You are surprised to receive a letter from Dr Smith, a former contractor, demanding over $100k for unpaid super. Dr Smith worked at your practice as a contracted doctor for over a decade and now claims he’s entitled to unpaid superannuation.
Where does the practice stand and how do you respond?
We often receive calls from practices and doctors seeking advice about whether a doctor is an employee or independent contractor, and what it means for the doctor. This determination is particularly significant when it comes to superannuation entitlements.
This vexing question was recently considered in a case involving a dentist. While the court found the dentist was not an employee, the practice was still required to make superannuation contributions on his behalf.
The dentist sought unpaid long service leave entitlements and unpaid superannuation contributions.
The court first considered whether the dentist was an employee for the purpose of long service leave entitlements. After considering all the relevant factors, the court decided he was not an employee for this purpose.
The key points arising from the decision to assist practices to determine whether a doctor is an employee or contractor are as follows:
The decision sets out a range of factors which can assist in determining whether a doctor is an employee or contractor. However, the list below is not exhaustive and shouldn’t be used as an automatic checklist to determine a doctor’s employment status. Depending on the particular case, other features of the relationship may be relevant in making the determination.
Superannuation legislation is complicated. Many are surprised to hear the legislation does not actually require employers to make superannuation contributions on behalf of employees to a superannuation fund.
Rather, the legislation requires an ‘employer’ to pay a tax known as the superannuation guarantee levy. An employer can avoid this tax if it makes appropriate superannuation contributions on behalf of its ‘employees.’
The term ‘employee’ is defined in the legislation to include a person who works under a contract that is wholly or principally for the labour of the person.
In past cases, the courts have found the legislation operates broadly and is intended to cover “employment like relationships in which work is performed for remuneration or payment”.
In this case, the court found the agreement between the dentist and the practice was “wholly or principally for the labour” of the dentist and therefore, the practice was required to make superannuation contributions on his behalf. As we understand it, the dentist was engaged under the agreement to provide services to the practice. This differs from a services agreement where the doctor engages a medical practice to supply services to the doctor.