Locums – use carefully
The use of locums in the health care industry has again been raised by several practitioners, making this an opportune time to re-examine the need for and proper use of locums in the industry.
First, let’s define just what a locum is. The classical definition is: “a person who stands in temporarily for someone else of the same profession, especially a cleric or doctor.” The emphasis here is on “temporarily”.
In this sense of the word, a locum is a suitably qualified professional employed to stand in temporarily in the absence of the professional.
But locums are increasingly being used on an ongoing, semi-permanent basis. In the eyes of the labour and tax authorities, this corrupts the original purpose of locums. Regular ongoing employment is not temporary, and therefore the labour legislation relating to all categories of employees applies. And, yes, that includes remuneration and tax obligations.
A case study published by Vizibiliti – “Who is responsible for paying your Locum’s PAYE?” [INSERT LINK TO ARTICLE] – reveals what happens when the ongoing use of locums is discovered by the SA Revenue Services.
SARS performed a payroll audit at a practice and determined that locums are classified as non-standard employees and that 25% PAYE had to be deducted from their earnings.
In light of this discovery, PAYE was due and the total outstanding amount had to be paid immediately to SARS – in the order of several thousands. In addition, all future locum fees became subject to PAYE deduction at the rate of 25%.
Apart from the labour and tax implications, there are other good reasons to question the need to use locums on an ongoing basis.
Many practices only operate at 60% capacity and also use locums. In the current economic environment this practice is unnecessarily costly, given that the locum is typically paid by the hour regardless of how many patients are seen.
Most business owners will tell you that they can’t afford to take time off from their working day, yet many healthcare professionals believe in taking a day off during the week.
While it’s understandable that surgeons who work long hours of overtime need down time, practitioners who normally work 9am to 5pm with no after-hours calls or overtime risk negatively affecting their productivity by taking time out of their working week. Their income is affected, not only by fewer productive hours, but also by the additional cost of the locum.
Then there’s the reputational cost to consider. Your patients want to see you and enjoy your personal professional input. They feel short-changed by having to see a locum. Furthermore, the incidence of errors and comebacks is significantly higher with a locum. All of this impacts on your brand and image.
Finally, the question of indemnity insurance needs to be properly assessed when employing a locum. When appointing a locum have you asked for a copy of their indemnity insurance and confirmed their registrations with the HPCSA?
In this increasingly litigious environment, the growing number of lawsuits has pushed up insurance premiums. One of the unfortunate consequence is that, alarmingly often, when a claim is made, the indemnity is discovered to be invalid due to the professional’s failure to keep paying the premiums.
As a business owner, again, you become liable and the impact on you and your business can be significant.
As a quick checklist for your business, ask these questions regarding your approach to using locums:
- Do you regularly use locums? If yes, is it always the same person on an ongoing basis i.e. twice a week, every month?
- Are they a permanent feature of your practice?
- Do they work predominantly for your practice i.e. do they earn the majority of their income from my practice?
- Do they work at your premises, with your equipment following your protocols?
- Have you signed an agreement with them, specifying that should you be found guilty of incorrectly classifying them as an independent contractor and become liable for their PAYE you will be able to reclaim this PAYE from them?
- If you restructure your week, could you do without them or, perhaps, use less of their time?
- Have you formally checked their Professional Indemnity Insurance and HPCSA registration?
The rules regarding deduction of PAYE for locums are set out in the fourth Schedule of the INCOME TAX ACT, NO. 58 OF 1962.
The questions posed in this act specifically challenge the status of a person, requiring that it be established and demonstrated that their position is clearly outlined in terms of either being hired as an independent contractor or non-standard employee. To determine this status, a comprehensive set of questions has been formulated.
In the case study previously referred to, the following ruling was decided and enforced by SARS:
An employer who has incorrectly determined that a worker is an independent contractor is liable for the employee’s tax that should have been deducted, as well as the concomitant penalties and interest. The employer has the right to recover the tax paid from the employee.
Ensure you’re up-to-date with SARS regulations and guidelines
Always remember that as an employer you are more accessible and accountable to SARS than your locums, so it’s your responsibility to stay up to date with the rules and regulations that govern PAYE deductions and criteria.
As a responsible medical professional, you’ll be familiar with plenty of effective treatments and remedies that should be used only sparingly and temporarily. Perhaps it’s time to face the reality that when it comes to your business, locums fit into that category.
Need more help with locums?
If you’re in need of personalised and professional advice on how to get the most out of using locums and running your practice more efficiently, get in touch with us today.
Vizibiliti Management Services – Success is in sight!
BY ALISON MAYTHAM
“There are many different factors that determine the success of your practice – but, as a busy healthcare professional focusing on the needs of your patients, you may not always have the time to focus on the many demanding, and often complex, facets of managing your business. Vizibiliti provides you with easy access to insightful, comprehensive practice and business management solutions and advice across all stages of your business journey – from establishing, growing or closing your practice.”