Getting started as a locum – creating your safety net

The benefits of being a locum are numerous. But what if the unexpected or life events happen? Sickness? Pregnancy? As a self-employed locum, it’s important to consider the benefits of salaried roles that you forego and make a contingency plan.

In August 2021, I was offered a salaried role with my training practice. However, it didn’t follow the BMA model contract. I was told that my previous five years of NHS service wouldn’t be recognised and I wouldn’t get sick pay for the first 12 months. Wholly unattractive  - and frankly not allowable for a GMS practice.

Negotiating through a poor contract was the last thing I needed. So I decided to become a locum and create my own safety net. As a locum, you could be looking to replace one year’s sick pay income of £75,000 (£50,000 full pay and £25,000 half pay) if you work ten sessions a week at £10,000 / session and are in the sixth year of service. It’s easier to achieve than you may think.

Throughout my career, I’ve maintained an income protection plan. This means that I’m covered through an insurance policy that pays me every month for time I spend out of work ill. I chose ‘own occupation’ cover, which means that I’m paid if I can’t work as a GP – policies that don’t cover own occupation mean that you have to do any work the insurer deems you capable of including those at less pay.

My policy pays until retirement age and I’ve set the cover and premium to track with inflation to maintain the value. Hence, I have a guaranteed income throughout my working life. I pay £50 a month and if I claimed, would take home £3,000 a month to give the equivalent of a gross income of £58,000.

Payouts from insurance policies aren’t subject to tax or National Insurance (NI), so £3,000 would be net income. To decrease my monthly premium, I chose to not receive a payout until after 12 weeks of illness. Comparatively, when I was considering increasing the monthly payout and to start receiving income after four weeks of illness, the quote stood at £155/month which would provide a gross income of £120,000 i.e. £5,500/month net.

Also, factor in as a locum the difference in salary. For the equivalent £10,000/session as a ten session salaried GP, you could reasonably earn up to £800+ per day as a locum, giving you £18,000/session i.e. £180,000 (this already has seven weeks annual and study leave taken out) vs the salaried’ GP's £100,000 per year.

In essence, you can have covered that £75,000 sick pay we needed at the start, even without an income protection policy if you’re tax efficient. This is where a limited company may sensibly come in – you could leave your sick pay fund in the company and draw it down as salary and dividends if you ever became unwell.

Maternity leave is another benefit many rely on. To qualify, you need 12 months’ continuous NHS service before the 11^th week of pregnancy.

Locums are entitled to Maternity Allowance (MA) rather than SMP direct from the Government if they meet eligibility criteria, which most GPs will. You still get up to £156.66/week for 39 weeks. If we go back to the example of our salaried counterpart, you will need to make up that missing eight weeks full pay and 14 weeks half pay.

Our counterpart earns £100,000 over 52 weeks so in maternity pay gets £1923 x 8 + £1923 x 14 ÷ 2 = £28,845: tax and NI will be deducted. Mothers can perform up to ten keeping in touch days (KIT) at their current employer during their maternity leave.

For the salaried GP, this is paid at her usual daily rate. Self-employed work can be done without affecting it but sometimes requires the employer’s permission. Additional employed work for your usual employer ends the SMP.

In comparison, our locum already earned up to £80,000/year more than the salaried GP, so has made up that £28,845 deficit. Like the case of sick pay, she could have invoiced her excess through a limited company to avoid being hit with a higher rate income tax in previous tax years. She could then draw it down as salary and dividends during maternity leave when she is earning less and taxed at basic rate.

In this case, however she would be getting SMP, not MA. Alternatively, if she invoices all her work as self-employed the Maternity Allowance she gets is not subject to tax or NI like SMP.

For the locum, she had already established a good relationship with a practice and decided to stick with them for her ten KIT days. Granted, she had a reduced list and more time so she charged lower than her usual day rate pulling in £6000 for ten days work.

On Maternity Allowance if she wanted to do more self-employed days she could, losing usually about 1/7^th of the weekly MA for each additional day of work she did. Unlike the employed GP who does not have an established client base, she can return to a supportive practice at will and fund her 39 to 52 week period at above the maternity allowance she received in previous weeks by working just one day a month.

As you can see, the benefits purported of salaried roles can be replicated or improved upon with organised and efficient work as a locum. A financial planner or accountant can support you in the best way to set up your trading structure so that events such as starting a family or unexpected sick leave can be factored in.

In my next article, I will discuss more about the self-employed vs. limited company structures for trading.

The Lockdown Locum is a locum GP in England, who wishes to write under a pseudonym.