It's not uncommon to read about the difference between independent contractors and employees, however less so about which arrangement is the better choice (for an individual and for a practice). In this article, we explain why you (as a practice) may want to hire a doctor as an employee and why (as an individual doctor) you may want to become an employee as opposed to an independent contractor.
Independent contractor arrangements have been long regarded as the more 'flexible' and popular option for doctors. However, recent legislation and case law have exposed a degree of risk when these arrangements are not properly characterised and do not reflect the true nature of the relationship. Misclassification has implications for a practice's liability to pay worker entitlements and/or payroll tax. As we can see through the public ruling by the QRO and recent case law, including Thomas and Naaz and Optical Superstores, this issue is dynamic and confusing for practice owners and practice managers alike, and short of there being significant systemic change, the situation is unlikely to simplify any time soon. The QRO public ruling suggests we may be about to see a shift away from Services Agreements and Independent Contractor Agreements as we know them altogether.
This article focuses on employment and discusses the benefits of employee doctors from both the practice's and the doctor's perspectives.
Under an Employment Agreement, the employee must do the work and get paid for the work by the employer. Employment relationships and a doctor's entitlements as an employee can be governed by an Award – but if a doctor is in private practice as a GP, there is no Award applicable. However, there are other relevant legislative provisions, including the Fair Work Act, that do apply. Entitlements include remuneration (including superannuation) and leave entitlements like sick leave, annual leave, and carer's leave. There may also be long-term practice service benefits. In contrast, whilst the Independent Contractors Act 2006 (Cth) does provide some protections for independent contractors, it is largely unregulated.
Why should I hire a doctor as an employee?
A key advantage of engaging a doctor as an employee is that they have the opportunity to master skills learned through their training and apply them with the support of the practice under their existing policies, processes, and practices.
The practice will have an added layer of control over the doctor's working hours – how many and when - which may result in an extra level of reliability and help ensure availability in the practice to see patients. This also gives a practice the option to make additional requirements part of the role, including team meetings, or being available on call after hours, and seeing a certain number of patients, among other things.
Employers need to be aware of the provisions in the Fair Work Act and any other ATO obligations, in particular, payroll tax and Pay As You Go (PAYG) Withholding Tax. The ATO has been given broad powers to audit and recover tax, and they have the authority to decide about employees for tax purposes. Being clear from the get-go avoids the risk of the arrangement being considered a sham arrangement.
Industry commentators have noted that it's difficult to argue nowadays that employment cannot provide the same level of clinical and professional independence that being an independent contractor can.
What's in it for the doctor?
Given employment is highly regulated in Australia, doctors can benefit from the National Employment Standards (NES) under the Fair Work Act 2009 (Cth) in that they become eligible for certain entitlements (e.g., a minimum amount of annual leave and personal (sick or carer's) leave). As an employee doctor, you will also have the benefit of long service leave under State or Territory legislation.
Depending on the specific circumstances, as an independent contractor, your practice might still have a legal obligation to make superannuation contributions. However, as an employee, this is guaranteed. It's something that many independent contractor doctors put off doing and then panic about as they get closer to retirement age.
There are other protections under the Fair Work Act 2009 (Cth), generally including unfair dismissal protections and protection against adverse action, as well under state, territory, and federal Equal Opportunity legislation.
If an enterprise agreement or award applies (for example, an Enterprise Agreement for a public hospital), then as an employee, you will receive further entitlements in addition to the NES 'safety net'.
When it comes to risk, the risk generally runs with the control of the contract.
As an employee, one can consider the Workforce Incentive Program - Doctor Stream, part of the Commonwealth Government-funded Stronger Rural Health Strategy Initiative. Under the program, GP's are eligible for payments when they meet a qualifying period of continuous service and progress by completing active quarters in categories of eligible rural and remote locations, with varying qualifying periods, dependent on the location.
Looking to hire a doctor as an employee in Australia? You Legal offers an Employment Agreement for General Practitioners and an Employment Agreement for Registrar Doctors. Our Employment Agreements align expectations between the Practice and the General Practitioner/Registrar Doctor, reduce the risk of conflict, ensure everyone is paid in accordance with their expectations and protect both parties and start the relationship on the right foot.
