VICDOC Winter 2022 - Magazine - Page 59
The legal distinction between independent contractors and employees is often
written about: not so often the question of whether a working doctor is better off as
an independent contractor or as an employee. If you have a choice, or the option is
negotiable, what factors are relevant in deciding which way should you go?
» Continuing Medical Education
support worth a minimum of
7.6% of annual earnings1.
» An additional week annual leave
if they are available for call,
worth 1.9% of annual earnings.
» Continuing Medical Education
Leave of 2 weeks per annum
worth 3.85% of annual earnings.
» Salary packaging worth a
minimum of 2.55% of
annual earnings2.
A Specialist employed by a
Victorian public hospital would
be at least 40.27% better off than
an independent contractor on
the same hourly rate. (Doctors in
Training cannot practice medicine
independently and without
supervision, and arguably cannot
be in business for themselves, and
cannot lawfully be engaged as
independent contractors).
Other benefits available under
the Enterprise Agreement include
employer obligations to consult in
the event of major change; a legally
enforceable disciplinary procedure;
and access to the FWC for dispute
resolution.
Unless equivalent provisions are
specifically included in contracts,
none of those entitlements apply to
independent contractors. However,
not everything can be negotiated
in. An agreement between a
contractor and a principal about
dispute resolution cannot confer
jurisdiction on the FWC to
deal with disputes if there is no
employment relationship. Taxadvantageous salary packaging is
only available to employees, and not
to independent contractors.
—
BEING “INDEPENDENT”
––
There was an historical bias within
the medical profession in favour
of independent contractor status
and against being an employee.
Working as an employee was
thought to compromise clinical
independence and the centrality
of the doctor-patient relationship.
In the 1949 High Court Civil
Conscription Case3 Chief Justice
Latham described private medical
practice as involving employment
by a patient of a doctor who
provides the service for which
the patient is bound to pay a fee.
Justice Rich spoke of the essential
confidential relationship of doctor
and patient, “a relationship akin
to that of solicitor and client and
priest and penitent.4”
Those descriptions still apply,
but the growth of employment of
doctors5 by public hospitals, the
introduction of Medicare in 1973,
the establishment of bulk-billing
(now 81% of medical services
provided), and the growth of
pseudo-employment of doctors by
corporate medical businesses has
affected the perceived professional
/ethical landscape. The view that
being an independent contractor
preserves clinical and professional
independence in a way that
employment does not is difficult
to sustain.
The option of being engaged
as an employee is frequently
not available. If the option is
available, there are few identifiable
advantages to being engaged to
work as an independent contractor.
This article does not advise
on tax. In some circumstances a
doctor may obtain more favourable
tax treatment of their earnings
by structuring their practice as
a company, and being engaged
by a principal as an independent
contractor. However, since the
introduction of the personal
services income rules in Part
2-42 of the Income Tax Assessment
Act 1997 (Cth) tax benefits are
limited and should not be assumed.
Obtaining professional business
and accounting advice is essential
when considering business structure
options and preferred legal
relationships.
1. Calculated on the top Specialists’ rate.
CME support will be a higher percentage
of annual earnings for many doctors.
Also calculated on the top Specialists’ rate.
Salary packaging will be a significantly
higher percentage of annual earnings for
doctors employed less than full-time.
2. British Medical Association v
Commonwealth (1949) 79 CLR 201.
3. The view is echoed in Breen v
Williams (1996) 186 CLR 71, 123.
4. It was not until 1959 that there were
enough Specialists employed in Victorian
Public Hospitals to warrant the state
government commissioning the Dillon
Report to consider how much they
should be paid.
5. It was not until 1959 that there were
enough Specialists employed in Victorian
Public Hospitals to warrant the state
government commissioning the Dillon
Report to consider how much they
should be paid.
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