{"id":75622,"date":"2024-02-01T00:00:29","date_gmt":"2024-02-01T05:00:29","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=75622"},"modified":"2024-02-01T12:28:00","modified_gmt":"2024-02-01T17:28:00","slug":"employee-discounts-0224","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/employee-discounts-0224\/","title":{"rendered":"Don\u2019t Reject the Value of Employee Discounts"},"content":{"rendered":"

One of the most misunderstood and abused on-the-job benefits in veterinary practice is the employee discount. According to a 2023 Veterinary Hospital Managers Association survey, 94% of practices discount services for team members\u2019 pets, and 88% cut product prices. If you\u2019re new to ownership, answer the following questions to help you lay out a discount policy. If you already have one, make sure your employee handbook addresses these seven points.<\/p>\n

1. Who is Eligible?<\/strong><\/h3>\n

Is the discount applicable to the employee\u2019s pets only or to those of family members and friends, too? Does family also mean uncles, sisters, cousins and in-laws? If the employee lives with parents, are all family pets eligible, and when would they be ineligible? What about roommates, boyfriends and girlfriends? What if the employee fosters a shelter pet<\/a>?<\/p>\n

2. When Does Eligibility Start?<\/strong><\/h3>\n

Do discounts begin immediately upon an employee\u2019s hiring or after a certain number of days or months?<\/p>\n

3. How Many Pets?<\/strong><\/h3>\n

Many veterinary professionals have multiple pets. Will discounts apply to all animals or just one or two?<\/p>\n

4. How Much is the Discount?<\/strong><\/h3>\n

For example, it is 10% off services and 20% off products? Or do you provide $10 in monthly discounts or set an annual dollar limit?<\/p>\n

5. Any Exclusions?<\/strong><\/h3>\n

Do pet food and all medical services come with a 10% discount, or are surgeries at full price?<\/p>\n

6. How is the Price Calculated?<\/strong><\/h3>\n

Does the manager or hospital owner determine the discount, or does the practice software compute it?<\/p>\n

7. What Are the Terms?<\/strong><\/h3>\n

Is payment required at the time of service or purchase? Do you offer payment plans? Payroll deductions? Are outstanding balances subject to interest or late fees?<\/p>\n

Tax Time<\/strong><\/h3>\n

It should come as no surprise that the Internal Revenue Service cares about employee discounts. Why? In short, unreported income affects payroll taxes. Also, the perceived value of a potential discount could influence employment offers and compensation packages.<\/p>\n

For example, you might work for an equine veterinary practice that offers 50% off services, and the only reason you accepted the job for $10 an hour is because your spouse has a horse-riding business. Or perhaps you\u2019re a dog breeder on the side or own a cattle ranch needing frequent veterinary services or products.<\/p>\n

From the compliance side, the IRS is particular about its interpretation of the law on employee discounts. According to the agency, you can give employees up to 20% off services without creating additional taxable income. Furthermore, you must charge at least a 10% markup for product discounts to be tax-free. If you exceed those limits, the difference becomes taxable compensation in the employee\u2019s paycheck.<\/p>\n

Therein lies the problem. Many practice owners intentionally or unintentionally run afoul of IRS rules and face ramifications when challenged.<\/p>\n

Do the Math<\/strong><\/h3>\n

Take a team member whose dog gets a veterinary exam and vaccinations<\/a>. You typically charge clients $80 and $100, respectively. The IRS is content if the employee pays:<\/p>\n