Mythbusting: Implications when Contractor Doctors are actually Employees.
The adage “it’s just the way we do things around here”, can be one of the most dangerous statements that is said in any business, let alone a Medical Practice. There are a few legal items that Doctors and Practice Owners need to be aware of that “may be the way you have always done things”, could mean you end up in hot water down the track. Contractor doctors may actually be considered employees in the eyes of the law. When you, as a business owner, agree to treat an employee as a contractor, you assume the risk of making a mistake. If you get it wrong, you can face penalties, interest, and charges for not meeting payments, tax and Super obligations. The 7 dangerous myths some medical business owners and administrators believe to be true:
1. An ABN automatically makes a doctor a Contractor. Right?
Just because a Doctor has an ABN does not automatically mean they will be a Contractor for every job. In determining whether the Doctor is an employee or a contractor - the whole of the working arrangement and the specific terms and conditions under which the work is being performed needs to be examined by someone who is an expert or has working experience with current employment laws.
2. Contracting Doctors are standard industry practice, so it must be okay?
Just because another Practice does something a certain way does not mean that it’s legal! An alarming number of medical businesses do not consider the legal ramifications of their employment decisions, and many medical business owners regret their lack of foresight when the law catches up with them at a later date.
3. If a Doctor is working more than 80% of their work hours for us, are they not automatically an employee?
Some people think that if a Doctor works more than 80% of their time for one Practice that automatically makes them an employee. The 80% rule, or the 80/20 rule as it is often referred to, relates to Personal Services Income (PSI) and how a Contractor reports their income on their individual tax return to determine if they can claim some business-like deductions at tax time. The 80/20 rule is not a factor a Practice owner should consider when determining whether a Doctor is an employee or contractor under current employment law. The specific working arrangement needs to be examined and the specific terms and conditions under which the work is performed must be considered to avoid acting in ways that are against the law.
4. If we use Contractors, then we don’t have to worry about paying superannuation. Correct?
You have heard me say this a few times already, but a practice always needs to look at the actual working arrangement and examine the specific terms and conditions under which the work is performed to determine whether a Doctor is a contractor or an employee. There are some instances where a Practice may be required to pay Super for contractors - do not assume.
5. If a Doctor submits an invoice to be paid, then they MUST be a contractor?
Submitting an invoice for work done or being “paid on invoice” does not automatically make a Doctor a contractor. Without wanting to sound too much like a broken record, to determine whether a Doctor is an employee or contractor, we need to look at the whole working arrangement and examine the specific terms and conditions under which the work is performed.
6. The Doctor has asked to be a contractor, so is that not how I should categorise his/her working relationship?
A Doctor might have a preference to work as a contractor, but that does not mean that your Practice should engage them as one. Whether a Doctor is a contractor or employee is not a matter of choice, but it depends on the working arrangement and the specific terms and conditions under which the work is being done.
7. We have always used contractors, and it’s never been a problem. Why change now?
Like most things, employment law exists in an ever-changing legislative environment. The Government is continually revising, tweaking and changing the rules about who is a contractor and who is an employee. So even if your Practice has always used contractors, it remains your responsibility as a business owner to regularly check and establish whether your existing Doctors are still considered employees or contractors under the current law.
What about when a new Doctors joins the Practice?
It is just as critical to check whether a new Doctor is going to be an employee or a contractor by reviewing and examining their expected and specific working arrangement –am I starting to sound repetitive?? In other words, unless a new working agreement (including the specific terms and conditions under which the work is performed) is identical to a past contract, and the legislation has not changed since that agreement was put into effect, it could change the outcome of whether a new Doctor is considered an employee or contractor. Sometimes a Practice may have incorrectly determined that its first contracting Doctor was a contractor. Continuing to rely on the original “contractor” decision would mean the business is incorrectly treating all future doctors as contractors when they are in fact employees.
What should I do now?
These small mistakes, repeated across multiple Doctors, year on year, can add up to a major business calamity if not addressed. As I’ve reiterated in this article, do not accept the status quo. Be rigorous in your considerations and use experts to guide your decision making. Regulators and others ARE watching. Keeping your hands clean now could ensure that there is less upset, pain, cost, and confusion in your future. Want to know more and “keep your hands clean” in the process? Contact us and our lawyers at You Legal will be happy to assist you in whatever way we can.
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