Most GP practices continue to be organised as partnerships: an ‘independent contractor’ status which has outlived innumerable changes in the NHS. The ‘golden hello’ new to partnership scheme has attracted over 1,300 applicants over the last year, demonstrating that there are still plenty of people who aspire to becoming a partner in a GP practice. However, in an effort to keep up with the fast changing environment and to appeal to a broader range of partner candidates, many GP partnerships are looking at ways of flexing the traditional partner role, to the benefit of all concerned.
In this blog, we look at the 3 main types of partner we regularly encounter in GP practices.
1. Equity Partner (self-employed)
This is the most traditional partner model. Equity Partners are self-employed and have full and equal rights to decision making and are part of a collective management team which is jointly responsible for all aspects of running the practice. Profits and losses are shared equally, although sometimes there is a ‘path to parity’ over a period of a few years. With the rise of part-time working, a common variant is to share the profits and losses on the basis of planned sessions. Equity Partners are expected to contribute capital to the business (as a minimum working capital, but sometimes also property or other capital) which is usually called ‘buying in’. An Equity Partner is jointly and severally responsible for any losses and liabilities that arise in the partnership. This means that creditors can choose to pursue one or all of the partners for the full amount of the partnership debts.
2. Fixed Share Partner (self-employed)
Fixed Share Partners are also self-employed. A Fixed Share Partner typically receives a fixed, guaranteed income for a defined period of time (sometimes during a mutual assessment period) and there should also be an element of variable income based on the profits or losses of the practice. The 'golden hello' scheme does not apply to Fixed Share Partners where the fixed share period extends beyond the expiry of any mutual assessment period. Fixed Share Partners still share full liability alongside the Equity Partners so they ought to be suitably indemnified by the Equity Partners in the partnership deed. Fixed Share Partnership arrangements need to be carefully documented to avoid HMRC viewing the tax status of the person as an employee.
3. Salaried Partner (employed)
Salaried Partner and Fixed Share Partner are often (incorrectly) used interchangeably. The key to this person’s status is in the word ‘salary’. Whereas partners take drawings on account of their profit share, Salaried Partners are employees who receive a salary. Salaried Partners should have an employment contract, they benefit from the protection of all relevant employment legislation and they receive a salary with tax and NI deducted at source under PAYE. Salaried Partners may have an element of ‘bonus’ depending on the profitability of the practice and this will be documented in their employment contract. Salaried Partners will not be a party to the partnership deed and they should have no share in the partnership profits and no voting rights. For a Salaried Partner, the word ‘partner’ is just a title and nothing more so they need to be suitably indemnified by the Equity Partners in their employment contract.
A word of warning…
Third parties can bring a claim against anyone who calls themselves a partner, be they an Equity, Fixed Share or Salaried Partner. So behind the scenes, Fixed Share and Salaried Partners are usually protected by way of an indemnity from the Equity Partners. An indemnity is a promise from the Equity Partners to financially compensate the Fixed Share or Salaried Partner in the event of a loss or liability arising. However, the indemnity will not be worth the paper it is written on unless the Equity Partners are good for the money.
If you are a GP practice or a partner or you are thinking about partnership and you want clarification on this blog or any other matter relating to primary care, then it’s time to contact us. Please call us on 01483 511555 or send an email to [email protected]