Figure percentage compensation

Q: I came to a new practice and brought a plethora of new clients. How can I determine what compensation percentage is appropriate?

Denise Tumblin, CPA, a Veterinary Economics Editorial Advisory Board member and president and owner of Wutchiett Tumblin and Associates in Columbus, Ohio, says there are several factors to consider.

First, Tumblin says you should find out whether the compensation percentage is blended (one percentage for all services and medical products) or split-rate (different percentages for services and medical products). Other factors to consider include the staff-to-doctor ratio and your status as an employee or an independent contractor.

"If you're an employee of the practice, a reasonable blended compensation percentage with a 1:1 staff-to-doctor ratio would be 25 percent to 26 percent," Tumblin says. "As the staff-to-doctor ratio rises, the compensation percentage drops."

For example, with a 4:1 ratio, Tumblin says the compensation percentage would be 20 percent to 21 percent. If you're an independent contractor and pay your own taxes and benefits, a reasonable rate would be 2 percent to 3 percent higher.

If you receive a split-rate compensation percentage, Tumblin says with a 1:1 staff ratio, the doctor compensation for medical services should be between 27 percent and 31 percent and the product percentage should be between 4 percent and 10 percent. Again, an independent contractor should add 2 percent to 3 percent.

Make sure to consider all these factors when determining a reasonable number that fits you and your new practice.