Nurse practitioners ask me questions all the time about employment benefits and contract details.
Thoughtful questions, too, — and I expect nothing less since you and my audience are just the best — NP’s want to know,
- What is the difference between whether I am employed as a W2 employee or a 1099 contractor?
- What employment benefits can I expect in a full compensation package as an NP?
- Which parts of my contract do I need to read carefully (so that I don’t end up regretting my decision later on)?
It’s vital to consider your benefits just as intentionally as you would weigh the pros and cons of your salary.
So today, I’m answering all of these and sharing exactly what to keep in mind while you are reviewing your employment agreement.
I’ll walk you through:
- The ins and outs of the different types of employment
- Individual benefits you can expect in a full compensation package (W2 vs 1099)
- Benefits specific to Nurse Practitioners
- Health benefits, vacation time, PTO, CME benefits, and more
- Termination & how to get out of your contract
- What you need to read carefully beforehand so that you don’t regret your decision
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Why discuss employment benefits? Isn’t salary more important?
It’s easy to be excited when talking about salary and negotiation. But employment benefits are equally as important and are adjacent to salary because your benefits often result in additional funds in either your current or future paycheck. It’s still money, just in a different form! 💰
So I strongly encourage you to always consider the benefits package in the context of your job offer. The salary number alone isn’t enough to make an informed decision, in my opinion, because there can be some drastic additions to the benefits in the entire compensation package. That said, let’s review the different types of employment…
The two main types of employment
W2 – Employee status
Being a W2 employee means that you are an official employee of the company or the organization and that you’re subject to the typical employment laws. Your employer will typically withhold your payroll, your income taxes, your social security and medicare and you will be issued a W2 slip at the end of the tax year that you will file with your taxes. W2 is the most common and traditional type of actual employment. And if you get laid off as a W2, you usually qualify for unemployment benefits.
Now, depending on how many hours you work and what your state employment laws are, you can expect that your W2 employment will come with benefits! There is some flexibility with your schedule, too. Being a W2 employee doesn’t necessarily refer to how often you work, but rather how you are designated with that company.
The other main type of employment, and I even hesitate to call this “employment” because it’s technically not, is 1099, also known as independent contractor status.
1099 – Independent Contractor status
If you are working as a 1099, or an independent contractor, you’re technically not an actual employee of the organization, but rather you are self employed and serving as a contractor. This means that you likely will not be eligible for any benefits because you don’t have a typical employment agreement. You also are not bound to any contracts or even any hours guarantee. The company that you work for will pay you the gross amount of your pay, meaning, your hourly rate x the number of hours you work.
As the contractor, you are responsible for setting aside your own taxes and paying them when they’re due, which may be once a year with your tax return. Or if this is a long erm deal for you, you may be required to pay quarterly estimated taxes.
You likely know that I am neither a tax expert nor an accountant, so I won’t go too deep here, but to give you some perspective – Yes, it will be nice to see the total amount of your rate of pay multiplied by your hours in your check. But it’s really up to you to estimate how much you need to be putting aside for taxes – keeping in mind that there’s also something called a self employment tax on top of your typical taxes. For this reason, 1099 hourly pay usually is or should be a little bit higher than W2 hourly pay to make up for the additional payouts you are responsible for.
As a 1099 contractor, the organization you work for is not responsible for paying any of your payroll withholding, unemployment insurance, parental leave benefits or any state-mandated payments – So keep this in mind.
Lately, I’ve been seeing more and more nurse practitioner positions that are 1099 opportunities.
But sometimes, NP’s are confused and unsure about the type of employment they are being offered. When you’re in an interview, definitely be sure to ask, “What type of employment is this? Is this contractor status, or is this W2 employment?”
Get everything in writing
First, it is normal to not always have an actual legal contract for NP employment. Sometimes you just have an employment agreement. So regardless, please make sure to get everything in writing. Even if you just have a one page employee employment agreement, there should still be an asset, such as an employee handbook, that outlines the remainder of these benefits that we’ll be going over. If you do get a legal agreement, like a contract, these usually will be included inside the multi page contract. Both of these situations are normal. Just make sure that regardless of which situation you’re in, all these benefits are outlined somewhere in writing. Got it?
Specific Benefits for Nurse Practitioners
The most common benefits for nurse practitioners are, of course, compensation and salary and…
Paid Time Off
Depending on the employer, PTO might be an entire “bank” that you use for sick time and vacation and personal time. Other places may separate this out.
Sometimes, if you are a salaried exempt employee, there might not even be a bank of sick time – you may be expected to make up lost hours – or there may be an expectation that when you’re sick, you’re sick, and you don’t have to “make it up”. Be sure to clarify this when you’re reviewing your time off benefits. ✔️
Vacation Time / Personal PTO
What I see typically is that NPs are given between three to six “work weeks” of vacation time. A “work week” is defined by the hours of your employment. So if you work 40 hours per week, then your “three work weeks” are 40 x 3. Usually this is stated either in days or hours. In terms of holidays, five to 10 paid holidays is standard.
It is very common to include health benefits in a compensation package. However, if an employer has fewer than 50 employees, it’s actually not required to include health benefits. So keep that in mind if you are considering smaller practices with fewer than 50 employees. This would be a conversation that you want to have. It could also be a negotiation moment for you. If their company doesn’t offer health benefits, you may be able to negotiate for an increased rate of pay or a stipend that you can use for purchasing health benefits for you and/or your spouse.
Most companies and organizations have either a 401K or a 403B option as employer sponsored retirement plans. What I want you to look for here is – Do they have any sort of profit sharing or matching structure? Because that means: free money.
If your employer offers a 401k option, that’s great. That means that you, as the employee, have the option to put money aside into this plan and the money that you put aside lowers your taxable income. You’ll get this money back when you retire because it’s your money that you’re putting aside.
On the other hand, if there is a match, meaning, let’s say your employer says, “if you put 5% of your salary into the 401k, we’ll also put at 5%” – That’s free money; that is a great benefit.
I’ve especially seen this be really fantastic with academic medical centers; they tend to have really great retirement plans and matching structures. The same is true of state or government agencies.
Productivity Structured Bonuses
These are bonuses structured by your efficiency and productivity and are fairly common for nurse practitioners. Maybe there’s a quarterly benefit if you meet a certain RVU number, or you have a certain average number of patients per day. This can be a really nice opportunity for you to earn above and beyond your base salary. You’ll likely want to ask if the productivity expectation is reasonable and reachable. For instance, if this is your NP job and you’re not sure if you’ll reach the bonus, simply ask them about the other providers and how often the other providers get their bonuses. This will help you make a more informed decision.
CME Money & CME Time Off
CME stands for Continuing Medical Education, meaning, you will be compensated to continue learning and advancing your education within your career.
I will say that most nurse practitioner positions offer this benefit. So typically, you can expect between one and two work weeks of additional paid time off to be used for CME. Some places of employment will require you to give proof that that’s what you’re doing. In other places, this is just a “bonus bank of paid time off” that you’re expected to use for continuing education.
There are often funds associated with CME. For full time employees, anywhere between $1000 to $3,000 per year is fairly standard for continuing education money.
How this usually works is that if you go to a conference, or you participate in a course, or you have a professional membership, you will pay for it yourself, and then submit the receipt to your employer for reimbursement through the company’s own reimbursement process.
What to look for in employment agreements
Right off the bat, be sure to look at the term and termination, clause or situation. This will typically be found in a legal contract. There should be a whole section titled, Term and Termination. Pay close attention to what you are signing for. Depending on the situation, if you sign a three year contract, you may not be eligible for an increased rate of pay until after those three years, unless, say, in the Compensation section, it outlines what your rate of pay increase will be every year.
The other point of this is termination, meaning, how can you get out of this contract? How can the contract end?
I will say that 60 days is pretty much standard and professional courtesy for nurse practitioners. We’re not really the type of role where it’s appropriate to give two weeks notice. This is really the type of thing where 60 days is the professional standard.
So I would recommend looking at that termination clause seeing what they require of you. If there’s something like “six months notice needed” for you to terminate the contract, that’s a little bit unreasonable. It may be something that you want to negotiate or reconsider.
You also want to see if there are any penalties for termination of the contract outside of what it says you can do. Definitely read all these details. I have heard some nightmare stories, but as long as you read over the contract in advance, and make sure you’re not signing things that you’re not comfortable with, then hopefully you won’t find yourself in a bad situation.
Signing a non compete clause
It is fairly common these days to have some sort of non-compete clause. A non compete clause will basically say you cannot work in whatever setting within X number of miles for X number of years. In terms of the length of time, two years is not completely unreasonable. But the radius really should depend on the state that you’re in, and the population density, because, you know, a mile in New York City is going to be different than a mile in rural Oklahoma, right? So you really need to consider, “Okay, if I don’t have this job anymore, and I want to look for another job… How far geographically am I going to be looking without having to move, and are there still opportunities for me, outside of what my non-compete clause says?”
Nothing that I am sharing with you today comes from a legal background, by the way. This is not legal advice. I am not an attorney. And non-compete clauses are very difficult to enforce. In many states, these clauses are completely unenforceable. But that said, you should still know what you’re signing and be generally in agreement to what you’re signing before you make a commitment.
Hopefully this has been helpful to you. Let me know what other questions you have about contracts and benefits, or a completely different topic! I love hearing from you and would love to hear any big takeaways.