Employee GPs – the new engagement

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 has 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 practices’ and the doctors’ 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 ensuring 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’.

As an employee, there are additional benefits available through salary packaging. Salary packaging is an arrangement between an employer and an employee where the employee agrees to forego a portion of their pre-tax salary in exchange for certain benefits, such as a car, laptop, or even mortgage or rent payments.

One of the new incentives for rural employees is the ability to salary package their mortgage or rent payments. This can be a significant benefit for employees who live in regional areas, where housing can be more expensive and harder to come by. By salary packaging their mortgage or rent payments, employees can save on their tax bill and potentially reduce their overall living expenses.

Regardless of whether you are an employee or a contractor, as a doctor, it is important to know about the Workforce Incentive Payments (WIP). WIP is a program designed to provide financial support to health professionals working in regional, rural, and remote areas of Australia. The program offers payments to doctors who work in eligible rural and remote locations. The payments are designed to help cover the costs associated with living and working in regional areas, such as travel expenses and additional training costs.

When it comes to risk, the risk generally runs with the control of the contract.

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.

If you have any questions about these Agreements, or anything else, feel free to contact us here