Locum Tenens Physician: 3 Financial Pros and Cons

Locum tenens positions at medical practices and hospitals are currently experiencing a surge in popularity due to a new generation of doctors who want more freedom and flexibility in their careers.

Defining Locum Tenens Physician

Locum tenens is a Latin phrase meaning “to hold a place.” In the healthcare industry, a doctor is considered “a locum” if they work at a practice that is not theirs or at a hospital that hires them on a contracted basis. Locum tenens work can include clinic and hospital work — whatever the employer might call for.

The duration of locum tenens work is defined by the contract signed between the employer and the physician. Unlike doctors who own a practice or are employed by a hospital, locum tenens doctors can negotiate their own hours, know the end date to their position, and have the availability to pursue work elsewhere.

Traditionally, locum tenens work has been common in rural areas where there weren’t enough local doctors to treat residents. Now, however, locum tenens work is gaining popularity with young doctors who don’t want to yet commit to starting their own practice or accepting full-time employment at a hospital.

Pro #1: Better Pay

Locum tenens doctors tend to command a higher hourly rate than their salaried counterparts. This is partly due to the fact that locum tenens positions indicate an immediate need for a physician — so urgency is a factor and the compensation must be attractive enough for a psychian to relocate and/or take on additional work against employment they already have.

In addition to an hourly rate, locum tenens doctors may also receive:

• Travel reimbursement

• Compensation for on-call hours

• A per diem for meals

Pro #2: Contractor Write-Offs

Locum tenens doctors are classified as independent contractors and are eligible for significant tax write-offs when filing. The most significant of these deductions is commonly home office expenses. Home offices must be rooms (or parts of rooms) in a physician’s residence that are dedicated to work, e.g. bookkeeping, charting, conducting telehealth appointments, etc.

Mortgage costs, rent, and some insurance costs can also be deducted from your tax filing if you’re a locum tenens physician, usually based on the square footage of your home office space.

Other common tax deductions for locum tenens physicians include:

• Car expenses (including gas and mileage)

• Hotel stays

• Parking and toll costs

• Meals

Please note, however, that most of these expenses are only deductible if a.) they were necessary for you to perform duties as a physician and b.) not reimbursed by your employer. For instance, if you use a car for both work and personal trips, your total gas expenses for that vehicle are not deductible — only the amount spent traveling to and from your place of work.

If you’re a locum tenens physician who wants to start tax planning for 2023, Earned can help. Get in touch with our experienced financial advisors today.

Pro #3: Supplemental Income

Locum tenens employment and permanent employment are not mutually exclusive. In fact, many doctors who already work full-time have elected to also take on locum tenens work to increase their income. This is a common option for doctors facing debt from medical school.

Choosing locum tenens work is also popular for doctors nearing retirement or who are already semi-retired. These physicians can negotiate less-demanding schedules and still earn income and ease any burden on their retirement savings.

In both cases, it doesn’t take a significant number of hours for doctors to see their locum tenens work to have a real impact on their finances. Because of the higher pay, even a handful of hours every month can make a real difference without contributing to burnout.

Con #1: Lack of Financial Predictability as a Locum Tenens Physician 

Locum tenens contracts can last anywhere from a few days to a few months… or even longer. However long they last, they’re not permanent, which can give physicians a lack of clarity on their long-term financial outlook. If a doctor is planning on buying a home or starting a family in the near future, relying on locum tenens work may not provide the predictable income needed to comfortably do those things. This is especially true when travel is also a common requirement.

It’s also important for physicians to carefully review termination clauses in their locum tenens contracts before signing. Many employers will propose to give little-to-no notice if they no longer need a physician’s services before locum tenens term is up. It’s recommended that physicians renegotiate these clauses so that the contract recognizes financial realities for the contractor.

Wealth management can be especially crucial for physicians who make a significant portion of their income from locum tenens employment. Earned can help you manage and invest your assets so you can enjoy as much financial stability as possible. Contact our team today to learn more.

Con #2: More Tax Responsibility

Like all independent contractors, locum tenens physicians receive compensation that isn’t yet taxed. They receive a 1099 Form from their employer and do not automatically contribute to things like Medicare, unemployment benefits, and state and federal taxes as they would if they were a permanent employee on the payroll.

However, locum tenens physicians are still required to pay these taxes. These means these doctors have to put extra consideration — and bookkeeping — into how they save and spend their income. Every financial quarter, independent contractors commonly pay estimated taxes to ease their tax obligation at the end of the year.

Con #3: No Employment Benefits

Independent contractor status also means that locum tenens physicians will not receive employment benefits offered to full-time employees. These vary by employer, but healthcare benefits, retirement plan contributions, and life insurance enrollment are typical benefits offered to doctors working full-time in a corporate setting.

Instead, locum tenens doctors need to pay for these things out of pocket. It’s crucial that these expenses are accounted for when negotiating compensation in a locum tenens contract.

Considering Being a Locum Tenens Physician?

Are you a physician considering locum tenens work and want to still ensure the long-term health of your finances? If so, Earned can help. Our financial advisors have decades of collective experience in helping doctors manage debt, investments, taxes, and more.

‍Reach out to our team today.

This post was all about the pros and cons of being a locum tenens physician.