Bottom Line Up Front: Signing a physician employment agreement during residency can provide extra income and the security of having a job lined up after training. But the earlier you sign, the more uncertainty you accept about your future circumstances, the employer, and the employment market. Before signing, understand exactly what you are committing to and, just as importantly, what it would cost if your plans change.
For residents, signing an employment agreement can happen surprisingly early.
Some physicians receive offers during their final year of residency. Others are approached as early as during PGY-2. In some specialties and markets, employers may begin recruiting even earlier.
And the offer can be tempting. Sign now, receive a monthly stipend or other financial support during residency, and have a job waiting for you when training ends.
That can be a great arrangement. But signing an employment agreement two or three years before you actually start working is a very different decision from signing one 6-months before graduation.
The question is not simply whether the offer is good today. It is whether you are comfortable committing your future self to that offer.
Link to Why Signing Early Can Make Sense Why Signing Early Can Make Sense
There are real advantages to securing a position early.
The most obvious is money. Residency salaries are not exactly known for being generous, and an employer-sponsored stipend can provide meaningful additional income during training. Depending on the arrangement, an employer may also offer a signing bonus, student loan assistance, relocation assistance, or other financial incentives well before the physician’s start date.
There is also value in certainty.
Signing early can eliminate the stress of conducting a job search during the final months of residency or fellowship. You know where you are going, what you will be earning, and, at least generally, what your professional life will look like after training.
For a physician who already knows where he or she wants to live and practice, that certainty may be worth a lot.
But there is a tradeoff.
Link to A Lot Can Change in Two or Three Years A Lot Can Change in Two or Three Years
Suppose you are a PGY-2 resident and sign an employment agreement today for a position that begins after graduation.
By the time you actually start, a lot may have changed.
The hospital or practice may have new leadership. Physicians you expected to work with may have left. The call structure may have changed. The practice may have been acquired. Your spouse or partner may receive an opportunity somewhere else. Your own career interests may change.
The market for your specialty can change too.
Compensation that looks competitive today may look very different two or three years from now. Signing early can mean locking in compensation before you know what the market will look like when you actually enter it.
None of those possibilities necessarily means you should not sign early. They do mean that the length of time between signing and starting should be part of your analysis.
Link to The Stipend Is Usually Not Free Money The Stipend Is Usually Not Free Money
This is one of the most important things to understand about early employment agreements.
If an employer is paying you during residency, there are almost always strings attached.
A residency stipend may be conditioned on actually beginning employment and remaining employed for a specified period of time. If you change your mind, fail to start, or leave early, the agreement may require you to repay some of all of the money you received.
Sometimes repayment obligations are forgiven gradually over time. Sometimes they become immediately due after certain events. And sometimes the amount owed can include more than the cash that actually hit your bank account.
That changes the calculation.
A $2,000 monthly stipend for two year sounds like an additional $48,000 during residency. But if accepting that money creates a $48,000 repayment obligation if your plans change, you should understand that obligation before treating the stipend as additional compensation.
The longer the period between signing and starting, the more important those provisions become.
Link to Ask What You Are Actually Locking In Ask What You Are Actually Locking In
An early employment agreement should be reviewed not only for what it gives you, but also for what it prevents you from reconsidering later.
Among other things, residents should understand:
- Compensation: Is your future salary fixed now? Can the employer change the compensation methodology before you start? Are productivity thresholds or bonus formulas clearly defined?
- Stipend Repayment: When must the stipend be repaid? Is repayment prorated? Is it forgiven over time? What happens if you cannot start because of circumstances outside of your control?
- Termination Before Start Date: Can either party walk away before employment begins? If so, what happens to any stipend, signing bonus, or other advance payments?
- Restrictive Covenants: Are you agreeing today to a non-compete or non-solicitation restriction that could affect your options years from now?
- Practice Location: Are you committing to a specific facility, or can the employer assign you to other locations?
- Schedule and Call: Are these obligations actually defined in the agreement, or are you relying on what you were told during recruitment?
- Outside Activities: Will the agreement restrict moonlighting, teaching, consulting, research, or other professional activities?
- Malpractice and Tail Coverage: Who pays for coverage, and who bears the cost of tail coverage if the relationship ends?
- Changes Before Start Date: What happens if the practice is sold, reorganized, or materially changes before you ever work your first day?
The American Medical Association also recommends that physicians understand not only compensation, but the duties, benefits, restrictive covenants, liability coverage, and termination provisions contained in an employment agreement.
The details matter because you are making the decision based on what you know today while agreeing to obligations that may not become relevant for several years.
Link to The Earlier You Sign, the More Flexibility Matters The Earlier You Sign, the More Flexibility Matters
There is an important distinction between signing an agreement nine months before graduation and signing on 3 years before graduation.
The further away your start date is, the harder it is to predict your circumstances.
That makes flexibility particularly valuable in early-signing agreements.
For example, a resident signing years in advance may want to pay particular attention to provisions governing repayment obligations, pre-employment termination rights, changes in compensation, assigned locations, and what happens if the employer undergoes a significant organizational change before the start date. See our 10 Significant Physician Contract Mistakes article for some examples.
The goal is not necessarily to create a contract that lets you walk away whenever you want without consequence. An employer providing significant financial support during residency reasonably wants some assurance that you will actually show up for work when the time comes.
The goal is to understand how much flexibility you are giving up in exchange for that support.
Link to So, When Should You Sign? So, When Should You Sign?
There is no universal answer.
If you know where you want to live, know the organization, like the opportunity, receive competitive compensation, and understand the obligations associated with any stipend or signing bonus, signing early can make perfect sense. The additional income and certainty during residency can be a great advantage.
But the stipend should not be the only reason you sign.
The earlier you commit, the more uncertainty you are accepting about your future circumstances, your employer, and the employment market. In effect, part of what the employer may be paying for is your willingness to make that commitment early.
Before signing an agreement that will not begin for another two or three years, ask yourself a slightly different question than whether you like the job today:
Link to If my circumstances change between now and graduation, how difficult and expensive will it be to change my mind? If my circumstances change between now and graduation, how difficult and expensive will it be to change my mind?
The answer is often somewhere in the employment agreement.
And that is something worth understanding before the first stipend check arrives.
Link to Frequently Asked Questions Frequently Asked Questions
Link to How early can a physician sign an employment agreement? How early can a physician sign an employment agreement?
There is no standard time when a physician must wait to sign an employment agreement. Some physicians sign during their final year of residency or fellowship, while others receive offers much earlier in training. The earlier you sign, however, the more important it is to consider what could change between signing the agreement and your actual start date.
Link to Should I sign a physician employment agreement during residency? Should I sign a physician employment agreement during residency?
It depends on the opportunity and your circumstances. Signing during residency can provide financial benefits, such as a residency stipend or signing bonus, as well as the certainty of having a job after training. The tradeoff is committing to an employer, location, compensation structure, and contractual obligations potentially years before you will actually begin working.
Link to Do I have to repay a residency stipend if I change my mind? Do I have to repay a residency stipend if I change my mind?
Possibly. Many residency stipend arrangements require repayment if the physician does not begin employment or leaves before completing a specified service period. The agreement should explain when repayment is required, whether the obligation is forgiven over time, and whether any exceptions apply.
Link to Can I get out of a physician employment agreement before my start date? Can I get out of a physician employment agreement before my start date?
That depends on the agreement. Some physician employment agreements permit termination before the start date, while others impose repayment obligations or other consequences if the physician does not begin employment. Before signing, understand both your termination rights and the financial consequences of exercising them.