Many doctors are interested in having a side gig, moonlighting, or doing some type of work in addition to their regular job. Many are motivated by having an additional income stream, others want to gain more experience, and some are just really passionate about the work they do. Whatever your reason, it's vitally important to understand the different work structures used.

The difference between a full-time position and a side gig is not just the hours worked. The structure of the work agreement is often fundamentally different. Many of the best side gigs for physicians involve work settings other than a traditional outpatient practice or hospital. Sometimes they involve performing tasks other than patient care. Many side gigs focus on nonclinical or administrative responsibilities. 

There are important implications of these differences. These pertain to your compensation, tax obligations, legal requirements, employer relationships, and personal circumstances.

Compensation Differences

Your compensation might be an annual salary, hourly rate, flat fee, monthly stipend, or other arrangement. Regardless, you need to take your employment structure into account when you negotiate and agree to your compensation. Do not simply calculate the hourly pay that you make at your full-time job and assume that is an appropriate hourly rate to earn in a side gig. Given the potential differences in tax obligations, benefits, and deductions between independent contracting and traditional employment, the effective compensation might need adjustment.

You also should ensure that your rate reflects your value and expertise. Independent contractor roles often pay for the worker’s expertise, not just their time. Higher fees for consultants’ specialized knowledge are both common and justified. Think about your contributions beyond just hours. Your rate should match the impact of your work.

In W-2 employment, employers withhold income taxes and Federal Insurance Contributions Act (FICA) taxes from employees' paychecks. They remit these directly to the IRS. This simplifies tax obligations for employees. Conversely, 1099 workers are responsible for their own taxes. Contractors need to track their earnings and make estimated tax payments to the IRS on a quarterly basis. They pay both the employee and employer portions of FICA taxes in addition to income taxes. This is a major reason that your hourly rate as an independent contractor should be higher than your hourly rate as a W-2 employee with the same responsibilities.

Health insurance, life insurance, disability insurance, and a 401(k) with a match are standard employee benefits. Some employers offer more robust benefits packages, including bonuses, tuition reimbursement, wellness programs, and more. Paid time off is valuable, too. Physicians often get additional benefits from their employers, like CME allowances and malpractice insurance.

Benefits constitute a significant portion of total compensation — often around 30%. Independent contractor agreements, on the other hand, don't come with benefits (though there are exceptions). Contractors cover these costs themselves, or choose to forgo certain benefits entirely. But contractors gain flexibility in choosing their benefits, like tailoring insurance coverage or contributing to a solo 401(k).

Deductions and Protections

For the most part, all the supplies and services that employees need to complete their job responsibilities are covered directly or reimbursed by their employer. As such, tax deductions for business-related expenses for W-2 employees are quite limited.

Independent contractors have much more leeway to deduct business expenses. Nearly anything that you need to complete your contracted work can be deducted when tax time rolls around. This includes office supplies, computer software, flights and lodging for work-related travel, subscriptions to things like UptoDate, legal and professional services, and medical licensing and certification fees. These expenses can really add up and significantly reduce taxable income.

Employees have a range of legal protections, including minimum wage, overtime pay, unemployment benefits, and worker's compensation. These are mandated by federal and state labor laws. As an independent contractor, you are considered your own business entity. So you do not receive these protections.

Contractors need to carefully negotiate their contracts, as your contract is where your "protections" lie. The contract typically outlines terms for contract duration and cancellation. Often, contracts allow the client to terminate the agreement at any time and for any reason. Therefore, income from independent contracting side gigs can be less secure compared to the steady income associated with permanent employment, though it offers more autonomy.

Autonomy in decision-making differs between employees and contractors. Employees have structured roles with set hours and duties, while independent contractors typically have more freedom in how, when, and where they work. Many physicians prefer the autonomy of 1099 work. However, some personalities really value the team camaraderie and involvement in workplace culture that can come with being an employee in certain organizations.

On the flip side, regulations and compliance within health care are complicated. Most organizations want to be compliant with the applicable laws just as much as you do. So, whether you're an employee or an independent contractor, you'll likely receive support from your employer to assist you in maintaining compliance. This may be in the form of internal legal counsel or protocols and policies to follow. As an independent contractor, however, you have greater responsibility for compliance. You will potentially incur higher legal costs for advice or rectification of non-compliance issues.

Finding Work

Permanent employed positions are frequently advertised on job boards. Finding a side gig as an independent contractor in the medical field tends to rely on networking and word-of-mouth, especially for roles requiring specialized expertise or consulting. Recruiters typically focus on filling employed positions, whereas staffing agencies are more likely to be involved in placing physicians in 1099 roles, such as locum tenens.

The differences between various work arrangements can seem minor. You might be tempted to ignore the structural nuances of a position that is "just" a side gig. But these differences impact your gig’s suitability, financial benefit, and long-term viability.

Sylvie Stacy, MD, MPH is a preventive medicine and addiction medicine specialist. She is author of "50 Nonclinical Careers for Physicians" and "50 Unconventional Clinical Careers for Physicians."

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