Falling behind inflation: Associate veterinarian compensation and strategies to increase earnings

After outpacing inflation in 2013, and matching it in 2014, associate veterinarians in Canada had little to celebrate with regard to compensation in 2015. Despite the lower than normal inflation last year, median associate veterinarian compensation failed to keep up to the cost of living.

Associate veterinarians in Canada earned a median compensation of $79 427 in 2015, a gain of 0.4% from the previous year. Concurrently, the national inflation was 1.1%, beating the growth in compensation by 0.7%. In real terms, associate veterinarians had less spending power in 2015.

Broken down by province, it becomes obvious where, geographically, associate veterinarians have experienced the greatest and least growth in compensation. From 2014 to 2015, only 2 of 10 provinces (British Columbia and Newfoundland and Labrador), experienced increases in median associate veterinarian compensation. Conversely, Manitoba, Nova Scotia, and Prince Edward Island saw median compensation fall. Alberta, Saskatchewan, Ontario, Quebec, and New Brunswick remained roughly consistent year after year.

One surprising finding from the Provincial Survey of Associate Veterinarian Compensation and Benefits is the small number of associates on some form of production-based pay. In 2015, only 1 in 8 were paid based on production, despite the average earnings for those with this method of compensation being 14% higher than the median. This equates to an annual pay that is $11 300 higher than the median associate veterinarian compensation.

Production-based pay can also be advantageous to the practice owner, as it allows him/her to transfer risk to the associate veterinarian. When the associate is paid commission, the owner is off the hook for any losses. If the associate does not perform, he/she does not get paid. If, however, the associate turns out to be above average, the practice owner pays for the superior production.

With production-based pay, the associate assumes greater risk, but also has the opportunity for greater reward. If the production-based associate is employed in a practice with above average client numbers and fees, as well as a competent team of technical staff, he/she can earn as much as a practice owner.

However, if that same associate is at a practice with slow client traffic, low fees, and little assistance, he/she may struggle to generate enough revenue to earn a competitive income. For this reason, a guaranteed salary in combination with the production-based pay is frequently the best option.

Decades ago, Mark Opperman, a practice management consultant, coined the term ProSal to explain a combination of production-based pay and salary. With ProSal, the associate’s pay is based on production but he/she is guaranteed a base salary every month, even if he/she does not meet the revenue generation target.

A ProSal agreement might look something like this: an associate gets paid 25% of his/her professional revenue but is guaranteed to earn a salary of $80 000 per year. If the associate generates more than $320 000 in professional revenue he/she will earn more than the base of $80 000 (25% of $320 000). If the associate generates less than $320 000, he/she will simply receive the minimum salary of $80 000. This guarantee of the salary ameliorates some of the risk for the associate and protects him/her from earning less than a specific amount.

ProSal works for a practice owner because he/she can transfer much of the risk to the associate. For example, if a practice owner is presented with an associate who expects a compensation of $125 000, the practice owner could pay this salary and assume the risk that the associate will not generate revenue commensurate with the compensation. Alternatively, the owner could offer a ProSal contract that pays a base salary ($80 000) and 25% of professional revenue. If the associate is able to generate $500 000 in professional revenue, he/she will earn the target compensation of $125 000. If the associate is unable to live up to his/her expectations, he/she is on the hook for the lost additional income, rather than the practice owner.

In the examples described, the term “professional revenue” has been used; this includes all revenues with the exception of dietary sales. Dietary sales are typically not included as the mark-up is too low to provide a production-based pay. Occasionally, hospitals will include 10% of dietary sales in an associate’s production when it is on the invoice for a visit with the veterinarian. However, if a client comes in to purchase food between visits with the veterinarian, the revenue generated goes to the hospital rather than the associate. A similar policy commonly applies to pharmaceutical sales; if sold during the consultation, revenue generated would be applied to the associate. If the client is picking up a refill, revenue is attributed to the hospital.

Given the gloomy economic outlook in many provinces, ProSal can offer associates a strategy for earning above average incomes, while sheltering practice owners from risk.

Figure 1.

Median compensation for full-time associate veterinarians compared to inflation adjusted associate compensation (2012 as basis year).

Table 1.

Median full-time associate veterinarian compensation stratified by province, 2012 to 2015

	2012	2013	2014	2015
Canada	$76 335	$77 864	$79 898	$78 792
BC	$85 000	$80 000	$76 000	$80 000
AB	$83 000	$87 500	$86 000	$86 000
SK	$74 500	$75 000	$78 849	$78 000
MB	$77 250	$80 000	$85 000	$78 000
ON	$77 000	$79 662	$80 000	$80 000
QC	$68 000	$70 000	$73 500	$74 000
NB	$70 000	$74 000	$71 000	$70 500
NS	$70 000	$70 000	$72 000	$70 000
PE	$62 856	$57 348	$90 000	$83 000
NL	$85 750	$85 000	$80 000	$85 000

BC — British Columbia; AB — Alberta; SK — Saskatchewan; MB — Manitoba; ON — Ontario; QC — Quebec; NB — New Brunswick; NS — Nova Scotia; PE — Prince Edward Island; NL — Newfoundland and Labrador.