It has been 3 months now since I quit being self employed to become an employee. TheFrugalDoctor was previously working as a sole trader in a general practice clinic. General practitioners (GPs) in Australia can be grouped into sole traders, employees, practice owners and locums. As a sole trader my earnings were a percentage of my billings. Every $100 that I billed could be broken down into:
- $40 service fee
- $4 service fee tax
- $26 income tax
- $3 other business costs (medical indemnity, accounting fees, insurances, registrations, education)
- $27 pay to myself (retirement contributions, leave, living costs)
When I looked at the above, it did not make sense to me. I was only earning about 27% of my billings. The service fee covered the cost of running my practice at the clinic. This included administration staff, software, collection of fees, and nursing services. I tried to negotiate a lower service fee but was unsuccessful. The only way I could increase my income would be to increase my billings. I was already charging higher fees than other GPs at the practice. I can only see so many patients in an hour (3-4) and still offer a quality service. As a sole trader I was responsible for making my own superannuation (retirement) contributions. I would not get any leave payments. Each quarter I was expected to submit a business activity statement (this task was done by my accountant). I nevertheless had to reconcile transactions in the accounting software and forward information to my accountant. As a sole trader if you do not work, you have no income. No billings = no income.
I had to walkaway from my previous role. I could become a locum gp. There are some attractive pay rates. The downside would be traveling to other parts of the country for weeks to months at a time. I could become a practice owner. However, this would mean increasing the number of days I work. I would also have to shoulder more responsibilities without guarantee of profitability. I could move to another practice and negotiate a better service fee rate as a sole trader. I could be an employee, negotiate a competitive hourly rate, and have guaranteed employer superannuation contributions (11.5%) and leave.
Being an employee is not as bad as it is made out to be. I am now on a flat hourly rate. I am enjoying focusing on the patient interactions and not focusing on the financial side of things. I do not have to think about patient consults in terms of billings per 15 minute time increment. I now see 2-3 patients per hour. If a patient fails to attend I am not worried that I have not billed anything. I can focus on achieving better outcomes for patients and still bill efficiently but the focus is on patient outcomes. I am doing similar work to what I was doing before but I have given myself a pay rise.I am still working three days a week. It now appears that I am now earning the equivalent of 65% of my billings in my previous role. I have more than doubled my income. This is by far better use of my time.
I no longer have to submit quarterly business statements. I can no longer claim a percentage of my vehicle costs for business use. I still nevertheless can claim a tax deduction for occupation related expenses. I get paid when I am sick or on leave. One reservation that most employees have is about leave requests and approvals. I have been fortunate that the organisation I now work for priorities flexible arrangements for it’s employees. I let my manager know about my plan to have 4 months off to travel in 2025. There were no objections. One of my colleagues is presently on a 3 month break.
I am so glad I made the switch from sole trader to employee. I am still swapping my time for money but in a more effective way. I am seeing less patients an hour and getting paid more. My focus is on the patient care, this is the work that I enjoy. Going on the Financial Independence journey has helped me realise the utility of my time. Vicki & Joe mention in their book Your Money or Your Life. They ask: “Are you getting full value for selling that most precious commodity – your life?” “Does work, work for you?” Work is working for me. I am getting full utility for my life energy.