Whether you are a trainee physician approaching the transition to becoming a GP, or a practice owner or manager looking to bring on a newly fellowed GP, we wish to draw your attention to some important considerations for both trainee doctors and employers. In this 'tips for new doctors and the practices hiring them' article, we're going to focus on a key element of the process – the way in which a doctor is engaged in a practice or stepping out on their own.
It's an exciting time when a doctor finishes their training and becomes a fellowed GP and there are quite a few options available to them when starting their career in Australia.
When embarking on a new working relationship, there must be a mutually beneficial outcome. This begins with the way in which a doctor is engaged within a practice or commences their independent practice with their own clinic.
In the event a newly fellowed doctor is looking to join an existing practice, there may already be an established hiring preference however, it may not be the best option for the practice. Practice owners and managers should be open to the options and benefits of each, as well as alert to why one avenue may be inadvertently illegal, given the practice's expectations of their doctors.
The avenues available to newly fellowed GP's in private and corporate General Practice include:
Naturally, both parties to any arrangement want to minimise their risk and maximise the potential of the working relationship. Here's what you need to know about each of the options available to newly fellowed GP's.
The most familiar arrangement is for a GP to join an existing practice under an Employment Agreement. Under this 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.
The advantage of being 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.
In addition, 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.
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.
While most GPs will consider working as independent contractors, it is commonplace within the medical industry for GPs to be engaged using service models. The service model will provide certain administrative services, and in turn, the doctor will be engaged to provide certain services to the practice.
Independent contractors have different rights and obligations to employees, and their Service agreement will vary from the Employment Agreement. Doctors hired as independent contractors are, in effect, running their businesses with an ABN and hence all the obligations that go along with business ownership attach. Unlike under an employment contract, where the employer pays the superannuation, payroll tax, and leave entitlements, independent contractors are responsible for their tax obligations and superannuation.
The benefit for a doctor working as an independent contractor is that they will have more control over the number of hours they work as well as what hours to work and how to take care of patients.
There are circumstances when GPs are engaged as independent contractors, but the law classifies the doctor as an employee. It is vital to consider the metrics that determine whether a contractor or employee relationship exists. Practices who are alert to the rules, will want to ensure that independent contractors are not viewed as employees, as there is a real risk of having to back pay payroll tax and leave entitlements if it is proven that an independent contractor should have in fact, been considered an employee.
Related: Independent Practitioner Arrangements - Payroll Tax Case
The Employer versus Contractor Distinction - Two Recent Cases
One of the key reasons a doctor may wish to consider independent contracting is the ability and freedom to choose their working hours. If as a practice, it is dictated when and how the contractor performs their tasks, then the practice may be considered an employer.
This can prove challenging to Practice Managers whose role is to ensure there are medical practitioners available consistently within the practice. Taking away the independence and control of the GP by requiring them to arrive at a certain time or asking them to be available on call after the contracted hours, may be indicative of an employment agreement.
As a general rule, independent contractors should provide their own tools, including laptops and medical equipment required to complete their contract. However, in most cases, the practice may require expensive or specialised equipment. In these cases, it may be necessary to share the resources to practice effectively.
By law, independent contractors can subcontract and delegate their work. However, as a practice owner, this may be against your policies, and interference will point towards it looking like an employment agreement. To resolve any discrepancies that may arise from this, it is important to include a clause of approval of any subcontractor arrangement.
Independent Contractors are responsible for their tax obligations. In the current context, the fees or results of the contract are considered Medicare rebates, which are more often than not collected by the practice, on a contracting doctor's behalf. Payments are structured from the rebates after deducting the fees for the consultation room or service fees. A payment calculated on time is more likely to be viewed as an employment agreement.
However, in an agreement in which the full Medicare rebate is remitted to the practitioner, and the practitioner pays the practice a separate service, this would be indicative of a contractor agreement. Therefore, it is important to consider how to structure the payments as a service fee. If the practitioner has no control over their work, uses only the practice's facilities, and is unable to delegate, the ATO might still find that the structure was set up as a tax avoidance scheme.
Finally, it is said that risk runs with control of the contract. That is, when independence and control are transferred to the doctor, so is the risk. This means that all contracting practitioners should hold their own professional indemnity insurance (and other relevant insurances).
However, caution should still be exercised. An Independent Contractor Agreement that assigns risk to an employer for work performed by a contractor, may indicate an employer/employee relationship.
Practice managers should ensure that the contract contains a warranty that the doctor, as a medical practitioner, will always hold sufficient and valid professional indemnity insurance (and potentially other insurance as well).
GP's can be granted a licence to occupy consulting rooms in the form of a tenancy agreement. With medical practices becoming multi-disciplinary, professionals with a range of skills and expertise can occupy the shared medical spaces. Immediately after training, GPs do not have the capital or customer demand for renting spaces. The tenancy agreement, granted through a Service and Licence Agreement or Service and Facilities Agreement, allows the practitioner to pay a licence fee for the practice.
Unlike in a lease agreement, the licence to occupy does not grant GP's exclusive possession of the space. Therefore, the parties will need to have an intention to create legal relationships, but the licence will allow for informal arrangements. A Licence To Occupy is a good option for parties who want a short-term arrangement. It would also be suitable in a situation where a licencee may not have sufficient demand to warrant exclusive possession of the space and instead share a room on a part-time basis with another practitioner.
Where a practice has granted a GP a licence to occupy, the GP often engages the medical practice to provide administrative services, which allows the doctor to provide services to the practice's patients. The amount paid to the practice for these arrangements is usually a percentage of billings.
The other option for a new GP is to start as a self-employed practitioner, either as a sole trader, partnership, or as an incorporated company. Although medical school will not have provided any business training, becoming a self-employed practitioner means having greater freedom in decision making.
However, being self-employed means being fully involved in the operations of the business, including taking full financial, legal, recruitment, and managerial responsibilities.
There are numerous advantages to self-employment however, some may find working in the business a burden and a high risk, particularly when new to practicing independently.
Regardless of the avenues discussed above, first and foremost, when a doctor is transitioning into independent practice, it is vital that there is a match between the GP's values and a practice's values and culture. In our work with doctors, practice owners and managers, this is central to all good, long-term working relationships.
As you can tell, the 'independent contractor versus employee' distinction is a complex one and recent cases have confirmed this. There are also changing parameters in relation to the employment of doctors. For these reasons, whether you are a doctor starting out in your career or you are bringing in a newly fellowed GP to your practice, it is important to ensure that the arrangement that is being considered, is setting up both parties for success.
As a number of recent legal cases have demonstrated, all is not always as it is intended. When a practice believes they are legally correct in their approach when engaging doctors and setting up licence and service agreements, only to be found later on to be incorrect, the consequences have been significant. The financial and reputational damage to the practice owners can become unavoidable. To be confident that all is as it should be, whether you are a new doctor or a practice owner or manager, any Employment Agreements, Services or Licence Agreements should be reviewed independently by a lawyer to identify if there are any elements that may require discussion, negotiation or updating, to ensure the terms are up to date and legal.
Equally, if you are a GP starting a new business, seek support with the set-up of your practice. Along with the employment of any team you start with, there is much compliance involved, which is best approached with the support of both an accountant and lawyer. Both will have helpful insights and tips for new doctors. It is vital you seek out advisors who have experience in setting up medical practices and are up to date with all of the compliance elements involved in setting up a medical practice.
Related Articles: Employing Doctors as Employees or Independent Contractors
Practice Owners & Managers: Adding a Doctor To Your Practice
Independent Practitioner Arrangements - Payroll Tax Case
The Employer versus Contractor Distinction - Two Recent Cases
Our team works with doctors and practices of all sizes, across Australia to review and mitigate risk. To minimise your risk, book a time to discuss your practice with one of our specialists. Connect with us here.
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