Published in Non-Clinical

Comparing Compensation Structures in a New Grad's Contract

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9 min read

Deciphering the differences between pay structures when signing a contract can ensure that you find the right fit. Check out those distinctions here!

Comparing Compensation Structures in a New Grad's Contract

Congratulations! You've made it through school, and now you actually get to start being paid for your hard work!!! Kind of unbelievable, isn't it? Well, believe it.

When a new grad enters the optometry work force, there are a million things to consider. What kind of practice do you want to be in? Where do you want to live? What's a fair starting salary?
These are all very important decisions to be made, but one area that graduates need to make sure they understand before starting negotiations concerns the different structures of compensation that one may encounter in a contract.
While there are many different variations and subtle differences within each practice's new hire paperwork, most will fall into one of three broad categories when it comes to salary structure.

Option 1: Salary-only, aka "the safety net"

This type of contract will most likely be found when considering an associate or employee position. Doctors with this arrangement will receive a set amount of compensation per their agreement, regardless of how many patients are seen or how much profit the practice makes.


  • There is a fixed amount of money paid to the doctor no matter what. So, a slow month does not equal a hit to your pocketbook.
  • Knowing how much money will be coming in per month means being able to plan your finances accordingly. There is no guesswork involved, so you can feel more secure in your spending and saving habits.
  • Just because there isn't a production based component of the contract doesn't mean that the company or practice may not give occasional bonuses or rewards for great work. They just aren't a guaranteed part of your contract.


  • If not considered ahead of time, this structure can make it difficult for growth or raises down the road because you have signed an agreement to work for a certain set amount. Make sure that the requirements and expectations for a future raise are included, in writing, within your contract and agreed upon by both parties. Otherwise, you may end up five years down the road making the same salary as you did in year one.
  • Busy months don't equal more compensation. Since there is not a production component within your contract, having a stellar month will not result in your paycheck reflecting that extra work. (Keep in mind, though, that this is balanced by not being negatively affected during slower months.)
  • Sometimes, depending on individual work ethic, this form of income may not incite much professional development or motivation to work harder. It is up to you to make sure you don't become complacent just because you know your paycheck won't be affected by a slow clinic. A lackadaisical mentality will never pay off in the end, and it could cost you your job.

Option 2: Production-only, aka "you eat what you kill"

Okay, so kill may not be the best word to use when talking about healthcare, but you get the picture. With these types of arrangements, the doctor's paycheck is directly related to the practice's bottom line. The more the practice brings in, the more you make. These types of contracts are typically seen in certain commercial environments, and the concept applies to ownership of a private practice as well.


  • Your earning potential is relatively unlimited. Any factor leading to an increase in the net profits of the practice can directly increase your salary.
  • You have motivation to grow the practice. By knowing that your efforts and hard work have the potential to positively impact your paycheck, there is an increased level of personal investment in the day-to-day activities of the office. While money is definitely not the only thing that makes doctors want to have an efficient and professional practice, it can help keep you encouraged to be on the lookout for creative and new ways to see more patients, deliver better care, and expand your office's reach. This benefits both you and your practice.
  • You control your fate. While for some, this may be a scary thought, for many, it is a welcomed challenge. Doctors often prefer to know that they can do very well for themselves if they work hard to keep improving their clinic and that they are responsible for their own success. Though the percentage of production reflected in your salary may be negotiated with the owning company, the final amount made is up to you and how hard you work each day.


  • Planning finances can be difficult. Without knowing exactly what your paycheck will look like each month, it is somewhat challenging to be able to fully plan your expenses and discretionary income. After being in a position for a bit, though, most are able to roughly predict what to expect.
  • This is the highest risk category. Slow months within the practice equal less compensation for you, and income can fluctuate drastically month-to-month.
  • There are no traditional, dollar-value raises. All increase in income is tied to increase in profits. The only form of a "raise" would be to negotiate a higher percentage of production to be paid to the doctor or to increase exam fees if the doctor receives all exam charges.

Option 3: Combination compensation, aka "the best of both worlds"

In some cases, doctors will be able to negotiate a contract that allows them a base salary with production related income added on top. Typically, the base salary is lower than salary-only agreements, and the difference is made up (sometimes surpassed) through production. There is great variation in these type of arrangements, as some will have a larger base and only add production if a certain profit goal is met, while others will have a smaller base and pay a percentage of all production. Associate contracts, partners, and some commercial practices may utilize this type of compensation agreement.


  • There is some built-in financial stability that comes from having a guaranteed base salary. No matter how slow the practice may be in a month, you will always know that at least X amount is coming with each paycheck. This takes some of the guesswork out of the equation and can help you know how to plan. There is less risk involved with this contract than with production-only types.
  • Like production-only contracts, you will be rewarded for exceptional months. The more the practice brings in, the more you bring in.
  • This arrangement helps motivate you to be an engaged and forward-thinking part of the practice team for the same reasons as the production-only contract does. The fire lit may be slightly less intense than the production-only version due to your safety net of a base salary, but this agreement will still help you to avoid the complacency sometimes seen in salary-only doctors.


  • Typically the percentage of production paid in these types of contracts is smaller than production-only arrangements. This means that, when the practice is doing well, you won't see the same degree of boost in compensation as you would've if your entire paycheck was linked to profits.
  • In slower months, you do have a risk of bringing home less than you would've if you were 100% salary.
  • You may encounter a practice that does not want to give you a raise in base salary over time due to the possibility of your income growing through production. However, if you think of this before signing, you may be able to negotiate the terms of an increase into your contract.
As you can see, there is no perfect compensation structure. Each of these options bring with them rewards and challenges.
Be sure to do your research before you sign a contract. In particular, you will want to thoroughly examine the books of a practice before you sign any agreement that hinges all or part of your compensation on production. Also, keep in mind that your pay structure is not the only thing to consider when negotiating your contract.
Each offer you review will likely contain certain benefits that may or may not sway your decision. These perks could include, but are not limited to: insurance coverage, a professional allowance (an amount the company will reimburse you for or directly pay for related to your professional expenses), mileage reimbursement if travel is required, a 401K, and/or paid time off.
The addition of these elements may substantially effect your overall happiness with your contract and should be closely evaluated during the decision process.
While contracts can be overwhelming, if you keep these points in mind, you will have much more confidence and be able to make a well-informed decision about your future.

Just Remember….

      • Salary is SAFE!
      • Production equals more risks, more rewards!
      • and…Combination gives you a little bit of both!
Patricia Fulmer, OD, FAAO
About Patricia Fulmer, OD, FAAO

Dr. Fulmer is the sole owner of Legacy Vision Center, a cold start, medically focused practice in Huntsville, AL, which launched at the end of 2020. A graduate of the UAB School of Optometry, she completed an ocular disease and primary care residency at the Thomas E. Creek VA Medical Center before returning to Alabama to serve as the Center Director and consultative optometrist for a referral-based, tertiary care facility and then as an associate at a multi-doctor family practice. Her clinical interests include disease management, particularly glaucoma, uveitis, dry eye, and neurology-related cases, as well as educating students and colleagues through lecturing and writing. She is an active member in the American Academy of Optometry and American Optometric Association and currently serves her profession as a member of the Board of Directors of the Alabama Optometric Association and as President of the North Alabama Optometric Association. In her free time, Dr. Fulmer enjoys spending time with her husband and family, spoiling their fur-babies, traveling, attending concerts, and exploring the outdoors while kayaking and hiking. She also loves giving back through volunteering, including serving on the Board for HEALS, Inc, an organization that focuses on providing healthcare to local in-need youth.

Patricia Fulmer, OD, FAAO
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