Written by: Rachelle Vanderzanden, CFP®
You did it. Or maybe, you’re almost there! For folks comparing job offers and about to take on their first attending job, this is a HUGE transition.
How many years have you been working toward this goal? Do we start counting at college? If so, let’s see… four years of college, four years of medical school, at least three years in residency and then maybe you even decided to tack on some more time for fellowship.
When you add it all up, you have spent at least eleven years of your life working toward this moment. Not to mention the money…. Yes, the tuition, the years of making less than minimum wage (just think of how much you work, my friends). This is huge.
Every time you evaluate a big job change, you need to compare the financial aspects of each opportunity. That is especially true with your first job out of training. In so many ways, this can influence your career trajectory, where you live, and your lifestyle.
I can’t begin to evaluate the pros and cons of what different jobs may offer you in terms of research opportunities, career advancement, or especially job satisfaction. What I can do is evaluate the financial aspects of those jobs.
It’s not just about the salary (although that helps). The benefits each job offers can vary dramatically, and they have real economic value. Having a better understanding of the financial incentives offered by a job can hopefully allow you to evaluate your options more effectively.
What Should I Ask Before Accepting a Job Offer?
The first step to evaluating any job offer is to make sure you have all the relevant information they can provide. On the financial side, the short list includes salary (both to start and over time), bonus and incentive pay, benefits, and retirement plans options.
Below is a short list of questions that can be helpful to ask any serious prospective employers:
- What is the starting pay?
- Is the compensation guaranteed or contingent on performance?
- If the salary is guaranteed, is there a schedule for increases over time?
- If the compensation is based on production, what have other employees made at similar points in their career?
- Do you offer any stipend during training, sign-on bonus, or relocation payment?
- Do you offer any assistance with student loans and/or are you a qualifying employer for Public Service Loan Forgiveness?
- What benefits do your offer your employees?
- Which benefits are paid for by the employer and which are paid for by the employee?
- Do you offer a retirement plan to your employees? If so:
- When can I enroll?
- What type of retirement plan is it?
- How much can I contribute?
- Do you match my contributions or make contributions on my behalf?
- What is the vesting schedule for employer contributions?
- Are there any financial consequences if I end up leaving? (i.e., pay back your bonus, the cost of tail insurance, etc.)
Okay, so I said it would be a short list and I lied… The lesson here is that more information is better. You also need to be able to understand the information that they give you. Benefits packages can be tedious and confusing to read; you need a few tools in your tool belt to be able to decipher everything.
Comparing Job Compensation Packages
You’d think salary would be the easiest thing to compare, but in medicine this can be much more complicated than in other industries. The compensation structure can vary widely from place to place.
The easiest number to look at is any sort of guaranteed base salary; that is fairly straightforward. If that is what you are offered, make sure you ask how salary increases work. Is it a fixed schedule? Is there a cost-of-living increase as well as a potential increase based on you being a rock star? Does your salary stay fixed or move to production-based at some point?
I also suggest you figure out how much people are actually working with this employer and do some basic math to get to an hourly wage. If you can make $400,000 guaranteed at one job, but everyone works 60 hours a week, is that what you’re looking for?
However, if you are paid based on production, get as much information as you can about what other employees at similar career stages have earned. If you can, talk to a few current employees about it. Get a feel for how much they earned and how much they worked to earn those dollars. Again, is it worth it to hit your production targets if it means you’ll have to work more hours than you want to?
One-time incentives absolutely figure into this equation as well, but you’ll want to find out how they are structured. A $30,000 sign-on bonus that is yours free and clear after you complete one year with the employer may be worth more to you than a $100,000 bonus that you have to pay back if you leave any time before five years is up. That’s not a sign-on bonus; that’s a retention bonus they give you up-front that then makes you feel tied to your position ‒ the classic “golden handcuffs.”
Higher annual compensation is also more attractive than a one-time bonus. Everyone loves money-in-hand, but I like it more when there are fewer strings attached.
What should you do with your signing bonus? Read more here: What Should You Do with EXTRA Money??
Comparing Benefits Packages
Big caveat here – insurance and other fringe benefits are not stagnant. We can get a snapshot in time of what they look like now, but these benefits are generally reevaluated each year and can be changed.
That’s why most of the time you don’t see detailed benefits information in a contract. They are not guaranteed, but generally if they offer benefits currently, it’s likely they will continue to offer them in some form.
Health insurance is a big deal. Very few people realize how expensive this can be because they have coverage that is mostly paid by their employer. If you did not have employer-provided coverage, you would likely be paying $500-1,000 per month or more even if you are young and healthy.
Important Questions when Comparing Health Insurance Benefits
- Will it cost me anything?
- How much will I have to pay out-of-pocket?
- What will my copayment be?
- Is this a high-deductible health plan (HDHP)?
- If so, is there a health savings account available to employees? Does the employer make any contributions to it?
- Does the plan cover everything I know I’ll need?
- Can I still see my current providers?
- Can I enroll my family? How does this plan work for them?
Also make sure you ask them about long-term disability coverage. How much coverage do they offer? Do they pay for it or do you? What’s the definition of disability on the policy? Make sure it’s an own occupation disability insurance definition.
If one employer offers coverage that replaces 60% of your income up to a cap of $5,000, but another offers 60% income replacement up to $15,000 per month, that could be a big difference.
In this case, paying for the coverage isn’t necessarily bad if it’s reasonably priced and gets you decent coverage. Generally, if your employer pays for the coverage then the benefit is taxable, but if you pay for the coverage then the benefit is not taxable.
Additional reading: 14 Facts About Disability Insurance, Own Occupation Disability Insurance, 7 Mistakes Doctors Make with Disability InsuranceOther key benefits to keep an eye out for include employer-provided life insurance, CME/licensing allowances, and paid time off. Just like with the other benefits, you’ll want to find out if the life insurance and expense reimbursements are considered taxable or not.
Comparing Retirement Plan Options in Job Offers
First, it’s important to understand the ins and outs of workplace retirement plans. Once you do, you’ll be more knowledgeable than 95% of people out there. Here are a few important terms to know:
- Waiting period – How long you must wait before you can enroll in your company’s employment plan. Sometimes there is no waiting period.
- Matching – Money that your employer puts into your account that is dependent on you making contributions.
- Employer contributions – Money that you employer contributes, sometimes even if you do not make contributions.
- Profit sharing – Generally discretionary contributions from an employer that are dependent on business profits.
- Vesting schedule – The agreed timing for when any employer contributions into your retirement plan become yours.
- Pre-tax contributions – Contributions you make into your retirement plan that reduce your taxable income now. Distributions in retirement are taxable.
- Roth contributions – Contributions you make into your retirement plan that do not reduce your taxable income now. Qualified distributions are not taxable.
Read more: How Much Does a Doctor Need to Retire?
When you are reviewing retirement plan options from prospective employers, it’s important to know what you can put into the account and very important to know how much your prospective employer may put in as wells.
If you are looking at one job that does a 3% match, you are limited to that 3%. If another employer makes a 6% contribution and will also match up to 3% of your contributions, that’s a big difference.
The vesting schedule is important to keep in mind. If you are unsure how long you want to stay at your next job a 3% contribution that immediately vests (you can take every dollar with you when you leave) may be better than a 6% contribution where only 20% of that contribution vests each year. Make sure you are reading the fine print and you understand all the details.
You may also come across deferred compensation plans and cash balance plans. However, make sure you understand what happens with these plans if you leave that employer. Often, you are required to take a full distribution when you leave your employer, which would add the entire balance to your taxable income for that year (yikes!).
Read more: What to Do with an Old Retirement Account?
What Can Negotiate in a Job Offer?
If you have a tentative job offer and you want to try out some negotiation tactics, it’s important to understand what’s on the table.
The obvious thing that’s usually negotiable is your salary. How do you negotiate a physician salary? Know what you’re worth, know what you need/want, and prepare to have a polite discussion about it. Hiring managers expect negotiations.
If you are looking at academic jobs or jobs with large institutions, they may not have a lot of wiggle room to negotiate salary or benefits (but don’t make assumptions; you can still ask!). Always remember that there may be other areas of the contract that you can negotiate (signing bonus, call schedule, benefits, etc.).
Outside of financial considerations, you can potentially ask for things like more protected time and funding for research or a larger relocation stipend if you’re moving cross country. There is usually something they can offer you.
Smaller employers and private practices are often the ones that have the most room for negotiation. You can ask for a larger salary or bonus. If possible, come to the table with some salary data to back up your request.
If you still have a few more months to go in your residency or fellowship, you can ask for a stipend throughout the remainder of your training to help you make ends meet until then.
Don’t forget about your student loans, if you have them. If you were working for a non-profit organization, you could potentially have the entire balance forgiven in a few years through PSLF. If you choose to work with a private practice, they may offer additional compensation to help offset your student loan payments or a larger one-time bonus after you’ve worked there for a few years.
Read more: PSLF Overhaul: What You Should Know
There are some things that are not generally negotiable. Benefits are usually the same for all employees, so unless it is a very small practice, one prospective employee will likely not move the needle a lot on those offerings.
Long story short, don’t be afraid to ask. Prospective employers generally understand negotiation is part of the process.
What Do I Do If I Have Multiple Job Offers?
Let’s say you are in the lucky position of having multiple jobs offers (of course you are!) and you’re having a hard time deciding between them. One strategy is to sketch out the things you can assign a value in a grid. With the more qualitative aspects, you may need to use the good old pro/con list.
Let’s look at detailed example (summarized in the table below).
With Employer 1, you receive a guaranteed starting salary of $410,000 in the first year. In addition, you’ve been able to negotiate a $20,000 sign-on bonus and a $10,000 relocation stipend.
They offer a 401k where they will match the first 3% you put in, but also make a 3% contribution on top of that, totaling 6%.
They offer 6 weeks of paid time off, a high deductible health plan where they pay a large portion of the cost and contribute $3,000 into an HSA on your behalf, and long-term disability coverage up to a cap of $15,000.
With Employer 2, you have a year one guaranteed salary of $375,000, but can potentially receive up to a $50,000 incentive bonus on top depending on production. They also offer a sign-on bonus of $50,000 and relocation bonus of $10,000.
After chatting with a couple newer docs in the practice about their production, it seems likely you would get a portion of that incentive bonus, but not all.
Their 401k has a more complicated match where they will match the first 3% you contribute dollar for dollar, but then only half of your next 3%. It ends up being a little less than that because you hit the maximum allowed contribution amount before you put in six percent.
They offer similar health insurance, but do not contribute to an HSA for you and their disability insurance is minimal, meaning you will need to pay a lot more out of pocket for additional coverage. Last, you get only four weeks of paid time off.
The offers are similar when you get down to the details, but the benefits for job number one are much better. In addition, you may get a $50,000 sign on bonus up front for job two, but that only happens once. Don’t give too much weight to short-term incentives when you are considering the long-term viability of a job.
In reality, I would want to know a lot more about what the career trajectory looks like for each job. What about years two, three, and four? Are there any partnership opportunities?
Once you understand the compensation break down for any offers you’re comparing, it can potentially give you a little more fuel for your negotiation. If you’re leaning toward one but could be enticed to take the other if the compensation were a bit better, tell them that.
Red Flags in Job Offers
Sometimes clients ask me if there are any signs that they should NOT accept a job offer. There can definitely be some red flags to watch out for.
This is a situation where it can be very important speak with an attorney. Contracts are legal documents. You make a commitment to an employer, and they make a commitment to you. On paper. With lots of weird legal language. An attorney is going to be the best person to point out any real red flags, but also make suggestions for how to potentially fix them. Red flags do not always have to be deal breakers.
One thing I hate is when you have a long, drawn-out interview and negotiation process and then the prospective employer hands you an offer and says, “You have a week”. What??? Did I forget to mention the YEARS you spent training to get to this moment? Do not let them rush you.
Also, be very aware of any potential financial consequences of separating from your employer. This can be anything from being forced to return bonus money to having to buy yourself out of your own contract. Depending on how a contract is written this can have costly consequences.
If a non-compete clause is too broad, you need to tread very carefully as well. If you are working in the only populated area for a hundred miles and your non-compete clause extends out thirty miles, you may have to move to find another position that works if you leave. Don’t get stuck!
Is It Better to Work as an Independent Contractor?
Why are we messing around with employers? One thing I have completely ignored here is the prospect of being employed in a job where you don’t get benefits, retirement plans, or paid time off. Many physicians work as locum tenens physicians and that can be a very lucrative way to go.
That idea deserves a lot of its own research and understanding. The first step? Take a good look at the chart above. As an independent contractor, you don’t get health insurance, long-term disability, or a retirement plan with someone else’s money flowing in. And there are some significant differences in taxation. That doesn’t mean it never makes sense. It just means that the incentives to work in a position like that better be GOOD, whether monetary or otherwise.
The single most important thing in a job search is to not undervalue yourself and your time. Come to the table with a good idea of what you think your time is worth and find something that works for you. You’ve worked so hard for this.
This should not be construed as legal advice. Consult with a legal professional in your state for specifics pertaining to your situation.