Pro-labore (owner's pay): what it is
Quick facts
- Definition
- Monthly pay of a partner or manager for the work they do for the company.
- Difference
- Profit distribution is the share of the result divided among partners; pro-labore is for work.
- Charges
- Usually subject to social security contributions and, depending on the amount, income tax.
- Action
- Set the amount with an accountant, according to the tax regime and current legislation.
Pro-labore is the pay of a partner or manager of a company for the work they do for it. For the orofacial harmonization (HOF) professional who practices through a legal entity (a company), pro-labore is the owner's "salary", but with a different nature from an employee's salary. Understanding the difference helps with clearer pricing. The reference here is Brazilian law.
Are pro-labore and profit distribution the same thing?
No. They are two ways for a partner to receive money from the company, with different logic.
| Aspect | Pro-labore | Profit distribution |
|---|---|---|
| Nature | Pay for work | Division of the result among partners |
| Basis | Set, recurring amount | Depends on the profit calculated |
| Charges | Usually subject to social security and income tax | Own tax rules, which depend on the regime and legislation |
| When it exists | Whenever the partner works in the company | Only when there is calculated profit |
Tax rules change with the company's regime and with legislation. For this reason, the pro-labore amount and the way profits are distributed should be set with an accountant.
Why does it matter for pricing?
Whoever works in the practice needs to pay themselves, and that amount goes into the calculation. If pro-labore is not in the costs, the price is calculated as if the owner's work were free, and the margin becomes illusory.
- Clinical hour: pro-labore is one of the components of the cost of a working hour.
- Contribution margin: shows what is left of each procedure after covering variable costs, to pay fixed costs, including pro-labore.
- Income statement (DRE): the statement shows pro-labore as an expense and lets you separate what is payment for work from what is the company's result.
- Markup: the selling price must cover direct and indirect costs, taxes, pro-labore and profit.
- Capacity: with a lot of idle capacity, the cost per appointment rises and pro-labore becomes hard to pay.
What mistakes are common?
- Withdrawing money from the till with no rule: mixes personal and company accounts and makes it hard to know whether the clinic is profitable.
- Having no pro-labore: can cause tax and social security problems, and hides the real cost of the work.
- Confusing cash with profit: the money that comes in during the month may be committed to purchases, taxes and future expenses. See cash and accrual accounting.
Also called: partner withdrawal, partner pay.
Frequently asked questions
Are pro-labore and salary the same thing?
No. A salary is for an employee, governed by the CLT (Brazil's labor law). Pro-labore is the pay of a partner or manager, with its own rules and charges, which the accountant sets according to the company's situation.
Do I need to pay pro-labore if the clinic is a legal entity?
In general, a partner who works in the company should receive pro-labore. The rules depend on the regime and legislation, and the accountant is the one who advises.