There are a number of important differences between employees and self-employed contractors. Perhaps the main two being:
- Employees receive a number of statutory rights, such as holiday pay and sick pay and the right not to be unfairly dismissed.
- Employers must pay tax and NICs (PAYE) on payments made to employees.
Practices, generally, therefore wish to avoid the additional burden of taking on further employees and make sure that their locums are engaged on self-employed terms.
Have a written agreement in place
It does not help a practice to have no contract. In the absence of any evidence to show what arrangements have been agreed, HMRC are liable to imply an employee relationship. In that case, a practice can find itself landed with an unexpected tax bill (together with additional penalties for late payment) even if it has already paid the locum gross.
So, it makes sense to put in place a written agreement, making it clear that a locum is self-employed.
A fighting chance
Now, the truth is, the contract is never conclusive by itself. HMRC can always challenge any arrangements, no matter what it says on the document. However, a practice will give itself the best possible chance of maintaining its position that its locums are self-employed if it can show that it has a properly worded agreement in place.
There are a number of elements involved in ensuring that a locum is self-employed, but three elements are key. If you adhere to these, it will be difficult for HMRC to argue that a locum is an employee of the practice.
Each of the following terms ensures that the arrangements fall outside the usual arrangements of an ‘employer – employee’ relationship.
The first term is that your locum should be able to provide a substitute. This is a theoretical right. It may be unlikely that the locum would ever do so. However, by virtue of the fact he has a right to appoint a substitute (a right which no employee has), he has been taken outside of an employment relationship.
The second term is that the locum is not entitled to holiday or sick pay. These are clearly employment rights, and HMRC would not accept a self-employed locum as having these rights.
The third is that the locum should not be controlled by the practice to the same extent that its employees are controlled. In practice, this means the locum is entitled to provide the services to the practice at their discretion, within the terms of the agreed contract and practice’s rules and standards.
The NASGP locum template includes each of these terms, to ensure that the practice has the best possible opportunity of maintaining a genuine self-employed contractor relationship with their locums.
See also - Working as a long-term locum
A long-term locum post at a practice often starts off as a short term venture, but with significant recruitment problems in general practice at the moment, it's likely the practice will want to hold on to you and keep you coming back.
This FAQ is from the perspective of being a GP locum in the same practice for a 'long time', rather than about choosing working as a GP locum as part of your career portfolio.
It explains it from four different perspectives - NHS pension scheme, HMRC tax perspective, employment law and 'mission creep', and there's even an audio podcast too.