Decoding Compensation Packages: A Doctor’s Guide to Salary Structures

Doctors are worth every penny they’re paid, but that doesn’t mean their salaries are simple. In fact, healthcare professionals have some of the most complex salary structures out there, which can make it difficult to navigate a new job offer or renegotiation. 

Yet, how you’re compensated for your hard work is a vital component of your financial health and future financial well-being. If you aren’t fully aware of your benefits and what they’re worth, you may be missing out on opportunities to save for the future or earn more in bonuses and other benefits.

Let’s take a look at the salary structure of doctors and physicians, as well as a few important considerations to make.

Key Components of Doctor Compensation Packages

As a doctor, your compensation package likely includes more than a simple salary and benefits. Let’s take a look at four common components of a doctor’s compensation package.

Base Salary

Base salary, or base pay, is the minimum amount you can expect to receive from your employer in exchange for your services (assuming you meet your required hours and fulfill all job requirements). It is not performance-based and does not typically fluctuate (unless you receive a promotion or renegotiate your compensation).

Most medical professionals likely receive their base salary as an annual amount, though it can also be provided at a monthly, weekly, or hourly rate. Keep in mind your base salary is calculated before tax and benefit deductions (like 401(k) contributions), so it will differ from your take-home pay.

Bonuses and Incentives

It’s not unusual for medical professionals to be eligible for additional compensation through bonuses and incentives. For example, one of the most commonly used incentive systems in a hospital is a volume-based payment method. The more surgeries they perform, the greater their compensation. Healthcare professionals may also earn bonuses based on productivity, quality of work, and certain academic accomplishments.

Some hospital networks will also offer sign-on and/or retention bonuses, especially for highly specialized or sought-after professionals. These bonuses may come with stipulations, however, that dictate how long the employee is required to stay with the employer. Should you receive one of these bonuses and leave prior to fulfilling your obligation, you could be required to pay it back (or at least a portion of it).

Benefits

Every hospital network differs in what specific benefits they offer, but there are some common ones to keep an eye out for when reviewing an offer or contract.

Insurance coverage for you and your family is important, and many hospital networks will offer doctors heavily subsidized policies (meaning their premiums are relatively low). These might include health, dental, and vision coverage. In addition, some hospital networks offer short-term and/or long-term disability insurance. This will cover a percentage of your salary if you are unable to work due to a qualifying illness or injury.

Retirement benefits come in all shapes and sizes, including a 401(k), 403(b), pension plan, and 457 plan. Find out what your employer offers and how much you’re able to contribute—or how much they contribute, as is the case with a pension plan. Some employers will incentivize employees to contribute by offering an employer-matching contribution, up to a certain dollar amount of salary percentage.

Paid time off and sick leave are pretty standard offerings for physicians, though the annual allotted amount and rollover policies will differ by network or facility. Some employers also award time for medical professionals to attend conferences, receive continuing education credits, volunteer, conduct research, or otherwise pursue career development opportunities.

Allowances and Reimbursements

Employers will often provide certain allowances and reimbursements relating to professional development, required continuing education, conference attendance, speaking engagements, and more.

They may also pay for your malpractice insurance or other liability coverage, as well as licensing fees.

In addition, it’s common for physicians and healthcare professionals to receive relocation allowances, which they can use to cover the cost of moving to a new area for work. 

Understanding Salary Structures

Aside from the different components of a physician’s compensation package, healthcare professionals may be offered varying salary structures as well. These include:

W-2 or 1099 Employee

A W-2 employee is someone who is on the company’s payroll and receives a W-2 form at tax time. These employees have taxes withheld from their employer, as well as salary reductions for certain benefits (like a 401(k) contribution or health insurance premiums). 

A 1099 is issued to an independent contractor, and they are not considered employees of the company. A 1099 contractor does not have their taxes or other benefits withheld from their paycheck. For an employer, a 1099 contractor is typically less expensive and simpler to work with—but as an employee, they may miss out on important benefits and tax withholdings.

If you receive a 1099 form and operate as a contractor, you’ll need to pay your own estimated or quarterly taxes ahead of tax time. Otherwise, you could be hit with a big tax bill and a penalty from the IRS or state tax authorities.

However, a 1099 employee may have more freedom and flexibility with their hours, since they work for themselves. A W-2 employee may be subject to non-compete clauses or more standardized working hours.

Partnerships and Employment Models

There comes a time for most physicians to decide which track will better suit their desired lifestyle and professional ambitions: being an employee of a practice or becoming a partner.

Being an employee in today’s evolving healthcare field certainly comes with its perks. Namely, job security with less risk. Hospital networks offer competitive and comprehensive benefits packages with robust compensation structures—which can make becoming a high-level hospital employee an enticing and lucrative career choice.

To become a partner at a practice, you typically need to do a partnership buy-in—which can be in the hundreds of thousands of dollars. There’s no guarantee that once you buy in, you’ll make that money back in a certain period of time. Depending on the success of the facility, it’s possible you would have earned more remaining an employee.

On the other hand, a successful partnership can reap many rewards for physicians. Along with the higher earnings, you may earn equity in the practice (which can help secure your future retirement), become a well-respected and notable professional in the community, and be involved in important business decisions. 

Evaluating and Negotiating Your Compensation Package

Next time you’re changing jobs or renegotiating your current pay structure, be sure to evaluate your compensation package closely. Decide what benefits are most important to you—it might not always be earning the highest salary possible. Many professionals will take less pay in exchange for a more positive work environment, better perks or bonus structures, or professional opportunities to move up the ladder later down the line. Or, maybe you’d like to slow down and work fewer hours—in which case a volume-based incentive system may not suit your lifestyle goals.

Once you are presented a compensation contract or offer, research your area’s market rates and industry pay standards. You should be able to find out what others in your region and industry are earning—especially if you specialize in a desirable field of medicine. Don’t be afraid to counter your employer’s initial offer, especially if you have the research and market data to back it up. 

Need Help Reviewing Your Salary Structure?

Doctors and physicians have some of the most comprehensive salary structures in the job market. Yet, your schedule is busy and your time is valuable—you may not have the desire or energy to research your options thoroughly. A financial advisor can help you make more informed choices about your salary structure and compensation package, based on your unique goals and needs.

If you’d like to talk to a knowledgeable professional about your current or pending compensation package, we encourage you to reach out to our team today.