The status of self-employed individuals has been a hot topic recently, with many high-profile cases concerning companies such as Uber and Deliveroo making it into the press. The latest fishing expedition by HMRC however appears to be casting doubt over the self-employed status of dental Associates.
Previously, the basic premise has been that where the Associate is engaged on the BDA standard document, you know, that 1970s standard, where the Associate is supposed to hire his own locum in his absence and the terms of the agreement are adhered to, HMRC guides that the Associate will be treated on a self-employed basis.
So it is substance over form, but substance has to match form.
There are two problems. The first problem is that a lot of Associates are hired on real terms, i.e. the practice owner obviously engages the locums and so on. The second problem is that a lot of Associates are hired on the BDA standard document, but the details, which genuinely distinguish self-employed contractors from employees are just ignored, which is just as bad.
Anyway, the HMRC fishing expedition is a serious wake-up call for us carefully to examine all of the badges of employment, to make sure that none of them feature in the template Associate Agreement and, most importantly, to put procedures in place to ensure that the provisions set out in the Associate Agreement are actually followed in practice.
In other words, and I summarise, the Associate really must hire his own locum in his absence. He needs physically to phone the agency, he needs to hire the locum, he needs to keep the locum’s revenue and he needs to pay the locum out of that revenue.
I will now consider each badge of employment in turn.
In employment contracts, there is usually an obligation on the employer to provide the employee with regular work. Matching this, there is a mutual obligation on the employee to make himself available to do that work. It is therefore important, in order for Associates to be considered as self-employed Contractors, that the practice owner is not obliged to offer them dental work on a regular basis and that there is no mutual obligation on the Associate to accept this work. This is the case as set out in the BDA standard document. More importantly, this remains the basis upon which Associates are engaged in reality. If the Associate has a morning without patients, he will not be paid for that morning.
A Contractor is required to have the ability to decide when and how he works and he should not to be under the direct supervision of the practice owner. This can be compared to employees who are seen to be under the direct control of the practice owner, who then decides what the employee does and how and when they do it. Employees are also expected to conform to certain standards, for example practice policies relating to behaviour and dress.
It is perfectly reasonable, for practice management purposes, for the practice owner to have a diary as to when the Contractor attends the Practice, but the Associate should have complete freedom as to the work that he performs for patients. It would also be prudent not to refer to compliance with practice policies relating to behaviour, dress or the like.
The BDA standard document requires the Associate to comply with practice policies. This could be considered to be an indicator that the Associate is in fact under the direct control of the practice owner.
The use of locums has already been mentioned above. In order to be treated as Contractors, Associates should not be obliged to carry out any dental services personally and should have an unqualified right to appoint a substitute. The key word here is “unqualified” as problems arise where any right to appoint a substitute is subject to the practice owner’s approval or where locums may only be used in certain situations i.e. when the Associate is unable, rather than unwilling, to work. This appears to be the procedure set out in the BDA standard document but as mentioned above, it is important to make sure that these provisions are also followed in practice.
Associates should not be required to work exclusively at the practice in question. It is important that they are free to provide their services at any practice of their choice, without qualification, such as the express permission of the practice owner.
Restrictive Covenants appear in the BDA standard document, but they can actually be an indicator of employee status. That said, restrictive covenants are clearly necessary to protect the goodwill of the practice. It is quite plausible to run an argument that restrictive covenants should apply to independent contractors as well as to employees, so we are definitely not suggesting that you remove them.
With the exception of fixed term contracts, an employee’s length of engagement is not usually pre-determined and does not usually relate to the performance of a specific task/project i.e. employees are commonly engaged on a permanent and ongoing basis. By engaging an Associate for a finite period or to carry out a specific task or project, he is more likely to be considered to be self-employed. This appears to be at odds with the BDA standard document, which is an ongoing agreement. However, for business continuity it is difficult to see how this badge can be more effectively addressed.
Associates should only be paid on the completion of a specific task or on a commission-only basis. They should also not be entitled to participate in any benefit schemes offered by the practice and should not normally be paid overtime. If an Associate is paid a fixed amount on a regular payment date, irrespective of their performance or if they receive benefits from the practice, such as pensions or bonuses (obviously ignoring superannuation), then you may be at risk of them being considered an employee. This should be an easy box to tick, as Associates are generally paid on a commission-only basis. It is definitely worth making sure that they do not participate in any other benefit schemes.
An Associate could similarly be at risk of being considered an employee is they have a defined role and are deemed to be fully integrated at the practice. Examples of this include if their name is on the practice’s internal phone directory, if they have a practice e-mail address, if they wear a uniform or if they have a practice business card. It is therefore important that Associates do not perform services similar to or substantially the same as those performed by an employee. It may be challenging to implement this in practice but, where possible, it might be worth seeking to ensure that Associates do not appear too integrated within the practice as a whole.
Self-employed Contractors generally provide their own equipment and materials in order to perform their dental services. It is an indicator of employee status if the practice provides the Associate with the equipment required by them to carry out their job. Again, it is difficult to see how you can implement this factor as the BDA standard document provides that the practice owner provides the facilities in order for the Associate to provide the dental services. Conversely, it should be possible to make a clear argument for effectively two categories of self-employed dentist. The first category is obviously one where the dentist provides his own premises, goodwill, equipment and the like. The second is where there is a slightly more fluid/flexible status, where the Associate provides everything except premises, goodwill and equipment.
In relation to financial risk, Associates should be personally responsible for any losses arising from their dental work. They should also be required to correct any unsatisfactory work in their own time and at their own expense. This is in contrast to employees, who do not assume any financial risk in working at the practice and who will need to be paid even if there is not sufficient work to keep them occupied. This should also be an easy box to tick, as Associates are usually responsible for correcting their own failed dental treatments and definitely participate in bad debts.
Taxation is the final matter to consider and is thankfully an easy factor to satisfy and be used to demonstrate self-employed status. Associates should be responsible for the payment of their own income tax and NIC on their earnings. This is, of course, reflected within the BDA standard document.
Overall, the BDA standard document does appear to comply with the badges of self-employed status outlined above. It is difficult to see how practice owners can remove the matters of restrictive covenants or of providing Associates with dental facilities and equipment.
However, in order for your Associates to maintain their self-employed status, it is worth considering whether Associates should be required to comply with practice policies, ensuring that they are not entitled to any other benefits schemes provided by the practice, considering the extent of their integration within the practice as a whole and ensuring that any right to appoint a locum is unqualified.
It is also important that, once you have gone to the effort of ensuring that your Associate Agreement is are HRMC compliant, that they are then followed in everyday practice.
Russell Abrahams, Solicitor, Abrahams Dresden LLP
Abrahams Dresden articles and guidance notes are for general information purposes only and generally state the law as at the date of publication. The information may not be relied upon as legal advice. We are of course always happy to advise directly on specific issues arising.