Signing bonuses: more than you signed up for?

You had three job offers, but you were hooked by the rural hospital that dangled the $50,000 signing bonus. Given the size of the bonus, you had no problem signing a three-year contract.

But a year later, you’re missing the city, and an urban hospital is interested. You’d like to make the leap, but you might be in for a big surprise.

“Physicians underestimate the amount of leverage they have…They’re afraid they’ll scare away the potential employer.” – Chris Brown, JD, Health Law Firm, Altamonte Springs, Fla.

“These large bonuses are designed to entice physicians, and they are very effective,” says Chris Brown, JD, an attorney with the Health Law Firm in Altamonte Springs, Fla. It turns out that fat signing bonuses often have strings attached.

“If your employment at the hospital doesn’t work out for some reason, you can’t simply terminate your contract early and walk away,” says Mr. Brown. “You usually have to repay part or all of that bonus.”

This is also true of other recruitment tools such as cost of credentialing, student loan repayment benefits, relocation costs and even recruitment fees. “These perks are offered as incentives to come on board,” Mr. Brown explains. “If the physician leaves, the hospital or group has lost out on its investment and wants it back.”

Any termination of employment before the end of the contract period—whether initiated by you or by the hospital or medical group—can lead to incentive repayment. So if you’re fired, you incur the same repayment burden as if you’d left voluntarily.

How can you protect yourself? Your contract should spell out “exactly what the hospital group considers grounds for termination,” Mr. Brown says. Some are obvious, such as misconduct, criminal activity or a revoked license. But continued employment is usually also tied to performance benchmarks and other criteria that vary from hospital to hospital.

Those should be clearly spelled out in the contract. And included in these specifications is whether you would be expected to repay your signing bonus and other incentives.

Further, the contract should specify repayment terms. When and how much would you have to repay? Signing bonuses, while given upfront, are typically considered to be pro-rated over a period of time, usually two to three years, Mr. Brown explains. You may have to repay only the remaining pro-rated amount. But some employers require the full amount, even if you have already worked at the hospital a year.

That doesn’t mean you should avoid signing bonuses. The key is to be informed about what your prospective employer has tucked away in the contract.

Also key: not being afraid to negotiate a more favorable arrangement.

“Physicians underestimate the amount of leverage they have,” Mr. Brown observes. “They’re afraid they’ll scare away the potential employer, but that hasn’t been my experience.”

On the contrary: His clients have successfully negotiated amending or nullifying the terms of repayment. “The worst that can happen is that the hospital says ‘no,’ but that’s unlikely because hospitals don’t want to scare physicians away either and they understand that a harsh repayment clause might give the candidate second thoughts.”

So even if you’re told, “this is our standard contract,” plan to negotiate to avoid being trapped in an unhappy situation. But don’t bring an attorney into negotiations at this juncture, Mr. Brown cautions. “Once attorneys are involved, the process can become unnecessarily adversarial. Get legal advice behind the scenes, but do the negotiation yourself.”

Mr. Brown also offers this advice. “Put your signing money into a savings account and leave it untouched for the full two- to three-year period, if possible. That way the money is available for repayment if the contract is terminated early.”