Understanding and Evaluating Associateship Opportunities
Guaranteed Bases and Percentages

Course Author(s): David G. Dunning, MA, PhD; Robert D. Madden, DDS, MBA

Guaranteed Bases and Percentages

Sometimes associates are compensated with a guaranteed base, with or without a bonus, which replaces the base when associate generated revenue exceeds an agreed upon threshold. However, in these situations, what happens if the associate generated revenue is short of expectation for several months, as is fairly common with a recent graduate? Does the associate owe the accumulated shortfall before the percentage system kicks-in? To illustrate, an associate earns a guaranteed base of $8,000/month, but when associate generated collections exceed $25,000/month, the associate is then paid 32% ($25,000 x .32). Suppose the associate generates $18,000 in month one, $24,000 in month two and then reaches $25,000 in months three and beyond. Does the associate then owe the owner $6,000 for month one and $1,000 for month two? Or does the owner allow this variance as a cost of doing business. Neither situation is right or wrong! What is critical is that the contract specify how this scenario will be addressed. That way both parties understand the rules for handling the associate’s compensation.