Elevating practice managers to partnership: considerations for practice owners05/02/21
We have seen, in recent months, an increase in the number of GP partnerships who have offered their Practice Managers a partnership role or alternatively where a Practice Manager has wished to be promoted to partner level. This is now becoming quite common in GP partnerships for a number of reasons and whilst ultimately the GP Partners and the Practice Manager must take financial and accountancy advice before proceeding down this route, it is something that can be of benefit to the partnership as a whole. We set out the reasons and the legal considerations you need to take.
Many Practice Managers have worked at their practice for a number of years, and so the offer of partnership can be a highly motivating and fair reward for them. It can also bolster their commitment to the practice by ensuring a clear career path is laid out for them. This can have a positive impact on the Practice Manager and encourage them to think about future profitability and long-term success for the practice.
Depending on the status that the Practice Manager wishes to join as (equity partner or fixed share status) they may bring in a level of equity when they join. This could mean buying into not only the partnership capital but also the partnership property (if the partners own the freehold). The more partners there are in the partnership at equity level status, the less likely it is that the partnership will be left with a “last man standing” issue.
The key considerations for a Practice Manager who wishes to become a self-employed partner are:
- Employment rights: Practice Managers will lose their employment rights, i.e. statutory rights to maternity, paternity, adoption leave etc. (albeit there will usually be equivalent rights afforded to them in the partnership deed) as well as any remedies to unfair dismissal/ redundancy. (This does not include employee discrimination rights, which are applicable to employees and self-employed persons).
- Unlimited liability: Partners have joint and several liability for the debts and obligations of their partnership. This is shared between the partners in their profit sharing ratios (or equally if there is no written Partnership Deed in place). A Practice Manager who is coming into the partnership at equity level would also share in this liability. An alternative is to have a fixed share status but there would need to be appropriate indemnities in the Partnership Deed to cover this situation on the basis that the fixed share partner would still be held to the outside world as a partner.
- Tax: A Practice Manager would be self-employed and therefore responsible for his/her own payment of tax and NI contributions. He/she would no longer be a party to the PAYE system.
- Partnership deed: This must be robustly and appropriately updated to include the Practice Manager as a Non-Clinical Partner. Consideration will need to be given as to their rights and obligations, whether the Practice Manager will be afforded a right to be involved in clinical decisions (and, if not, appropriate indemnities will need to be included) and whether they might be subject to a restrictive covenant if they were to retire from the partnership.
As with any other significant partner changes in your partnership, there are key issues that need to be considered when taking on a practice manager as a partner, and both legal and accountancy advice should be sought.
How Capsticks can help
Capsticks’ Primary Care Group knows the workings of healthcare practices inside and out, including the commercial challenges they face. Our legal experts understand the need for robust contractual arrangements, and can arrange a new partnership deed for you or revise and update your existing one. In addition, our team is able to prepare you for new collaboration models, resolve disputes and handle employment and property law aspects.
If you have any queries around what's discussed in this insight, and the impact on your primary care organisation, please speak to Puja Solanki, or any of your contacts at Capsticks, to find out more about how we can help.