Contractors Vs Employees: What Psychology Practice Owners Need to Know

Hiring in private practice is never just about filling rosters. The model you choose — contractors or employees — shapes your cash flow, your culture, your compliance risk, and ultimately your ability to grow.

Most psychology practice owners start with contractors. It feels flexible and lower-risk. But as practices scale, many owners hit the same wall: high turnover, limited buy-in, and a team that feels more like a collection of individuals than a cohesive practice. That’s when the question becomes louder: Would employees serve us better?

Let’s break this down through the lens of compliance, culture, cash flow, and growth stage.

Compliance: Getting It Right From the Start

The line between contractor and employee is not just preference — it’s law. The ATO and Fair Work Commission look at things like:

• Who sets the hours?

• Who provides the tools and systems?

• How independent is the work?

If your contractors look and act like employees, you risk being found non-compliant, which can mean backpay, penalties, and a lot of stress you don’t need. This is why choosing the right structure early matters.

Culture: Buy-In vs Independence

Contractors often see themselves as “their own business.” That can be fine at a small scale, but it can make it harder to build a unified team. You may find:

• They come and go more easily.

• They’re less engaged in supervision, team meetings, or culture initiatives.

• Their loyalty sits more with their caseload than your practice.

Employees, on the other hand, are easier to embed into culture. They’re part of your systems, your supervision structures, and your vision. This often means stronger retention and less of that “every man for himself” vibe.

Cash Flow: Flexibility vs Stability

• Contractors: You only pay when there are sessions. That keeps costs flexible during quiet periods but makes income harder for clinicians to predict.

• Employees: You carry fixed costs, even if client flow dips. But this stability can make financial forecasting clearer and help you grow with confidence.

This comes down to your appetite for risk and your current systems. If you have a steady referral base and strong client flow, employees can be a smart investment. If you’re newer or still finding your rhythm, contractors can ease the pressure.

Growth Stage: What Works When

• Early stage (1–3 clinicians): Contractors often make sense. They give you flexibility and keep costs low while you’re still establishing systems.

• Scaling stage (4–10 clinicians): This is where cracks often appear. High turnover, disengagement, and compliance grey zones can create chaos.

• Established stage (10+ clinicians): Employees usually provide more sustainability, stronger culture, and less disruption. Your overhead is higher, but so is your capacity to carry it.

The point is not that one model is “better” than the other. It’s that each model has a season.

The Bottom Line

The contractor vs employee decision is more than HR admin. It’s about the kind of practice you want to run, the culture you want to build, and the way you want to lead.

Most practice owners I work with start with contractors, but as they grow, shifting toward employees gives them more control, less turnover and a stronger foundation for scaling.

At Disco Rodeo Consulting, I help psychology practice owners weigh these decisions and put the right systems in place so whichever model you choose, it works for you.

👉 If you’re stuck on whether contractors or employees are the right fit for your practice right now, let’s talk about your stage of growth and map a staffing strategy that sets you up for clarity and confidence.