Retention bonuses are becoming more popular with employers both inside and outside of the healthcare industry. Retention bonuses are offered to high-in-demand, easily-poached employees for staying on the job for a certain period of time. Although they sometimes get confused with signing bonuses and forgivable loans, they are different—and therefore appraisers need to analyze them differently when conducting a fair market value determination.
BuckheadFMV conducted online research to determine how many physician employers are offering retention bonuses. We found that the military pays eligible physicians with at least 8 years of service between $12,000 and $60,000 per year for signing multiyear contracts. We also found that a small percentage of the thousands of online job postings in the private sector specifically mention a ‘retention bonus’. Bonuses ranged from $10,000 to $50,000 per year and varied based on length of service and physician specialty. Although they aren’t ubiquitous yet, from our viewpoint, retention bonuses seem to be a growing trend among hospitals that employ physicians.
Given the significant dollars involved, it is important for employers with retention bonus programs to consider these payments when analyzing physician compensation for fair market value. It is also important to consider how the timing of retention bonus payments may impact the analysis. As noted in the infographic, retention bonuses are taxable compensation in the year payment is received. Employers may find that retention bonus payments made at intervals throughout the service period, rather than in a large upfront payment, make it easier to stay within the fair market value range.