Rewarding staff for their input is essential to the well-being of a veterinary practice. The most common reward is a salary increase at a regular interval of time. At times, the basis of such rewards is the time the staff member has been in the practice and is expected whether the practice has an increase in profit or not. Also at times, a staff member may have reached a maximum salary for their position in the practice and the owner finds him/herself in the awkward position of telling someone that their salary has reached its maximum level.

One management tool you may want to consider is a bonus/incentive plan. Under this type of plan, an employee receives a percentage of a company's profits based on its quarterly or annual earnings. This is a great way for a business to give its employees a sense of ownership in the company. One suggested amount that is often split between staff is 10% of the increase in income of the quarter in question over the same quarter a year ago.

Calculations for bonuses under these plans can be based on salary of the individual staff members (comp-to-comp method), or hours worked in the quarter in question by the staff member. It can be applied to support staff or to all employed staff including associate veterinarians.

In the comp-to-comp method, the bonus is calculated using the following calculation: an employer adds the sum of all of the employees' compensation. Then, to determine what percentage of the bonus an employee is entitled to, each employee's annual compensation is divided by the sum of the total compensation.

Using the hourly basis, all staff hours are added together, and the bonus paid is based on hours of service, regardless of their regular hourly pay. One caveat is that calculations may be made on increases in gross income or may be calculated based on income actually collected, giving staff an incentive to collect from problem clients.

Advantages of the bonus/incentive plan are:

·         It brings groups of employees to work together toward a common goal (the success/benefit of the company).

·         It helps employees focus on profitability.

·         The costs of implementing the plan rise and fall with the company's revenues.

·         It enhances the commitment to organizational goals. The pay for each employee moves up or down together (no individual differences for merit or performance).

·         Funds received under these plans may be received as additional taxable income, or employees may elect to contribute to a simple step program if the employer has one.

Disadvantages of the plan are:

·         It focuses only on the goal of profitability (which may be at the expense of quality).

·         For smaller companies, these plans may result in drastic swings in earnings for employees, and the employees may find it difficult to manage their personal finances.

·         Employees who may leave or be dismissed may receive additional unemployment benefits because of the bonuses they may have received.

Bonus/incentive plans are different from profit sharing plans used in corporate America, where it is often standard procedure for the funds from profit sharing to go directly to retirement plans. In many bonus/incentive plans, the bonus may be available to the employees to use at their discretion.

Before implementing a bonus/incentive plan, a practice should calculate how it would have worked for the previous four to six quarters. Also brainstorm a list of what-ifs to see how they would have influenced the pay-out.

Before implementing a bonus/incentive plan, you should discuss the idea with your accountant to see what the implications may be for your specific situation.