The Private Practice Success Podcast

44. A Crash Course in THE NEW Contractor Arrangements

• Gerda Muller • Episode 44

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In episode 44, Gerda delivers a timely and practical crash course on the new contractor arrangements every allied health group practice owner needs to understand. With legislative changes and ATO crackdowns reshaping the way practices can engage independent contractors, Gerda breaks down what’s out, what’s in, and how to protect your business from costly compliance mistakes.

Drawing on her own hard-won experience (and months of legal consultation), Gerda shares the five biggest shifts in contractor managements, common pitfalls to avoid, and actionable steps to keep your practice compliant, without losing your sanity. Whether you’re considering a hybrid model or just want to ensure your current arrangements are watertight, this episode is your essential guide.

In this Episode, you will learn (among others):

  • Why percentage splits are out and how fixed-rate contracting benefits both your practice and your contractors.
  • The crucial updates to 'contract for results', superannuation, and what actually defines a true contractor relationship.
  • How to spot red flags in your agreements, avoid treating contractors like employees, and implement changes with confidence and clarity.

Who This Episode Is For:

  • Allied health group practice owners who currently engage or are considering engaging independent contractors.
  • Practice leaders who want to stay ahead of legislative changes and avoid ATO risks.
  • Anyone seeking a practical, step-by-step approach to building a compliant, sustainable, and flexible business model.

Tune in for a no-nonsense, empowering guide that will help you navigate the new contractor landscape and build a practice you can’t stop smiling about :)

Special Resources:

  1. Get clear on the differences between a Contractor Model and a  Services/Facilities Agreement Model by accessing this FREE explanatory video training HERE.
  2. Access Gerda's Contracting in Private Practice Training to dive deeper into what has changed in contracting arrangements by clicking here: bit.ly/PPContracting - Use Coupon Code 25OFF to access your Podcast Only Discount Code. 

Want Gerda's Help with your Business?

Gerda helps allied health group practice owners go from overwhelmed, overworked, and underpaid to fully empowered and financially thriving. If this is you, then make today the day you reach out. Complete this super short Triage Form here bit.ly/triageformpps and Gerda will personally reach out to you. 

Here to help you build a practice you can't stop smiling about :)

Connect with Private Practice Success & Gerda here:

Well, hello there passionate private practice owner. My name is Gerda Muller, and you are listening to the Private Practice Success Podcast, and this is episode number 44.

Today I'm going to give you a Crash Course in Contractor Arrangements. So where does this topic come from? Well, as you can imagine, I find myself in a lot of Facebook groups for group practice owners. And over the weekend I was looking at one of those Facebook groups and a well-known organisation was advertising in one of these groups, and they were advertising specifically for independent contractors - so not employees -  independent contractors. 

And I read the ad, and the more I read, the more I went - Oh my goodness, you are putting yourself at such significant risk. Because even the job ad was describing an employee arrangement. Whilst the ad said, “Hey, this is an independent contractor role,” and then they started to share as you do in your job, and what's in it for this person, and what they offer as a business. I get all of that, but that was really a big red flag for me. It does surprise me - it probably shouldn't - that there's still a lot of people out there, AKA private practice owners, that are still contracting like we did five, three, even two years ago.

I know that this often happens. We are so busy running our business that we sometimes forget or we just do not prioritise looking at what is happening out there in the market. What is happening legally, legislatively, or we know it, or we hear about it and we just go, “I'll deal with that later.” Because very often in our heads, this is such a big deal. It's something that when you think about, “Oh, the contracting arrangements have changed,” it's like, oh my goodness, that's going to take me days, probably weeks, to just get my head around. Then I'm probably going to have to engage in all this change management, and then it becomes really overwhelming.

And I know that when we are overwhelmed, we often avoid or procrastinate. I'm not making excuses for us. What I'm saying is that we are all human. We are all small business owners, medium business owners, some of us are large business owners. We've got family, we've got all these things.

But let's face it, we probably feel like we're constantly on that hamster wheel. So I know that it's very easy to miss these things, and I would hate for any group practice owner to land in trouble with the ATO because the consequences will be significant. The consequences of not contracting properly based on the latest legislative changes can close your business. It can literally destroy your business and potentially destroy big parts of your world beyond your business. 

Because when you are the business owner, if you've got a company, you aren't very protected. The ATO has made a lot of changes where you can't hide anymore as the director of a company. And yes, that's why your accountant will probably tell you to have trust structures and all of that stuff. But you know every six months, the ATO is closing another loop and closing another loop, and at the end of the day, the buck stops with you.

So really, if you've got independent contractors at your group private practice, or you are a solo practitioner looking to expand and thinking that contracting would be a low-risk way of dipping your toes into the world of group private practice, then you have to continue listening. Please continue listening.

Important Disclaimer 

Now, I am going to preface this episode by saying: I am not a lawyer of any way, shape, or kind. I'm also not an accountant of any way, shape, or kind. So what I'm sharing with you today is not legal advice, and it is not accounting advice. What I'm sharing with you is what I have learned and insights I have gained as a fellow group private practice.

So during the last six months of 2023 and the first six months of 2024 - during that 12-month period - I literally consulted with my group private practice lawyer for around nine months straight. Back and forth, emailing, back and forth phone conversations. Some of those went up to an hour because I really had my head around how things had to be done legally and compliantly before all of this stuff. 

I found it really hard - and I'm admitting this - to adjust to these changes initially. Because, it took so long to get my head around how to do this right and to do it in a way that I knew,  “I'm ticking all the boxes. I'm so compliant at my business, I'm doing the right thing,” and then to go - shit, now things are changing and I don't like it.

I did have a big sense of losing control to some extent as to how things are done. But what I can tell you is when I came to the end of that nine-month period, looking back on it and now doing contracting the way we are doing it right now - the new way, the current legal compliant way - it is actually a hundred times better. It is actually better, but you still need to do it the right way. 

So I'm going to share with you a couple of. do's and don'ts. What's in, what's out. Just five big things that I have noted a lot of people are still doing what I would refer to as the old way. I'm not saying that you throw the whole baby out with the bath water based on how you contract, but if you were to come and work with me as a business, coaching client within my PPS Academy or my Founders Club, this is what I would advise you to consider. 

You don't have to do it. People often come and work with me, and I tell them - This is what I think we need to be doing, whatever you decide is right at the end of the day. But really when it comes to contracting, these are legalities. There's actually no choice in here with the majority of these things.

Percentage Split VS Fixed Rates

So the first one I'm going to talk to you about is actually not a legal requirement. Not based on my interpretation of the law, however, this is what I would consider a best practice, innovative way of contracting, and that is the old percentage split. There's still a lot of people doing the old percentage split.

So at my practice, we stopped doing that back in 2018, which is now  5, 6, 7 years ago already. It feels like just, you know, two years ago, but seven years ago already, we stopped doing the percentage split. So that is out. Since then, what we have been doing is we are paying our contractors a fixed rate per billable client hour.

So when I say client hour, that is 15 minutes plus 10 minutes for note taking  and prep. It has been a game changer, and I honestly believe that it is the best option for both the contractor and the business.  

For a business, it allows you as the business owner to more accurately budget for your expenses. It allows you to more accurately do your cashflow projections. For the contractor it does exactly the same. They can budget better; they can do better cash flow forecasting for their business so they have that security now of not having to calculate what is this amount for this particular referral type. They know exactly this is what I'm getting. 

It also means that there's a lot more onus in the business, the group practice to make sure that the types of referrals coming in are appropriate. That what clients get charged is appropriate. So, this is again, the benefit for the contractor that whether I bulk bull with an offer, the practice offers a reduced fee, whether it's a full fee-paying client with an EAP client, NDIS, DVA, whatever. It doesn't matter what the business charges the client. I know that I'm secure in my business for the amount of money that I'm going to get. So I get paid the same amount of money irrespective of the type of referral that walks into my therapy room, which can be a physical therapy room or a virtual therapy room. So there's a lot less risk for the contractor in that situation. 

Now you might go, "Oh, well Gerda, aren't you mean to put the needs of the practice owner first?" Yes, but there's a lot of things that the practice owner can do to control that because in an independent contracting arrangement, do you know who sets the fees? The practice owner sets the fees, not the contractor. 

The contractor sets the fees that he or she charges your business. But your business, the group practice, decides on the fees being charged to the clients. And if this is confusing to you, it's probably because you are not sure about the difference between independent contracting, and what is referred to as a services facility’s arrangement, which is a different business model. And I'm not talking about that model here today.  

Actually, come to think of it, I do have a 9 to 10 I think, minute video that talks you through the differences between those two. So if you are interested in that, what I will do is pop in a link into the show notes that actually shares with you this video, where I really make it clear what those two differences are. 

So long story short, what I do at my group private practice, and what I would recommend is best practice for us as business owners right now when it comes to contracting, is to not do a percentage split, but to rather pay a fixed rate to your independent contractors.

Change in the Definition of 'Contract for Results' 

The second important thing that I really, really want to highlight here, and this is the change in definition of what is considered a contract for results. So the contract for results concept, before 2024, helped you make decisions around whether you were going to pay your contractor super or not.

However, this is one of those loops that the government has closed, so they've changed their definition. If you don't know what that change is, it's on the ATO website, you can go look it up. So that definition has been changed. And that has been a major contributing factor to changes in my contractor agreement that we use at the practice.

So last year, I think it was July 2024, I ran a webinar on contracting in private practice where I actually spoke about all those changes in the landscape. So what we did at my group practice is we actually compiled what we refer to as a contracted checklist. It's basically a decision tool that we go through with every new contractor coming on board. But we also redo it every 12 months when we negotiate new contracts. 

Maybe this is not one of my five, but the other thing I will tell you because I've just thought of that, is if you've just got a rolling contractor agreement - that's putting you at risk in my point of view, - because when you are in a relationship with another business, there should be no guarantee of ongoing work.

Can you see how it starts to get that feel of employment? Because if I'm an employee, I've got an ongoing contract, right? And it's really hard to fire somebody in Australia. You need to go through all these processes and performance plans and all of that stuff. So in my opinion by having a start and an end date to your independent contractor agreement, and then in 12 months you review that, that is more in line with true contracting.

So as I was saying, every 12 months, even with current people, we would go through that decision tool again. An interesting conversation that I had with my personal practice lawyer at one point was that he said - Gerda, you can have 10 contractors at your practice doing the exact same work. Okay, let's say it might be therapy, maybe it's assessment. So the clients you give them might be similar. The type of work they're doing might be similar. But based on the questions in that decision tool, the one you might need to pay super to, the other, you might not need to pay super to. 

And that really did my freaking head in because like, I just want this to be black and white, please. Why can't it just be black and white? And he just laughed. He said, “Well then, all us lawyers would be out of work, wouldn't we? Because you can take one arrangement to the one lawyer and they can interpret it one way and somebody else can interpret it another way. Which is why we do it so that if we ever were to be taken to the ATO, and that normally happens when somebody gets the shits with you and you know they go, “My accountant said that you should have done A, B, and C.” Then we will now have documentary evidence to show this is the due diligence that we did as a business,  maybe we made a mistake, but we can show that we did our risk assessment, we asked the right questions, and based on the information that was provided to us by this person at this time, this is the decision we made, and this is what it was based on. 

If they didn't come back to us three, six months later when their situation changed to update us, well, I don't think that's on us. Well, you know, that's debatable, but that's my opinion on it. So it's really important that if you are still using a contractor agreement that is based on the previous definition of contracting for results, that this is your flag to go and speak to a lawyer and get this fixed up.

The What VS How Principle 

The third point that I want to highlight here is what I refer to as the - what versus how principle. And this is a really important differentiation when you are asking yourself, is this person an employee or a contractor? Not in terms of the previous point of, you know, their personal situation, how their business is set up and that stuff - but really how are you treating them?

This is a really important reflective point for you as the business owner, in terms of how much control do you want over what this person does? Because I know especially when you're in those early stages and you've worked so hard to build up your reputation and your business, and now you're bringing in a new clinician, you are really trusting that person - with your hard work, with your blood, sweat, and tears with your reputation. 

So a lot of times we want to tell them exactly what to do, when to do it, and how to do it. If you want that level of control, you probably need to have an employee model. Because you cannot have that level of control when it comes to contractors. If you were to enforce that level of control, you're putting yourself at risk. 

So this is the way that I look at it and how I differentiate it in my own head. When you have an employee, you can tell them what to do, and how to do it. However, if you have an independent contractor, yes, you can tell them what to do. You cannot tell them how to do it. The how is up to them Now, let that sink in.

I would also encourage you to reflect on your own interactions with your contractor team. Are you telling them how to do things? Are you giving them your operating manual and saying that I need you to do all of these things? If you are, you are putting your business at risk?

Yes, you can most certainly tell them what to do. You can check compliance with your what. Not only can you, you should, you should be telling them what to do. You should be checking that it gets done. You should be giving them feedback if it's not done properly. No, you cannot performance manage that. Okay? That is an employee exercise. Not a contractor exercise.

If I'm unhappy with the person doing the website for my business, I'm not putting them on a performance improvement plan. Okay? I'm telling them, “Hey, what's going on here?” I don't like this. Or, “I need you to change that, or I need you to get back to me sooner.” It's a different working relationship. Because an independent contractor is another business that you are in business with.

Contractors are not part of your Team

And that brings me to point number four, and this is when people refer to their contractors as a team. People do this in their job ads. They do it in the way of talking. And I did that - you know, pre all of this, it's like, you know, we are very inclusive at the practice. We want people to feel welcome and want them to be part of this culture that we are creating at the business. Well, actually, they're not. They're not part of your team. And I know this might be a really difficult pull to swallow, but they are not, they are not your team.

So I want you to start catching yourself in using the word team when referring to your independent contractors. Your contractors are your associates. They're business associates of your business. They are people where you've gone, “Okay, I can't see all these clients, maybe my employee team is all fully booked now, so I'm going to get these independent contractors in as business associates to my business. I'm going to have a business-to-business arrangement with them.” 

How much I'm going to pay them for every available hour where they may be, provide therapy to the clients of my practice, and I'm going to pay them X amount of dollars to provide my business with that service. So your business and their business are in a business relationship. They're not part of your team. If you want to have a team, you need to have employees. That's my interpretation of it.

Access to CPD & Resources

Last but not least is number five, and I'm going to just call this CPD - Continuing Professional Development. As a group practice owner engaging independent contractors, you need to be really careful if you are providing free in-house supervision to your independent contractors - because that is treating them like an employee. Remember I just said this is a business that you've got a business-to-business relationship with.

So if you are going to provide them with free clinical supervision, it's like, hmm, why? Why would you do that? Businesses rarely do something for free for another business. So that will put you at risk of potentially treating that contractor like an employee. Same with sending them on trainings, even if it's just a one-hour training. If you give them free CPD, that's a red flag.  These are those really grey areas. I don't know, a lawyer might say it's not grey at all. If you want to be really black and white, the answer is no. Don't do it. 

Depending on your risk tolerance, you might decide to do various things and position it in various ways - and I feel like I'm not being very helpful when I say that - but the bottom line is this: you really need to ask yourself, what am I providing for free right now to the contractors within my business.  Am I giving them free access to those policies and procedures, like I said earlier, and actually requiring them to use it? Mm, not good. Am I giving them resources that they haven't paid for? Because remember, they're a business., they're not employees. Am I giving them professional development for free that this business hasn't paid for?

You really want to ask yourself -  How is this putting myself at risk? As I said, the safest answer is not to provide any of that. To be really black and white here, and big time err on the side of caution. But again, this is part of a lot of stuff that goes into that assessment of what it is that you are doing and how you are treating this independent contractor.

Okay? So that is my five-point crash course in contractor arrangements.

Now if you are sitting here and thinking this is not good. I've got 10, 20 contractors on my team and I've not done anything, and I didn't even know about this. Well, now you know, and now you can do something about it. Don't freak the hell out, okay. That's the worst thing you can do - having a knee jerk reaction is the worst thing you can do.

What you need to do now is familiarise yourself with the changes. You can start by going onto the ATO website. You are very welcome to - I'll put this in the show notes as well - to watch the recording of the training I did last year, it was called Contracting in Private Practice. It's very cheap training. I priced it really inexpensively because I wanted to make it as accessible as possible to any and all practice owners that have contractors. 

Again, that training is delivered through the lens of me being a group practice owner. I'm not a lawyer. I'm not an accountant. But you know what? Training like that, just like a podcast, like this episode, will now alert you to what's happening, and it will empower you to ask the right questions.

So when you go and see your lawyer, you will have that information. Because remember, they don't know what you know and don't know, and they're not going to sit there and lecture you on the basics. Well, maybe they will, but they're probably going to charge you $600 an hour to do that. Whereas you can listen to my little course that went, I don't know how long it goes for - two, three hours and pay, I think it's something like $250 for that to empower you to ask the right questions. And then you go, what is the next thing that I need to do to move towards becoming compliant, and you start the process and you follow through. 

I will tell you that it is also really hard for the contractors working within your business right now to accept some of these changes. Because if you don't know about it, guess what? They're going to be even less exposed to it. That's the problem. And when they don't know, all they see is change. All they hear is the business owner coming to them going, “Oh, this needs to change.” And they go, “What? No, we like the way it is. Don't change it. Why? Why should you change it?”

So it's really important also when you start this process to tell them that you are reviewing the contracts based on these changes. Maybe send them a couple of links. Remember, it's also their job to educate themselves. They're a business. Okay, so it's their job to do that.

But I would be very clear with them once you start to implement the changes, that it's not because you probably want to, it's because you have to, because this is a legal requirement and you do not want to open yourself up to any fines from the A TO or from any claims. Because no matter how well you get along with your contractors, I can tell you now, the pawpaw often hits the fan, and even the best, most loyal, longstanding relationships between people can go sour when it comes to freaking money.

So you have to protect yourself and your business, and that means that you need to do the right thing. And that means that you need to support your contractors in realising - This is, this changes, send them those links, get them to speak to their people as well. And go on this journey together to ensure that both of your businesses are compliant and doing the right thing.

The final thought that I want to share is: contracting is not the devil. So you might go, this is all too hard. I'm going to change all my contractors over to employees. Or you might go, this is all too hard. I'm not going to have contractors at all, I'm just going to do an employment model. 

Well, I actually personally like having a hybrid model, so I've got a core team of employees, and then I have the contractors. So the contractor is really there to look after that overflow of work. So we always focus on the core team of employees first, making sure that they are fully booked with their ideal clients. And only once that has occurred do we send clients to our associates - which are our independent contractors. And it works really beautifully.

So just get your head around all the changes. Implement one step at a time. And as always, if you need help with the implementation of all of this, this is what I do in my Academy, in my Founders Club. There's a triage form in the show notes. Complete it, reach out - I'm here to help.

We are going to leave it there for today. Thank you so much for tuning in, and as always, remember that I am here to help you build a practice you can't stop smiling about. 😊

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Gerda Muller

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