Is a locum doctor an employee or independent contractor?
12 May 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: Our client is
a medical practitioner that sometimes makes use of a locum. For example a locum
worked 1 day and received a salary of R 15 000.00.
Should it be viewed as a salary earner or an
Should the doctor deduct tax and issue and IRP5
at the end of the year? If so, what tax rate should be used if the locum does
not have a directive?
If the locum works for more than one day should
UIF be deducted? SDL paid on behalf of the locum as the Doctor is registered
for SDL purposes at SARS?
A: A locum is
typically not an employee and normally carries on a trade independently.
A person making payment to an individual (in respect of
services rendered) would have an obligation to deduct employees’ tax from that
payment unless the individual (recipient) rendered the services in the course
of a trade carried on independently (as required by proviso (ii) to the
definition of remuneration in paragraph 1 of the Fourth Schedule to the Income
Tax Act). If an amount does not
constitute remuneration there is no obligation to deduct employee's tax. Please note that SARS issued a guide on the
employers’ tax responsibilities with regard to independent contractors.
The recipient has a duty to declare the income in a return
of income (IT12) and that is not influenced by whether or not the payment was
correctly treated by the person making the payment.
If the locum didn’t carry on a trade independently, the
payments were remuneration and the client had to withhold employees’ tax. Paragraph 5(2) of the Fourth Schedule
provides that where SARS is satisfied that the failure to deduct the employees’
tax was not due to an intent to postpone payment of the tax or to evade the
employer’s obligations under this Schedule, SARS may, if he is satisfied that
there is a reasonable prospect of ultimately recovering the tax from the
employee, absolve the employer from his liability to make payment in respect of
the past periods.
The Unemployment Insurance Contributions Act, 2002 excludes
from employee an independent contractor and then applies to all employers and
employees, other than an employee and his or her employer, where such employee
is employed by that employer for less than 24 hours a month.
In terms of the Skills Development Levies Act, 1999 an
"employee" includes an employee as defined in the Fourth Schedule to
the Income Tax Act. We accept that none
of the exemptions (in section 4 of that Act) applies. Similarly, the client would have had to pay
the Skills levy if the locum was not an independent.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.