Fixed Salary vs. Production-Based Salary – an Introduction to Compensation Structures

Congratulations! You’ve found your perfect position as a doctor of optometry and you are ready to begin discussing your contract with your new employer. Before you get started, it is essential to have an understanding of different pay structures that may appear in your contract to put yourself in a position to negotiate the salary and pay structure that works best for both you and your employer.

Three common pay structures include fixed salary, production-based salary, or a hybrid of the two.

• Fixed salary – With a fixed salary, you and your employer will agree on a set yearly salary that remains constant, regardless of how many patients are seen. Some ODs prefer this salary type because it is a steady amount they can rely on. It is possible that an OD with a fixed salary may also receive production-based bonuses, however, these are not guaranteed or included in the contract. Keep in mind that, while having a fixed salary can provide peace of mind, it can potentially limit future raises down the line. If you are considering accepting a contract with a fixed salary compensation structure, make sure to discuss the expectations and schedule for future raises with your employer and have those terms included in the contract.
• Production-based salary – Production-based salaries link your pay to the success of your practice. With this type of compensation structure, you and your employer will agree on a percentage of the practice’s income that you will receive, which may vary your total compensation from month to month, depending on how busy the practice is. This is a great option for an OD who is motivated to help their practice grow and enjoys being in control of their earning potential. The challenge with this pay structure, however, is that it can be difficult to budget for expenses if you don’t have a set salary, and slow months can have a major impact on your finances.
• Hybrid salary – With a hybrid salary, you and your employer will determine a set salary that will be paired with production-based income. The set portion of the salary will often be lower than a fully fixed salary, but the production-based portion offers the potential to meet or possibly exceed the income that would be brought in by a fixed salary. This compensation structure works well for ODs who feel more secure having a base salary they can count on but are excited to have production-based earning potential, as well. With a hybrid salary, you will need to ensure you have a clear understanding of what percentage of production you will receive and make sure you and your employer set clear terms for raises in your base salary.

Each compensation structure comes with its opportunities and challenges. Before signing a contract, make sure to have an open dialogue with your new employer and work with them to find the compensation structure that meets your needs and the needs of the practice. By doing some research beforehand and estimating your budget prior to signing your contract, you can position yourself to negotiate the terms that will allow you to cover your necessary expenses and maximize your earning potential.

Haven’t found your perfect position yet? Visit the AOAExcel Career Center to connect with hiring practices nationwide.