explain why your skills, certifications, or experience justify a stronger offer
Why Your Base Salary is Negotiable (Even If They Say It’s Not)
Employers may tell you, “This is our standard starting salary,” but that doesn’t mean you can’t push back.
Negotiation points can include:
- Higher base pay
- A sign-on bonus
- A moving allowance
- Guaranteed salary for the first year before productivity-based pay starts
Don’t assume you have no leverage, even if you’re a resident or fellow stepping into your first job.
What’s a Fair Salary for Your Specialty?
Before you accept an offer, you need to know what’s typical for your specialty and region.
Here’s how to research it:
✅ MGMA Data: The Medical Group Management Association (MGMA) publishes salary surveys that show what physicians in different specialties are earning. (It’s not cheap, but it’s the gold standard for this data.)
✅ Online Salary Tools: Sites like Glassdoor, Doximity, and Medscape can also give you ballpark numbers
✅ Colleagues & Mentors: Ask other physicians what’s standard in your specialty
What If They Offer Less Than Expected?
This happens more than you’d think, so don't panic. Employers sometimes lowball offers just to see what you’ll accept.
When this happens:
✅ Ask for a higher base salary using MGMA data as proof
✅ Suggest lower the threshold for bonuses that reward your productivity
✅ Negotiate for extra perks such as, CME allowances, relocation funds, loan forgiveness, or more vacation time
If the employer says, “This is our standard starting salary,” ask, “What’s the timeline for salary reviews?”
Questions to Ask Before Signing
Before you commit, ask:
- Is this salary guaranteed for my entire contract term?
- If productivity is involved, how is it calculated?
- Are bonuses guaranteed or discretionary?
- What deductions will come out of my gross pay?
Get Smart Before You Sign
If all this sounds overwhelming, you're not alone. The Real Contract Course makes it easier. This 2-hour video course teaches you how to:
✅ Spot compensation red flags.]
✅ Ask smart questions that get results
✅ Understand contract terms so you don’t get taken advantage of
Before you sit down with your lawyer, take the course. It’ll save you time, money, and headaches, and you’ll walk away knowing exactly what you’re fighting for.
