Locum Tenens Pay, Contracts, Taxes and Insurance
By Cory Kleinschmidt
The money side of locum tenens rewards physicians who read the fine print. Four things decide how a locum job actually pays: your contract, your rate, your taxes and your malpractice coverage. Get those right and locums pays well. Ignore them and a strong rate can quietly turn into a bad deal.
This chapter is the overview. The clause-by-clause and line-by-line detail lives in the dedicated guides linked at the end, so read this to know what matters, then go deep where it counts for you.
Not a physician? This chapter is written for physicians, MDs and DOs. Advanced practice clinicians (NPs, PAs and CRNAs) have their own guides.
Key Takeaways
- Everything in a locum contract is negotiable before you sign. Read all of it, especially termination, non-compete and malpractice terms.
- Pay is an hourly or daily contractor rate. Compare take-home, not the sticker rate (ranges live in the pay guide).
- As a 1099 contractor you owe self-employment tax of 15.3% and make quarterly estimated payments, because nothing is withheld for you (IRS).
- Know occurrence vs claims-made malpractice, and confirm in writing whether tail coverage is included and who pays for it.
- Malpractice risk is real: by 2024, 45.2% of physicians age 55 and older had been sued at least once, vs 28.7% of physicians overall (AMA 2026).
Read the Contract, All of It
A locum contract is negotiable, and almost everything in it is on the table before you sign. Read all of it. Once you’ve signed, almost nothing changes. These are the parts that decide whether a good rate stays a good deal:
- The job. Location, schedule, patient volume and call. Vague scope is where disputes start.
- Compensation. How pay is calculated (per shift, per hour or per RVU) and when you’re actually paid.
- Termination. The notice each side must give. Watch for lopsided terms, where you owe long notice and the other side owes almost none.
- Termination for cause vs without cause. “Without cause” usually requires written notice (30 days is common). “For cause” should require notice of a curable breach, not an instant exit.
- Non-compete (restrictive covenant). May limit working with the same client through another agency for a period. Enforceability varies widely by state and the rules keep shifting (Foley & Lardner, 2026 overview).
- Evergreen clause. Automatic renewal is convenient, but it can quietly extend an arrangement you meant to end.
- Boilerplate that still bites. Choice of law and forum, force majeure and entire-agreement clauses decide where and how a dispute gets resolved.
Lopsided notice is a real risk. In one documented case, a physician lost about $20,000 in expected income after her scheduled shifts were canceled with less than 24 hours’ notice, while her own contract required her to give 60 days’ notice before canceling (Sullivan Law, documented case). Notice terms that bind you far harder than the other side are exactly what to catch before you sign.
Everything in a locum contract is negotiable before you sign. After you sign, almost nothing is.
How Locum Pay Works
Locum physicians are paid an hourly or daily rate as contractors, and rates vary widely by specialty, geography and demand. Because you’re a contractor, the headline rate isn’t your take-home. You cover your own taxes, benefits and the unpaid gaps between placements, so compare offers on what lands in your pocket, not the sticker number.
Specialty-by-specialty ranges, and how locum pay stacks up against a permanent salary, live in the rates guide, where we source them properly. The rate is only half the math. What you keep after taxes is the other half, which is the next section.
Taxes: You’re a Business Now
As a 1099 contractor you pay self-employment tax of 15.3% on your net earnings and make quarterly estimated payments, because no one withholds for you. The 15.3% covers both halves of Social Security and Medicare (12.4% for Social Security, 2.9% for Medicare) that an employer would normally split with you (IRS, self-employment tax). You generally owe income tax in each state where you work too, though your home state usually credits tax paid elsewhere so the same income isn’t taxed twice.
Nothing lands in your account pre-taxed, so the IRS expects payment across four periods a year, not one check in April (IRS, estimated taxes). Three decisions do most of the work:
- Entity choice. Most locums start as sole proprietors. Some form an S corp or, in certain states, a professional entity. The right answer depends on your income and is worth a CPA’s read.
- Deductions. Travel, lodging, meals on the road, licensing, CME and professional supplies are commonly deductible for a 1099 physician. Keep the receipts (the travel chapter covers which costs the agency already pays).
- Cash discipline. Set money aside for taxes every time you’re paid, and keep a reserve, because nothing is withheld for you.
15.3%
Self-employment tax on net earnings
4
Estimated tax payments due each year
$0
Withheld from a 1099 paycheck
That’s the headline. The mechanics reward getting them right, so go deep in the 1099 taxes guide (deductions and entity choice) and the guide to quarterly estimated taxes.
Disclosure: Locumpedia partners with The Doctor’s CPA (Prithi Daswani, CPA), a locum-focused firm whose interpretation we cite alongside IRS primaries and at least one other independent source.
Malpractice: Know Your Coverage Type
Malpractice coverage is usually provided by the agency for the placement, but the type matters, and so does what happens when the coverage ends. There are two kinds, and the difference is the whole ballgame:
- Occurrence. Covers any incident that happened while the policy was active, whenever the claim is filed. Broader protection after the policy ends.
- Claims-made. Covers a claim only if the policy is still active when the claim is filed. That leaves a gap the moment the policy ends.
Tail coverage closes that gap by extending the reporting window after a claims-made policy ends. Confirm in your contract whether tail is included and who pays for it. That single line can be worth thousands.
| Term | Occurrence | Claims-made |
|---|---|---|
| What it covers | Any incident during the policy period | Claims filed while the policy is active |
| After the policy ends | Still covered for that period | Gap, unless tail is added |
| Tail coverage | Not needed | Needed to close the gap |
| What to confirm | That it’s truly occurrence | Who pays for tail |
One practical caution: a Certificate of Insurance (COI) is a summary, not the policy. Being named an “additional insured” takes an actual policy endorsement, not just a line on a certificate. If coverage is central to a deal, read the policy language, not the COI.
Malpractice isn’t a small risk. By 2024, 45.2% of physicians age 55 and older had been sued at least once in their careers, vs 28.7% of physicians overall (AMA, 2026 report). Over a full career, coverage type is not a detail.
Frequently Asked Questions
Do locum physicians pay their own taxes?
Yes. As 1099 contractors they pay self-employment tax of 15.3% and make quarterly estimated payments, because nothing is withheld (IRS).
Do I owe taxes in every state I work in?
Generally yes, but your home state usually credits tax paid to other states, so the same income isn’t taxed twice.
What malpractice coverage do locum physicians need?
Confirm whether the policy is occurrence or claims-made. If it’s claims-made, confirm that tail coverage is included and who pays for it.
Is a locum tenens contract negotiable?
Yes. Rate, schedule, termination, non-compete and coverage are all negotiable before you sign.
How much do locum physicians make?
It varies widely by specialty and location. See the pay guide for current ranges, and remember the take-home is what’s left after 1099 taxes.
Go Deeper
- Locum tenens 1099 taxes, deductions and entity choice
- Quarterly estimated taxes for locum physicians
- Malpractice and tail coverage for locums
- Reviewing a locum contract, clause by clause
- Locum tenens pay rates by specialty and state
Up: The No-BS Guide to locum tenens.