So you want to be a locum?

Introduction

Becoming a locum, or freelance worker, brings risk - but it also brings benefits. If your thinking about locuming, it is important to think about all aspects of the way of working.

Advantages of becoming a locum include:

• Being your own boss
• Greater flexibility about when and where you work
• Building up useful experience working by for a variety of employers
• Financial benefits, including better pay rates and opportunities to reduce your tax bill

Some of the disadvantages are:

• Reduced job security
• Uncertainty about where your next contract will come from
• Lost income if you are ill or on holiday
• Working away from home

If you think locuming is right for you, it would be wise to seek advice from professionals experienced in this field about the options which are best for you.

If you are planning to source your own work, rather than going through an agency you will want to start thinking about and organising potential clients well before you take the decision to give up your job.

However if you decide to use an agency speak to them first, they should be able to give you a good idea of work availability and likely rates of pay.

What business structure is best for me?

There are a number of business structures available to locums. Traditionally the most popular and tax efficient are:

Limited Company

The finances of a limited company will be seperate from your own personal finances. This means that you are not personally responsible for any company debts, except in exceptional circumstances.

Limited companies have certain responsibilities, including registering with, and submitting annual accounts to, Companies House, along with an annual return to Companies House updating your company details.

Limited companies pay corporation tax and employees pay income tax and National Insurance contributions. You must also register for VAT if your turnover reaches more than £73,000 within 12 months.

A company must have one Director, whose job is to make sure the company is run in accordance with company law, for example recording company meetings. There are different ways to form a limited company, including setting it up from scratch, buying a ready-made company off the shelf or converting an existing business or partnership.

You can find out more about limited companies by visiting the Companies House website at http://www.companieshouse.gov.uk/

Umbrella Company

Umbrella companies operate on behalf of several locums at the same time.

The locums become employees of the umbrella company and contracts of employment are made between the locum and the agency or client and the umbrella company.

The umbrella company will issue invoices on the locums behalf, collecting payments from the client or agency, calculate their tax and national insurance contributions and pay them directly into their bank account.

Umbrella companies may particulaly suit:

• First time locums who want a quick and easy start
• Locums seeking a simple, cost effective solution when they take on short-term contracts between permanent assignments
• Locums caught by IR35 tax regulations.

Self Employed

Self employed or sole trader status as a locum is not recommended. This situation has the potential for significant tax liability and many clients are now refusing to engage self employed locums because of the tax liability risk

Do I need Insurance

Some practices will offer insurance whilst a locum is working on an assignment but you may not be covered if a claim is made after you finish the assignment. We strongly recommend therefore that you have your own insurance cover.