Employment status for dentists

Employment status is important, both from a tax and employment rights perspective. Employees have tax deducted at the highest rates of the three but have the most rights. At the other end of the spectrum, anyone who is genuinely self-employed pays less tax than an employee and has more flexibility but has limited rights beyond any contractual rights agreed.

Until 2023, associate dentists who were engaged on a standard British Dental Association or Dental Practitioners Association associate contract were effectively treated by HMRC as self-employed, without much interrogation beyond those terms other than in exceptional circumstances. That all changed in 2023 when HMRC withdrew its guidance around this issue and removed the existing concessions to treat associate dentists as self-employed.

So, what does this mean? The standard associate contract will no longer act as a “shield” against HMRC interrogation regarding the amount of tax and NICs paid. Employment status for dentists will now be determined based on the (often complex) caselaw around employment status, both in determining status from a tax and employment rights perspective.   
Where there is any dispute around status, (including HMRC disputes and claims by associate dentists relating to their rights), it will now be determined by the day-to-day reality of the working practices of the associate dentist. Contractual arrangements remain an important piece of the overall picture of the status of that relationship, but they are not the sole determining factor as was the case previously from an HMRC perspective. 

A self-employed relationship can bring important financial and tax advantages - the money generated by dental treatment is split directly between dentist and practice without many overheads, which can lead to high profits for both parties. On the other hand, genuinely self-employed dentists are not afforded employment rights protections, which can make self-employment a riskier position for the individual, (although this is often seen as being outweighed by the other advantages). 

However, in light of the recent changes mentioned above, if a relationship with an associate dentist is incorrectly labelled by the parties as self-employed, the financial and reputational risks can be very high. These include the practice being liable for tax, national insurance, penalties and interest, including liability for backdated sums going back a number of years. They also include liability for employment rights including, (for those with employment status), protection against unfair dismissal, and, (for those with employment and/or worker status), the right to paid holidays, not to be discriminated against and national minimum wage, amongst others.

Self-employment therefore remains a popular status choice for dentists, but the risks of getting status wrong should not be underestimated. Especially with the burden of the GDS contract provisions and regulatory provisions requiring practice owners to exert more control over a dental associate than would be expected of an unregulated profession.  Therefore, calling into question their self-employed status. Practices should therefore review their day-to-day relationships with self-employed dentists from the outset and on a regular basis, to ensure that the relationship is a genuine self-employed relationship, and that the arrangements will stand up to scrutiny if the employment status is questioned.

Assuming that the relationship between practice and dentist is one of genuine self-employment, the next most important source of legal protection for both parties will be the agreement between them, which is often the associate agreement referred to above. This is a contract signed between the dentist and the practice. A well-drafted associate agreement will:

• set out the precise legal relationship between the practice and the dentist (including contractual provisions that can assist in showing that the relationship is one of genuine self-employment)
• set out pay arrangements, including how and when a dentist gets paid, and the way the profits are split between the parties
• govern what happens when a dentist joins and leaves the practice; and
• explain what happens if things go wrong between the parties, including indemnities to:
  • ensure the practice can contractually pass on any liability to the associate dentist in respect of tax liabilities and employment status claims if there are any disputes that arise relating to employment status; and
  • ensure the practice is protected in respect of the associate’s clinical and regulatory actions, which we will discuss further in our next article on vicarious liability.

The concept of assessing employment status and having a well drafted associate agreement or self-employed contract, (and the contractual protections contained within), has become even more important in recent years because of complex developments in employment status.

An example of a recent development is Uber v Aslam, a high-publicity case from 2021. Uber’s drivers argued they were “workers”, a “middle” category between employee and self-employed which would entitle them to holiday pay and minimum wage.  

Uber is just one of many cases heard by the courts of England and Wales in recent years that have shown the complexities around employment status and the significant financial consequences if the parties self-assess status incorrectly. These cases have a direct impact on dentists and their self-employed status. In fact, the 2022 case of Sejpal v Rodericks involved a dentist who was found to be a worker and not self-employed. Any practice that finds itself in a similar position could face costly legal claims, including claims for backdated tax and penalties, backdated holiday pay, or even unfair and constructive dismissal.

If you are a dentist being asked to sign a self-employed associate agreement, or a practice owner preparing an associate agreement for a new dentist, it is sensible to take legal advice on both the agreement and the applicable employment status.