Employees vs Independent Contractors
While at a Convention and Exhibition, my colleague Linda & I talked to hundreds of General Practitioners, Practice Managers, Nurse Practitioners and Nurses. However one thing stood out for me as a concern: the number of Doctors who told me they were engaged as Independent Contractors instead of being hired as employees. Now for many people this might not seem like much of an issue. You’re still getting paid to do a job, just in a slightly different manner. But the current trend to hire people as independent contractors instead of employee’s is concerning for a number of reasons:
You’re not paid any leave entitlements: annual, personal/carer’s, parental, etc.
You don’t accrue long service leave entitlements
Highly likely to be missing out on Superannuation contributions
You have to pay for all your own professional development to maintain your professional accreditation, instead of your employer paying for or contributing to part of the cost
You’re engagement can be terminated without notice for no reason
You’re not entitled to any notice period if your engagement as a contractor is terminated
You’re not truly independent – you’re working to a set of directions.
The Australian Fair Work Ombudsman has a Fact Sheet detailing the differences between independent contractors vs employees (https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/contractors-and-employees-whats-the-difference). The courts have found time and time again that you are not a real independent contractor if you are unable to delegate your work and the company hiring you is significantly involved in directing your day-to-day work activities. In the case ACE Insurance Limited v Trifunovski 2013 the Federal Court ultimately found that the Independent Contractor had "…no real independence of action or true independence of organisation" and they were actually an employee (http://www.hcamag.com/hr-news/court-finding-sheds-light-on-employee-vs-contractor-equation-173955.aspx).
So why is this an issue for medical practitioners looking to set up their own practice - or anyone wanting to set up any business - and bring people on board? Because:
If you get this employment relationship wrong, you risk getting a call from the ATO and being investigated.
If you deliberately hire independent contractors, but then treat them as employees you risk being taken to the Fair Work Commission or even Federal Court for trying to avoid paying employee entitlements.
You need great people working with you to build a practice. Happy staff = happy patients/clients and screwing over your people by engaging them as independent contractors may save you a buck short term but will hinder the success of your practice long term as your contractors will resent your penny pinching over time.
For more advice on how to determine the right employment relationships for your business, contact Nyree at The Fiddes Group.