When you are exploring new career opportunities, one key decision you may face is whether you will be an employee or an independent contractor. Perhaps you’ve already come across this issue before – but may want more clarity around these options and how they will affect your compensation, tax status and more.
Here’s what you should know about the differences between these two employment options and how to evaluate the terms in any written agreement that will define how you will work.
Employee status: how it works
Generally, dental associates are considered employees if their employer has the right to control how duties are performed. This would mean you are subject to your employer’s decisions and direction on:
- When and where you work
- The equipment and supplies you will use
- The processes you will follow when doing procedures
- Who you will work with
- The patients you will be assigned
Though some of the specifics may vary, as an employee:
You will be provided with equipment, supplies and tools needed to perform your work.
Office staff will coordinate your patient schedules and handle patient billing and collections.
If the practice offers staff health, dental, vision or other insurance, you will be eligible for these benefits at a reasonable cost. Premiums will commonly be deducted from your paycheck.
Your employer will take responsibility for calculating and remitting all payroll taxes and withholdings. You will be responsible for your individual income tax returns (federal and state).
You will be eligible for worker’s compensation benefits if you are hurt on the job. You may also be eligible for short-term and long-term disability payments, if this coverage is part of your employer’s benefits program.
Independent contractor status: a very different arrangement
If you are offered an associateship that engages you as an independent contractor, your compensation and tax status will be dramatically different from an employee’s - most significantly, you will not have any taxes or other deductions from your paycheck. As a contractor, you will:
- Be a self-employed individual providing a service to patients in the setting of the dental practice or office.
- Set your own schedule while growing and managing your own patient base.
- Purchase and manage your own health, dental, vision and other insurance benefits and manage your own retirement savings.
- Pay your own job-related expenses, including liability insurance, training, travel and professional membership dues.
- Prepare and submit your own payroll and income taxes, possibly using a paid preparer or accountant who helps you comply with self-employment tax laws and regulations.
Depending on your contract, you may be required to purchase some supplies, with rights to use the practice’s systems and equipment in performing your work.
While this arrangement might sound more expensive and work-intensive than being an employee, you may balance it with the relative freedom to set your own schedule and the flexibility to work in multiple locations.
Who decides whether I am an employee or a contractor?
Generally, the practice or office you work for makes this decision, spelling the terms out in a written contract. However, keep in mind that all businesses must follow federal regulations that govern employment status. Federal agencies have clear definitions and tests that distinguish employees from independent contractors. The regulations exist to protect both parties and clarify the responsibilities on both sides of the work or employment agreement.
According to federal law, your employment status depends on:
How much control your employer has over the way you work, including your schedule, processes and reporting relationships.
How much financial control your employer has: for example, whether or not they determine your total compensation and manage your taxes.
Independent contractors have more control over their work, but more responsibility for their own actions on the job, as well as their obligations to the IRS. While they may agree to work on certain days of the week or month, they retain the right to determine their own schedules.
Employees, on the other hand, must operate within the framework set up by their employer, including schedules, pay arrangements, teamwork, procedures and more. In exchange, they receive more support from their employers and are generally eligible for more benefits as noted above.
What can happen if my employment status isn’t clear?
In reviewing any proposed contract you are offered, it’s a good idea to consult an attorney. The terms of your employment (or independent contractor agreement) must be crystal-clear to avoid legal and financial problems down the road.
If your agreement is not clear, or does not fully comply with federal requirements, you may not be aware that:
- You are (or are not) liable for remitting your own state and federal taxes.
- You are responsible for certain expenses that reduce your net compensation.
- You will (or will not) receive paid vacation, sick or personal days.
- You are responsible (or not) for booking and billing your own patients.
By confirming that your contract is clear in specifying your status, your attorney can help you avoid big troubles with the IRS and potential disagreements with practice owners and colleagues.
Deciding which arrangement works best for you
As part of your job search, you may want to seek out positions that offer the employment status you prefer. Here are some questions to ask yourself as you consider which option is best for you.
Do I want to determine my own schedule, possibly offering my services to more than one dental office or practice? Or do I prefer the simplicity of working for one practice with predetermined hours?
Do I prefer to build my own patient base according to my own priorities, or am I willing to work with the patients I am assigned (with some latitude in suggesting sources of new patients)?
Am I willing to handle my own taxes, billing and other financial matters, or do I prefer to have these matters handled for me?
Am I willing to purchase and pay for my own health benefits, or would I value the cost savings of being part of a group plan? (Benefits for individuals and families are generally more expensive outside of an employer-sponsored plan.)
Would I like to be part of a retirement plan that might match some or all of my contributions, or do I want to manage my own long-term savings?
Learn more with the ADA’s comprehensive guide to employment agreements
No matter where you are in your career, it’s vital to know everything you can about employment contracts. Being fully informed prepares you to seek out the employment situation that suits you best and negotiate business and employment terms with confidence.
To learn more, check out the American Dental Association’s guide, Dental Employment Agreements. The guide covers employment status in detail, including sample clauses and language you may find in your current contract (or one a prospective employer presents).
Accepting a new associateship is a major step in your career journey. If you’re looking for personalized support, the ADA’s Practice Transitions service is ready to help. This helpful service matches you with dental practices that align with your treatment philosophy, career goals and lifestyle. You will enjoy customized resources and personal support from your ADA Advisor – helping you feel more confident every step of the way.