Locum tenens is temporary fill ups for vacant post of doctors in healthcare settings. It is a very flexible, wide spread, hour based option for doctors to work. Because of its contractual features, the biggest challenge for locum doctors is to manage their finances of their everyday work.
Various payment options are available for locum doctors. Some of the most common payment modes and its features are listed here for locum doctors.
PAYE is national withholding system on income payment to employees. Employer deducts general tax and national insurance before remitting it to authorized personnel mostly the HMRC. Any legal agency is obliged to operate PAYE or pay a limited company. Thus, it is the one of safest payment mode for both locum and the agency that also guarantees a regular payment.
If you are employed by more than one agency, it may complicate your tax code system and you may end up losing it. Other than that, PAYE is one of the most reliable payment mode for locum doctors.
As of rule, agencies are obliged to pay a limited company if not the PAYE system. Many locums prefer this option as locum can claim legitimate expenses such as insurance, travel and professional fees. Locum tenens need to set up their own limited company if only they do not fall under IR35 legislation. Make sure the contract with the agency is “IR35 proof”. You can verify or call for advice from the agency’s accountant.
The best part of this payment mode is the full control over the paycheque with correct amount of tax and national insurance payment. Nonetheless, it can be costly if you are returning to permanency after short period of time in locum.
Offshore companies are legal entity incorporated or registered in offshore financial centres. The agencies pay offshore companies, which later pays locum gross earnings of around 80% to 90%. These methods do not have any tax obligations other than the processing fees and insurance. The HMRC allows limited transactions of locums being paid though offshore structures, if found pertinent motives.
This payment mode often involves recruitment agency and an Umbrella Company as an employer to agency contractors. Locums working under umbrella receive payment via PAYE system whilst being able to claim expenses as well. Under IR35 legislation, umbrella companies have full employment rights and an assurance of employers contracts remained within the IR35 guidelines. Although locum can only use umbrella companies if they work through more than one client. Recruitment agencies take small fees for their services in between.
Any umbrella company must have valid and appropriate P11D Dispensation agreement with HMRC. Locum must know if their agency have the agreement, if not they may accumulate more additional tax liabilities to the HRMC.
We also provide consultation on all kinds of payment methods on medical professionals' preferences. Contact us for any of your queries on different payment modes to a locum.