The tax advantages of being self-employed are in a state of flux at the moment. In the latest Budget, National Insurance tax for the self-employed was set to increase – but then the Government quickly changed their minds. Even so, being self-employed does not come with the same advantages as it once did, which may lead many to decide that being employed is actually more beneficial to them – thanks to the statutory rights granted to employees. This changing paradigm may directly affect the dental profession due to the high numbers of dental associates who are, at present, classed as being self-employed. This system of principals and associates has been the norm for many years now and, in the majority of instances, has proven advantageous – from a tax perspective – to both parties: the principal has the opportunity to increase their business output with the help of associates and the associates are able to work largely autonomously without the financial burdens of owning and running a practice themselves.
However, there has been a gradual shift in the status of self-employment and it may be that we are tending towards a working environment that does not favour those who work for themselves. The changes are not necessarily linked directly to dentistry – we should remind ourselves of the recent case brought against Uber that challenged the relationship between self-employed workers and their parent companies – but it is likely that the profession will begin to feel the ramifications.
As such, it is important that principals ensure that they have the correct agreements and contracts in place as soon as possible. This is the first step that any practice principal should take in order to safeguard their business. By drawing up a thorough and bespoke associate agreement that reflects the needs of the individual practice, for each self-employed member of the team, a lot of potential issues and difficulties can be avoided in future.
For example, and this is happening at the moment in many cases, if an associate is dismissed from the practice (by giving three months’ notice, or however many months is required by the current contract) they may decide to go to tribunal alleging they were, in fact, an employee all along and, therefore, have the right to claim unfair dismissal (it’s important to remember that principals do not have to follow the same procedures when dismissing an associate as an employee). If the courts find that there has been no formal agreement drawn up by the principal, they are almost certain to decide that the associate was in fact an employee and the principal may find themselves liable for compensation for unfair dismissal.
However (and this is incredibly important), an ink and paper agreement is not the final word in such disputes. If a principal is dragged in front of an employment tribunal, accused of unfair dismissal, and they argue that there was an associate agreement in place all along, the courts will only give this due consideration if the agreement was being followed on a day-to-day basis. If it was being ignored, and the relationship that existed between the principal and the associate was more akin to that of an employer and employee then the documentation may well be disregarded.
Consequently, simply having an established agreement is not enough – it must be followed to give it any legal standing. This should be remembered by principals when deciding how much control they wish to exercise over their associates. By being more prescriptive with the day-to-day conduct of their associates, a principal will be more likely to be seen as an employer in the eyes of the courts. By controlling the manner in which an associate may work, what equipment they can use, when they can take holiday and what locums they can appoint during their absences, a principal is effectively setting themselves up as an employer – and, thus, putting themselves at risk of liability in the future. Indeed, there will be little doubt in this situation that a court will decide that the relationship between principal and associate is that of an employer/employee. This will be true even with an associate agreement in play if it is not carefully drafted and followed.
Unfortunately, this can put principals in a Catch-22 situation. For example, if a principal decides to dismiss an associate and, fearing any legal repercussions, they follow formal dismissal procedures, they are immediately putting themselves into the role of employer, giving their dismissed associate grounds to claim that they were employed. On the other hand, if they simply give notice and, in subsequent proceedings it was determined that the associate was in fact an employee, then the dismissal will be found to be unfair – by virtue of not following a fair procedure!
As you can imagine, therefore, the line between self-employment and employment in the dental practice is becoming increasingly unclear. Because of this, is it crucial that principals not only set out clear and fair associate agreements, but they invest time in creating a Practice Handbook which succinctly details the protocols and procedures for every member of the team. Doing so can help eliminate any ambiguity in the relationship between the principal and their associates and will help safeguard the practice from any employment tribunals in the future. To ensure that such a handbook includes everything that is necessary, it is worth contacting a dental specific solicitor, such as Goodman Grant, to help run through every eventuality.