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  • Signing Bonus

    I recently received a contract that included a signing bonus, but I have some questions about the stipulations of the bonus.

    The wording of the contract states that after signing I would get $50K (minus withholding for federal and state taxes and FICA), but if do not fulfill the obligations of the contract or elect not to become a partner then I would have to pay back the entire $50K plus the share of FICA paid by the group.

    Does this seem standard? By signing, I'm basically committing to become a partner and buy in, but if I don't, I will owe the practice money. My idea of a "signing bonus" is an incentive to sign the contract to work for the stipulated period of time, then partnership would be addressed later once I have worked with them.

    Thoughts?

  • #2
    What you are describing is a retention bonus.  Calling it a signing bonus is a misnomer since you are loaned the money and you only get to keep it if you stay.

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    • #3
      It’s common. Some say to come back and ask for it to be split up as guaranteed income over years to avoid the penalty should you leave. Maybe not as sexy as 50k now, but better than paying back 50k on the 30k you actually got.

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      • #4
        I agree with White.Beard.Doc - this is not a "signing" bonus. Taking out taxes on the front end is not the norm (at least, that I have run into), either. Nor is the requirement to become partner, but that doesn't mean it is wrong, just awkward. For example, should you have to pay it back, tax reporting will be difficult unless you've already earned enough wages in that year for them to offset on your W2. I would want to know how that would be handled. It would be cleaner to handle as a retention bonus "loan" forgiven at each stage you meet certain requirements.

        Recommend you work with a good contract attorney with a specialty in physicians or Contract Diagnostics.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          The partner obligation bothers me.  Has the buy in been negotiated?  A retention bonus for working a certain # of years seems fine and normal.  A penalty for choosing not to purchase a share of the practice some years in the future doesn't.  If the buy in hasn't yet been negotiated, then you are at a huge disadvantage as they can throw some awful terms at you and you have to write a $54k check in order to say no.

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          • #6
            The partner aspect is flat out bizarre. Most of the time, a group is going to want to include language stating that they are NOT obligated to offer partnership in case you end up being lazy/drunk/just a bad fit.

            Forcing you to pay back your retention bonus if you don't want to be a partner only makes sense if your becoming a partner is a profitable event for them. This is only the case if the partnership buyin will not be fairly valued, i.e. your buyin amount is for more than the share of the partnership is worth. This is a major red flag for me.

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