A medical practice usually runs three different kinds of working relationship at once: employed staff on ordinary payroll, locums whose status depends entirely on the facts of the arrangement, and associates who may be partners, employees or genuinely independent practitioners. Getting the classification wrong on the second and third is the most expensive payroll mistake in the sector, because SARS applies substance over form and can reassess years of payments as employment income.
Practices rarely get PAYE wrong on the receptionist. They get it wrong on the doctor.
Why is the locum question so difficult?
Because a locum can genuinely be either, and the answer turns on facts rather than on what the arrangement is called.
A locum who looks like an independent contractor: works across several practices, sets their own availability, carries their own professional indemnity, invoices for sessions, bears real risk on their own work, and is not integrated into the practice's management.
A locum who looks like an employee: works only at your practice, on a roster you set, at rates you determine, using your rooms, your equipment and your staff, under practice protocols, over an extended and continuous period.
The second is an employment relationship regardless of the invoice, and the fact that both parties preferred the contractor arrangement is not a defence.
The tests that matter
SARS looks at supervision and control, whose premises and equipment are used, integration into the organisation, who carries the risk, and whether the person is genuinely conducting their own trade.
There is also a statutory presumption that bites where a person works mainly at premises occupied by the client and is subject to control or supervision as to the manner of the work or as to their hours — subject to the earnings threshold at which the presumption applies.
And an important safe harbour: the presumptions do not apply where the person employs three or more full-time employees who are not connected persons. A locum operating a genuine practice of their own, with staff, is on much firmer ground.
See independent contractor or employee.
What does it cost if SARS reclassifies?
The exposure is larger than practices expect, because it runs backwards.
Take a locum paid R60,000 a month for two years, treated as a contractor with no PAYE deducted.
| Total paid | R1,440,000 |
| PAYE that should have been withheld | Substantial — the practice was the withholding agent |
| UIF and SDL | Owed on top |
| Penalties | On the unpaid employees' tax |
| Interest | Running from each month it should have been paid |
The critical point: the obligation to withhold sat with the practice. SARS looks to the employer for employees' tax that should have been deducted, and recovering it from the locum afterwards is a private matter between you — often years later, and often not possible.
Multiply by several locums across several years and this becomes the single largest liability in a small practice.
What about associates?
Three arrangements, three completely different answers, and practices frequently operate one while documenting another.
| Arrangement | How it works | Payroll treatment |
|---|---|---|
| Employed associate | Salaried, practice bears the risk, patients are the practice's | Ordinary PAYE, UIF, SDL |
| Cost-sharing / room rental | Independent practitioner paying for rooms and services, own patients, own billing | Not payroll — a rental and services arrangement |
| Partner or co-shareholder | Shares in profits, shares in risk | Depends on structure; often distributions rather than salary |
The dangerous middle case is the "associate" who is paid a percentage of collections, uses the practice's rooms and staff, sees the practice's patients, bills under the practice's number — and is treated as independent. That is substantially an employment or profit-share relationship, and it needs to be documented and taxed as what it is.
The structure matters here too. Many practices operate as a Personal Liability Company, which changes how the practitioners are remunerated and taxed. See what is a personal liability company (Inc) and salary or dividends.
The ordinary staff, done properly
Less dramatic, and still where inspections find things.
Receptionists, practice managers, nurses and assistants are straightforward employees. What practices miss is usually one of these:
Written particulars of employment for everyone, including part-time reception cover.
UIF from day one, including the person who works three mornings a week. See casual staff and UIF.
Overtime, where staff stay late for a running list. It is overtime whether or not anyone calls it that.
COIDA registration. Practices sometimes assume it applies only to physical trades. It applies to every employer — and in a clinical setting, needle-stick and similar injuries are exactly what it exists for. See what is COIDA.
Fringe benefits taxed correctly — a practice vehicle, a phone, medical scheme contributions, parking. See which employee benefits are taxable.
And SDL, once your payroll crosses the threshold. Practices frequently cross it without noticing. See what is SDL.
How to structure a locum arrangement defensibly
Where the locum genuinely is independent, make the substance support it — because a contract alone will not.
Do:
Engage them for defined sessions or a defined period, not open-ended
Let them work elsewhere, and know that they do
Require them to carry their own professional indemnity
Have them invoice for work done
Keep them outside practice management — not supervising staff, not setting protocols
Do not:
Roster them like an employee over an extended continuous period
Pay a fixed monthly amount regardless of sessions worked
Provide them with employment benefits — leave, a bonus, a medical scheme contribution
Give them a practice email, a name badge and a place on the staff roster while calling them a contractor
Where you cannot honestly do the first list, they are an employee — so put them on payroll and price the arrangement accordingly. That is a cheaper decision than a reassessment.
Have the agreements drafted properly. Locum and associate agreements are legal documents with tax consequences, and a template downloaded from elsewhere will not reflect your structure.
Frequently asked questions
Is a locum doctor an employee or an independent contractor? It depends on the facts. A locum working across several practices, setting their own availability, carrying their own indemnity and invoicing for sessions is likely independent. One working only at your practice on a roster you set, in your rooms, under your protocols, over an extended period is likely an employee regardless of the contract.
What happens if SARS reclassifies a locum as an employee? The practice is liable for the employees' tax that should have been withheld, plus UIF, SDL, penalties and interest, running back over the periods concerned. The obligation to withhold sat with the practice, and recovering it from the locum afterwards is often not possible.
What is the three-employee safe harbour? The statutory presumptions that treat a person as not independent do not apply where that person employs three or more full-time employees who are not connected persons. A locum running a genuine practice with staff is on firmer ground.
How should an associate be treated for payroll? It depends on the arrangement. A salaried associate is an ordinary employee. A genuinely independent practitioner renting rooms with their own patients and billing is not payroll. An "associate" paid a percentage of collections while using the practice's rooms, staff and patients is substantially employment or profit-share and should be documented as such.
Does COIDA apply to a medical practice? Yes. COIDA applies to every employer regardless of industry, and in a clinical setting needle-stick and similar injuries are precisely what it covers.
Do part-time reception staff need UIF? Yes, unless they fall within the narrow exclusion for employees working fewer than 24 hours a month for you. Someone working three mornings a week is well past that.
Can I just have the locum sign a contractor agreement? A contract helps but does not decide it. SARS applies substance over form. If the working arrangement looks like employment, the agreement will not change the outcome.
What is the safest approach if I am unsure? Treat them as an employee and put them on payroll. The cost of doing so unnecessarily is an administrative overhead. The cost of getting it wrong the other way is years of PAYE with penalties and interest.
The classification decision is worth taking advice on
Most practices manage payroll for their staff perfectly well. The exposure sits with the locums and associates — arrangements agreed informally between practitioners, documented lightly, and running for years before anybody examines them.
Smartbook runs payroll and accounting for South African medical and allied health practices: the locum and associate classification assessed properly, staff payroll and fringe benefits handled correctly, EMP201s and EMP501s filed on time, and the Inc structure and remuneration mix reviewed against what it is actually costing you.
See accounting plans for healthcare practices →
Last reviewed: 28 August 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Employment classification is fact-specific and the consequences are significant — take advice on your particular arrangements, and have locum and associate agreements drafted by an attorney. General guidance, not advice on your circumstances.
Primary sources: SARS — Employees' Tax · Income Tax Act 58 of 1962, Fourth Schedule · Basic Conditions of Employment Act 75 of 1997 · Compensation Fund · HPCSA