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GP work: Employee vs Independent Contractor

Choosing whether to work as an employee or an independent contractor is a critical decision for GPs working in Australia.

Both come with risks and benefits – not just for the GP but for the clinic as well.

These considerations are based largely around flexibility as well as remuneration and tax implications.

But not all is as it seems.

Here’s what you need to know.

The basic difference

The overwhelming majority of doctors working in Australia are employed as independent contractors.

This allows them the flexibility and independence to work the hours they choose.

Or at least it should.

It may also bring a significant tax benefit.

Doctors who establish a business in Australia pay a top tax rate of just 30% compared to employees who pay more than 45% for every dollar earned beyond $180,000 per annum.

This generates a significant tax advantage to doctors on very high incomes.

In the medical profession, the basic differences between an employee and an independent contractor are:

Employee – hired by a clinic to work certain hours at the clinic’s discretion.

GPs are paid a mutually agreed salary or hourly rate. The clinic provides all necessary equipment for the GP to perform their duty.

Independent Contractor – GPs operate like their own business within a medical practice, and bill their patients and Medicare for their consultations.

Their clinic then invoices them periodically, generally recovering around 30% of their takings as a service fee.

Independent contractors may be required to provide all necessary equipment to perform their duties.

The government crackdown

While most doctors in Australia operate as independent contractors, the reality is that many are no longer considered such by government regulators.

The Australian Tax Office in conjunction with relevant state authorities are closely examining the relationship that doctors have with their clinics to determine if they legitimately remain independent contractors or are really employees in disguise.

Such rulings can have serious tax and financial implications for both doctors and clinics.

Doctors will be forced to pay more tax while the clinics will face a significant payroll tax liability.

Every clinic in the country is being closely scrutinised to ensure all is above board.

The determining criteria 

There are a number of factors the ATO and state government authorities are using to determine whether a doctor is truly an independent contractor or merely an employee.

Importantly, independent contractors may be classified differently from state to state in Australia.

It is also possible to be classified as an independent contractor for some duties and as an employee for others, depending on the exact tasks performed in each role.

No one factor is used on its own but rather, all are examined in their entirety before a judgement is determined.

These factors include:

Independence

Who decides when, where and how you perform your duties – you or your clinic? 

There are normally some factors such as expectations of availability written into the terms of any contractual agreement.

But if changes are made to these terms, requirements about taking a certain number of breaks or seeing a minimum number of patients, it is likely that doctor will be viewed as an employee rather than a contractor.

Independent contractors should NEVER be rostered; they set their own hours.

Payment structure

A truly independent contractor sets their own fees, collects all their receipts and pays their clinic an agreed service fee.

They do not receive any sick leave or holiday allowance.

Money should NEVER flow from the clinic to the GP.

Any variation to this arrangement risks the contractor being viewed as an employee.

Equipment

Contractors may be required bring their own tools and equipment including a laptop however IT equipment and support are usually covered by their service fees, in addition to basic furniture including a table, chair, bookshelf and medical bed.

There may be a share arrangement provided for a particularly expensive device.

But if a clinic is providing anything over and above that, it may be considered an employee relationship.

Risk

A contractor is responsible for their own professional indemnity insurance.

If a contractor’s agreement absolves them of that risk and diverts it to the clinic, it may indicate the existence of an employer-employee relationship.

Subcontracting

Only a contractor can subcontract or delegate their work in the event of their unavailability.

This may not always be desirable to the clinic and may be excluded under certain terms and conditions.

Ongoing employment

The expectation of ongoing employment may also define an employee.

An independent contractor has no such expectation beyond the initial terms of any signed agreement.

Sham contracting

The law governing employees and independent contractors is the Fair Work Act 2009.

Sham contracting is the act of knowingly or recklessly representing an employee as an independent contractor and is illegal under this Act.

It is also illegal to coerce an employee to act as an independent contractor or to dismiss or threaten to dismiss them if they don’t perform those tasks in that role.

The maximum penalties for each contravention are $93,900 per business and $18,780 per individual.

Contact Health Recruitment Australia today

If you are a doctor either considering working or already working in Australia and concerned about your employment conditions, Health Recruitment Australia can help.

HRA’s primary role is to place doctors of all ages with the right clinics in Australia, whether you’re trained overseas or down under.

Part of our commitment is being fully versed on the latest regulations, protocols and recent changes in law regarding independent contractors and employees in the medical profession.

Many clinics work with doctors who believe they are operating as independent contractors.

But in reality, they are likely to be considered employees and leaving themselves vulnerable to a nasty shock and a hefty tax bill.

If you are unsure where you stand, or want to know the best pathway for you, consider contacting HRA.

If you wish, we can even offer you relocation to a clinic where you can work with the confidence of operating as a fully independent contractor.

Feel free to start with an informal, no-obligation discussion with the experienced team at Health Recruitment Australia. Contact us.

Enquire now, and we’ll be
in touch shortly!

 

Enquire now, and we’ll be
in touch shortly!