Written by: Corey Janoff
I have a number of clients who are locum tenens physicians. What is a locum tenens physician? A locum tenens doctor is basically a temporary employee. They are independent contractors, rather than salaried, W2 employees at a hospital or private group. Most of them choose to do locum work. In fact, I don’t think anyone I know who is doing locums work is doing it as a last resort because they couldn’t find a job. They prefer to do it at this point in their career for one reason or another.
Today I want to dive into some of the benefits of being a locum tenens physician so you can decide if it may be the right fit for you.
1. Freedom and Flexibility
When you work as a locum tenens physician, you have a lot of freedom and flexibility when it comes to your job. Typically, you will go through a locum staffing agency and get to choose which job(s) you want to take. If you don’t like the location or hours required, you don’t have to work there!
You get to pick locum jobs with a schedule that works for you. If you get into a role and don’t like it, you’re only there for a short period of time!
Many locum doctor jobs are at hospitals that have trouble finding full time physicians (usually due to location), so locum physicians often have the option of doing multiple locum stints at the same employer. Some locum doctors I know alternate back and forth between a couple employers when they feel like working. They might work summers up north and winters down south. It’s great for them!
2. Work-Life Balance
Most of the doctors I know doing locum work do not work full time. They might work for several weeks or several months at one location and then take some time off.
As a locum physician, you get to pick which jobs you take. You can pick a job that works well with your desire for work life balance. One client I know has a schedule at her current locum job that is 7 days on, 7 days off. No nights, no call.
You might work 9 months of the year and take summers off. You could work a couple months, then take a month off. Whatever you want. You are in control.
Depending on your specialty, there has also been an increase in popularity of tele-health contracts in the locum’s space as well.
Questions about being a self-employed physician? Contact us to setup an initial consultation to see how we can assist you moving forward.
Working as a locum tenens physician can enable you to travel (on someone else’s dime) to places you have never been before. Most of the locum work available is at hospitals that have trouble attracting full time employees, usually due to geography. Granted, some of the places you could go may not exactly be on any “top destinations to visit before you die” lists, but you can definitely get to some beautiful parts of the country.
One hurdle is licensing. You must be licensed to practice medicine in the state you will be practicing in, so you have to plan ahead a little bit with where you want to work.
4. Income Earning Potential
As a locum tenens physician, you can earn a pretty good income for the amount you work. You know how I mentioned most locum doctors I know don’t work full time? Those same doctors also often earn a higher income than their full-time employee peers. I know locum hospitalists who work half of the year and earn $200,000 – $300,000!
The pay is often above average, especially for someone just getting started in their career. Now, if you are a specialist, you can probably earn more as a partner at a private group. For most primary care doctors, the pay for locum work is pretty good.
It is important to note, however, that there are no workplace benefits that come with locums. At best, the locum agency you go through may offer health insurance. Everything else is on you. Depending on the job, employer benefits could add up to as much as a third of your total compensation, so salary isn’t everything.
Along those lines, you need to make sure you are properly insured with individual own-occupation disability insurance and some sort of life insurance if you have any dependents, as you will not be protected by your employer.
5. Ability to Customize and Max Fund Retirement Accounts
Retirement planning capabilities is probably my favorite perk that locum tenens doctors have. As an independent contractor, you are your own employer. This means, you get to decide what “employer” benefits you have and how you want to structure your “employer-sponsored” retirement plan.
Many of you are aware that the maximum amount you can contribute from your salary to a 401(k) or 403(b) as an employee is $22,500 in 2023. If you age 50+ you can add another $7,500. However, the maximum amount that can actually go into those plans is $66,000 this year (not including the extra catch-up contributions available if over age 50). As a refresher on retirement plans for doctors, please visit our other blog post detailing the retirement plan options many physicians have access to.
As an independent contractor, you are self-employed, which means you are both the employee and employer. This means you can contribute the full $66,000 to a self-employed 401(k) account! Now, you have to earn enough income to be allowed to contribute that much (based on a formula). You also have to have a business identification number (EIN) to establish an Individual 401(k).
Without getting too far into the weeds, most locums doctors who earn over $300,000 per year will be able to get pretty close to that if they can’t max it out.
If you would like help seeing if an Individual 401(k) is the right fit for you, please contact us and we would be glad to discuss these plans in great detail as it relates to your situation.
Why is this so beneficial? Because of the tax benefits!
You could contribute all $66,000 pre-tax, which will lower your taxable income by $66,000 in the eyes of the IRS. That’s some pretty hefty tax savings.
You could also choose to do your $22,500 employee contribution into a Roth account, which will be accessible tax free in retirement.
Now, if you really want tax-free money in retirement, you could design the 401(k) plan to allow for after-tax deposits above the $22,500 limit and contribute all $66,000 post-tax and convert the after-tax dollars into a Roth IRA. We dove into this a little bit in our tax-planning for doctors podcast episode, but we recommend speaking to a professional to assist you with this and to advise on if this may make sense for you. If you have any confusion on Pre-Tax vs Roth contributions, view our blog we wrote breaking down these differences in tax treatment and when each may be advantageous for you.
On top of the $66,000, you could set up a defined benefit plan, such as a cash balance pension and contribute upwards of $100,000/year pre-tax to an investment account. If you’re in your 50’s, that number could be approaching $300,000/year (if your income is high enough).
Long-story short, you have an opportunity to invest a lot of money in a tax-favorable manner if you are a locum tenens physician.
6. Avoid Workplace Politics
Sick of the bureaucracy and politics at work? Do locums! As a temporary worker, you don’t have to worry much about the decisions made by administrators that impact all the employees. You’re only there for a short period of time.
You won’t be required to attend policy meetings or give your input on a particular issue. Your colleagues won’t drag you into workplace conflicts because your days there are numbered.
Sure, you might have to learn a new EMR system, and it might take a few days to feel out the lay of the land, but you won’t get sucked into the ongoing drama that comes with being a full-time employee.
If you only want to work part time, yet still earn a decent income, consider locum work. Some people make a career out of it. Others do it for a couple of years while their future is up in the air.
Maybe your spouse is doing a one-year fellowship and you don’t want to commit to a full-time position in that location, so you pick up locum tenens gigs until you have a better idea of where you will be long-term.
Many places who are hiring locum doctors need full-time employees. So, if you like one of the places you are at, there is a good chance they will hire you on full-time if you want. Could be a good way to do a test-drive at a hospital before making a formal commitment.
If you have questions regarding the financial planning aspect of being self-employed, 1099 income considerations, retirement plans for self-employed individuals, or other general financial questions, feel free to reach out to us and one of our independent advisors would be glad to get those answered.
Related Blog Posts:
- Retirement Plans for Doctors
- Tax Planning for Doctors Podcast
- What is a Cash Balance Pension Plan?
- Should I Make Roth or Pre-Tax Contributions to my Retirement Plan?
- Own-Occupation Disability Insurance
Investing involves the risk of loss, including total loss of principal. This should not be construed as individualized investing advice. Consult with your investment advisor to develop an appropriate investment strategy for your circumstances.