Employee, contractor or what?

There is much talk nowadays about the legal bases on which dentists are employed in Australia.

In my early days of working in dental practices, and when I employed dentists myself during the 10 years I owned my own practice, the ‘norm’ was to bring a dentist in as a contractor but they really worked as an employee. There was the odd formal contract signed but overall both employers and dentists worked happily with this arrangement in good faith.

However, unfair management by employers of this relationship and the fallout of ‘bad break-ups’ has given rise to a real need to get all ducks in a row when entering into such arrangements. Both employers and dentists want, and should have, protection from unscrupulous behaviour from either side.

I have been asked the question of whether to hire dentists as employees or contractors by several clients. Many are seeking the ‘golden contract’ that allows for the traditional ‘you-are-an-employee-in-terms-of-behaviour-and-performance-but-contractor-when-you-are-compensated’ arrangement. And I can understand why. It worked well for the vast majority of employers and employee-contractors for decades.

However, practices are now being compelled into clarifying and formalising their employment arrangements, with the risk of a high price to pay if not done properly.

Handling change can be challenging and many of us resist the uncertainty that comes with it. Until we gather information and perform our research, we feel uncomfortably incompetent in the space with more questions than answers.

As I contemplate this issue, I hear Charles Kovess’ (co-founder of JPPS, and Australasia’s Passion Provocateur) words ringing in my ears: ‘Every situation presents an equal number of benefits and drawbacks’. And this rings true in this situation.

Considering the substantial benefits of hiring dentists as employees over contractors, I confidently say to employers “embrace the employee arrangement!”

I say this because dentists do not bring their own tools to work, one of the crucial tests of being a ‘contractor’. Therefore, a contractor relationship is often likely to be a questionable issue. The Government is discouraging, indeed attacking, employer-contractor relationships when in actuality, the contractor fits more into the employee category.

The benefit of hiring under the contractor agreement is that once you get the contract right, you can set the percentage commission the dentist will be paid and avoid the need to budget for leave, superannuation, workers’ compensation and other entitlements.

However, the drawbacks in this arrangement are substantial. A recent case heard by the Federal Court of Australia listed the classification factors for a contractor-dentist as one in which the contractor works the days and hours they choose, take any allocation of leave they want and the employer does not control how the dentist works or behaves with patients or staff. Can you imagine?…

Your practice works hard to create and deliver a high standard of service to your happy and grateful (hopefully!) patients. A crucial element of this process is the consistency of that service. You want your whole team to be EMPLOYEES so that you can collectively develop and implement great systems, expect certain performance standards from each other and move towards the common goal of ideal patient care. Together.

In my view, the answer to the structuring of the financial compensation of your employee-dentist is a straightforward calculation.

Given the number of sessions the dentists will work and the average hourly rate they currently generate, calculate what their commission payment will be over the expanse of a year. Now calculate the same year, given they will be entitled to superannuation, sick leave, annual leave, paid time in staff meetings etc. at the national minimum hourly rate of $18.93. Reduce the commission percentile to incorporate this amount and you will ensure business expenses remain balanced while still providing fair compensation to your employee-dentists. Those dentists’ lives become simpler in terms of their own accounting and financial management.

This arrangement then entitles you, as the employer, to ask that they wear a specific uniform, behave in accordance with the patient service protocols of the practice, contribute to effective teamwork, participate in team meetings and training, and practice their craft within the parameters of the service your practice desires to deliver.

It is abundantly clear that the success of any dental practice relies heavily on its people, so getting the employment arrangement right is vital to moving forward, united in the combined pursuit by all team members of delivering your practice’s ideal service.

There is the possibility that candidates for a dentist position at your practice actually request (or demand) that they are engaged as a contractor. My advice is to stick to your guns. It has been my experience that there are many wonderful dentists out there looking for the perfect practice for them. Become skilled in your employment strategy and you will attract numerous great dentists, avoiding the inclination to bend to one specific candidate’s demands.

Once you have that great new dentist on board, complete your employment process with a kick-ass induction routine. This is crucial for a mutually-satisfying path moving forward. If you do not have a system in place at your practice, I suggest you take a look at a couple of JPPS products that address this area.