Employment and Partnership Contract Negotiating 101

November 30, 2010

You did it. You landed your dream job. The offer is in hand. You've met the staff. And you can already picture your name displayed on the front office door. A little advice? Don't pop the champagne bottle just yet. There's still plenty of work to be done.

You did it. You landed your dream job. The offer is in hand. You've met the staff. And you can already picture your name displayed on the front office door. A little advice? Don't pop the champagne bottle just yet. There's still plenty of work to be done. Indeed, before you commit to the job, you'll need to negotiate the terms of your employment contract, which may or may not be in your best interest. "You want to understand what the offer is: what the compensation model is and what your workload is," says Jack Valancy, a healthcare consultant and clinical assistant professor in Cleveland Heights, Ohio, who specializes in contract review.

That means reading through your contract with care, and arming yourself with information. Before you start in with the requests, for example, do some research of your own - consult colleagues, healthcare consultants, and lawyers for their perspective on what's considered reasonable for your market. And have your attorney identify items in your contract that may leave you exposed. "You have to pick your battles and if you don't know what your battles are and you ask for something unreasonable you'll look out of place," says Jim Kelso, a healthcare attorney in San Antonio. "Don't waste your negotiating capital on things that aren't that significant."

Identifying 'deal breakers'

Indeed, says Valancy, some of the terms in your contract may be deal breakers, such as base salary, tail premiums for malpractice, or the geographic scope of your non-compete clause, and you'll want to start there. "This is not like negotiating for a car," he notes. "You don't need to tell them these are deal breakers because that sounds confrontational. You're not trying to raise the temperature in the room. Just ask for the revision you want and see how they respond." Indeed, he notes, negotiations should always be amicable. "These are people you're going to be working with," he notes.

Kelso agrees. Professionalism is paramount. An overbearing or entitled demeanor can leave a bad impression in your employer's mouth, and create an unhealthy working relationship right out of the gate. You'll get better results in the negotiating process if you give your employer a chance to consider your request in private, rather than putting them on the spot, he says. "I recommend that you send an e-mail or letter that says these are the five or seven things that I would like to discuss in the contract that I'm unhappy with," says Kelso. "The benefit of that is that they won't be caught flatfooted. If you call them and want to talk contract changes at that moment they're going to get defensive."

Often, of course, the back and forth that takes place over terms of your employment are discussed during the interview process. You'll no doubt also have the opportunity to request changes to the verbal offer via e-mail and other correspondence. Perhaps you'll want to change the term of your contract, your base pay, or the language that defines your compensation package. Ambiguity is bad, says Valancy. In addition to your base pay, for example, the contract should spell out the terms of any performance incentive. Is your base salary slated to rise, fall, or remain static going forward? "If it's scheduled to decline, you need to know how hard you have to work to make up the difference in that income and what performance incentives are used toward your bonus," he says. If productivity is measured in work relative value units (RVUs), for example, what's the threshold you must reach to trigger a bonus? The same detail should be provided for productivity bonuses tied to collections, charges, and profitability. You should also see in writing what your rate will be - or how much you'll be paid for each additional measure of productivity - which determines the size of your potential bonus.

Looking ahead

A prudent physician will also inquire about the details of any potential (in the future) partnership deal, says Valancy. During your negotiation for employment, ask about the buy-in price for partnership and whether you would be granted an equal share of the company or a minority stake. "These are issues you want to explore when you are taking the job as an employee," he says. "You're not asking for a promise of partnership, but if you're going down this path you want to know what that deal might eventually look like."

Keep in mind that smaller practices may be more willing to accommodate requests than larger groups, since they can't compete on salaries and must be ready to sweeten the deal elsewhere to attract top talent. But don't let larger groups push you around. "You might hear a prospective employer say that this is a standard agreement and it may be a standard agreement for their organization but there is no such thing as a universal standard agreement," says Valancy. "There is tremendous variation in employment contracts." They might also tell you your request is "never seen in employment agreements" or "that never happens." "Often times, that's done to end the discussion, to intimidate the employee," says Valancy. If the term is one of your deal breakers, don't be afraid to say "no thanks." "The key to your strength as a negotiator is that you can walk away from a bad deal," says Valancy. "Don't expect them to come running after you. They may let you walk away, but you don't have to accept a contract you don't like. There are plenty of jobs."

Once an employment offer is extended, you should respond within a week - two at the most, says Valancy. "This is like them proposing to you," he says. "You have to give them an answer. Tell them which issues you may be concerned about and offer suggestions for what you'd prefer to see."

Ultimately, though, it's not about what you win from your employer - but what you learn in the process. "The most important thing about negotiating an agreement is not getting everything that you want, but gaining information about your future employer," Valancy says. "How they treat you is far important than what they give you. Are they pressuring you? Do they treat you with respect? Are they hostile toward you making changes? Are they dictatorial or collaborative?" Playing hardball with your prospective employer, he says, gives you an opportunity to see how they will react to complex situations in the future.

Shelly K. Schwartz, a freelance writer in Maplewood, N.J., has covered personal finance, technology, and healthcare for more than 12 years. Her work has appeared on CNNMoney.com, Bankrate.com, and in Healthy Family magazine. She can be reached via editor@physicianspractice.com.