Independent contractor

[David the Nome]

This has been discussed here somewhat before in prior discussions, but I'm hoping some of you may be able to provide some guidance to my situation specifically, as I've only been an employee thus far in my PA career.

 

I currently work ICU with a 90k/year salary. Bennies include 50% medical coverage, dental, retirement with a 10% of my yearly salary contributed by employer. I get 1000/year cme and 4 weeks PTO.

 

I've been offered a position in EM as an independent contractor with a 75$/hr salary. Malpractice would be covered but nothing else.

 

I am married with 3 kids and we do use the health insurance from my current position.

 

How does this independent contractor position compare to my current one? It is a position I'd like to take simply because I prefer EM. However I'm very wary about the tax situation, having to provide my own insurance, and everything else that would come with being an independent contractor. Any advice is appreciated

[gbrothers98]

Yeah

It has been covered.

Here is the problem.

You are doing an apples to apples comparison between the two. 

 

It cant be done. You think right now that you make about low 40s per hour based upon a 2080 hr work year.

Then you multiply that $75 per hr x 2080 and get 156k and you think wow, no brainer.

 

But you have to look at the fact you have to provide all your benefits except malpractice. And then you better take a hard look at that because likely it is bare bones. They may also require you to contribute to this too. You likely will have to supplement that given EM is a high risk area.

 

As an individual, you will have to go to the state health exchange to get your insurance for your family. Will have to drop over a 1k a month on that plus. You will make too much money to qualify for a subsidy. Then add in life ins, dental ins, disability ins costs on a monthly basis. You have a family. You have to take care of them and provide even if you are gone, sick or injured. You would have to find that out on your own for dollar amt per month. It is not cheap on your own. Run it by an insurance broker and ask them for #s. Then you pay all your CME costs (btw 1000 at your current job sucks). Your PTO is gone. So when you take time off, you wont get paid, have to budget that in too. Then there is retirement. You will have to set up your own plan and pay for it. You have a 10% match? That is quite good. Your employer is giving you $9000 a year tax free till you withdraw that. That is in combination with the 18k you can contribute. So you should really think that your employer pays you 99k a year, with 9k deferred. If you are maxing this out, thats 27k right there that has to be replaced.

 

Someone somewhere will tell you that you can deduct all your costs. Instead of believing me or them, go to a tax expert. Tell them what you are doing. Ask them what you can deduct and not. Itemizing is easy for your mortgage interest and real estate taxes. But costs associated with employment have to meet a certain % of income which you likely wont reach as an individual. If you incorporate, start your own business, you might be able to get away with it. But likley the IRS will look at the whole arrangement and state, no you are an employee.

 

Several times this has been broached. It doesnt pass the litmus test. You are an employee. Your employer just benefits from you not being categorized this way. In some states this is illegal, others a gray area. They dont have the hassle of benefits, they can lay out less money to all of you independent contractors cause the cash is a fixation. Then you also look at that 75 per hour. More money than you have ever been paid. You are working all sorts of shifts to make money. Before you know it, you are working much more than your old job to keep the cash flow going. It is a slippery slope.

 

Take a look at these people making the offer to you. It prolly is not a national group. It prolly is a couple local or regional guys who dangle cash in front of people to get them to work. Or a group of docs who hire a bunch of PAs & NPs to staff cheaper and work them till they are too lathered up to go on. So they are using a model to keep more money in their pocket and work less themselves. They essentially have no overhead other than a spreadsheet to schedule everyone. 

 

This isnt indentured servitude. This is more like driving by home depot and getting a bunch of day laborers to do the heavy lifting for you on the weekend.

If you really want to do this, a rate more like $150 per hour is realistic. But I think these positions stink. I had a colleague whom did this in northern mass. Until he joined us and became an employee, he did not understand how much he was being screwed by this setup. But he went from making less than $15/hr as a medic to making almost $50 /hr out of PA school and the more he worked, the more he made. He only carried health insurance and didnt save a dime. He worked well over 200 hrs per month, more like 250. Didnt take time off.

 

But it is not a long term plan.

 

Good luck.

G Brothers PA-C

[CByersPAC]

Probably not enough money in the case you describe. What gbrothers said.

 

You have to do the numbers to know if it's what you want. Personally when I was 1099 I found the numbers worked to my advantage, but that's situational. Factor in your malpractice, health insurance, and things like how much time you want to take off.

 

Then figure out what your W2 salary *really* is, adding in benefits. Last I figured that out, in my state and for my specialty it was about 10K a year, not counting paid time off. Your mileage will probably vary.

 

Then you're more apples to apples, number-wise.

 

Other potential advantages to 1099 is you may be more of a free agent in terms of taking other work, and there's something to be said psychologically to not having your benefits/malpractice tied to any one position. If that stuff is something you take care of yourself, you have less to lose in any contract negotiation, and as a 1099 you've got good ground to refuse any noncompete clauses.