Does Your Consulting Firm Have an Unfavorable Bonus Schedule?

Jun 17, 2014 4:28:00 PM · by David Kushan

Many people who get into pharmacy informatics/pharmacy IT consulting are motivated by the additional income they can earn. However, there's one factor that keeps many more from transitioning into the market space: the required travel. In fact, the travel makes demand for qualified people that much greater. Still, most people probably wouldn't do the required travel without some additional financial incentive.

Consulting firms understand this, which is why you’ll generally see a 10% to 30% increase in salary levels offered to consultants performing responsibilities similar to those of their hospital-employee peers.

Because consulting firms pay for bench time, they want to provide a plan that will pay their employee a higher level of compensation based on billable hours, but a lower compensation if the employee is not currently billable. If they’re not billable, they will be on the bench, where they’re simply an expense to the firm, until they’re billable again.

Many firms have yearly bonus plans. Such firms compensate their employees with an annual salary, but also share some of the firm’s profits in the form of a year-end bonus — if the employee is able to bill out a minimum number of hours throughout the year.

[Guide: Healthcare Consulting 101: Understanding the Four Types of Healthcare Consultants]

Firms set a target number of hours upon the employee’s arrival and pay a bonus if that number is reached. The problem with the yearly bonus plan, for the employee, is that it doesn’t take into account any surges of significant hours that may be required of the employee. Let me give you an example:

Let’s say your compensation plan includes a 10% bonus to be paid if you’re billed out for work at least 1,800 hours for the year. At the beginning of the year, you’re brought in from January-April to help a client who’s behind on a timeline to reach a March 25 go-live date. From the beginning of the year to go-live, you’re putting in 40-plus hours per week and near/during go-live you’re in the 60-hours-per-week range.

During this time you’re doing nothing but work. You even stay at the client site a couple of weekends and forego coming home a couple of times. You feel it’s worth it because you’re well on your way to hitting your bonus number and will get the financial payoff at the end of the year. By the end of the first quarter, you’re already up to 700 hours.

However, after this engagement your firm can find only a couple of other two- to three-month projects for you. So, with all the unexpected bench time, you end up billable for only 1,350 hours for the year. Now, there’s an argument that you were probably paid well, overall, for working only those 1,350 hours. But this was not necessarily your choice.

The firm certainly has a responsibility to come up with work to keep you billable. Nonetheless, you put in all the extra hours for those months, thinking there would be a payoff at the end of the year, only to end up with no bonus. 

As a result, many consulting firms now pay bonuses on quarterly or monthly hours worked beyond a minimum. Some firms even pay a bonus for every hour worked. 

It’s important to be aware of the different bonus plans available to complement your salary. They can have a huge impact on your total compensation at the end of the year.

Learn more about the different types of consultant arrangements by checking out our guide — Healthcare Consulting 101: Understanding the Four Types of Healthcare Consultants.

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General, Consulting, Career Planning, David Kushan


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