Chart of the month: Compensation growth—A key to team retention

While money isn’t everything, it can be a strong incentive for valued team members to stay in our practices. We’ve seen inflation accelerate in recent years, and an annual raise that keeps pace with the cost of living can be an important motivator.

How is the veterinary profession doing when it comes to compensation growth? 

What the data show

According to the 2023 AVMA Veterinary Practice Owners Survey, a substantial proportion (86%) of practice owners raised their team’s wages within the previous year. 

The most common raise given was 4% to 6%.
 

The data are reported in the 2024 AVMA Report on the Economic State of the Veterinary Profession.

What does this mean?

These data suggest that most practices are taking action to improve compensation for their teams—which is good news. Compared against the cost of living, though, we see a different story.

That’s because inflation was somewhat tumultuous in 2022. The cost of living fluctuated from month to month, and the annual U.S. inflation rate hit 6.5%. So a 6% raise in January 2023, while substantial by historical standards, actually may not have kept up with the increase in cost of living. The result: the employee’s purchasing power may have declined from the previous year. 

What can we do with this information?

A variety of factors influence decisions on wage increases—everything from individual team member performance to the practice’s financial performance. When making salary decisions, inflation and the cost of living are important factors. Considering the rate of inflation can help employers maintain their competitive edge while also supporting employees’ financial health, job satisfaction, morale, and sense of loyalty. 

If wages fail to keep up, team members may start looking elsewhere to secure a stronger compensation package. And the toll of a team member’s departure can be heavy, bearing both emotional and financial costs.

Setting up practices for success

While the inflation rate may be slowing lately, prices remain high, making this a good time to examine how your practice is doing when it comes to compensation growth. Consider the last time each team member received a raise, and the amount of that raise, then compare this with the rate of inflation. 

Of course, wage increases aren’t the only financial way to incentivize retention. Bonuses can stimulate employee engagement and performance, can be targeted to specific team members, and don’t have to increase year over year to still be appreciated. 

To cover the costs of any raises or bonuses, practices need to be in good financial health. Panelists at last year’s AVMA Business and Economic Forum shared these practical tips for maximizing efficiency and productivity. Additionally, the AVMA has a suite of tools to help build business profitability.

Be sure to save the date to attend this year’s Veterinary Business and Economic Forum October 8-9, 2024.