PSA vs. Employment: How “Employment Lite” Rewired My Career (and Can Rewire Yours)

Today’s Micro-Business Tactic: PSA vs. Employment: How “Employment Lite” Rewired My Career (and Can Rewire Yours)

Today, we are going to explore What a Professional Services Agreement (PSA) is vs. an employment agreement—and how my transition to contracting via a PSA called “Employment Lite” changed my career and life. The long version is in my book, Doctor Incorporated: Stop the Insanity of Traditional Employment and Preserve Your Professional Autonomy—grab the mini-book here

Why this matters to your autonomy (and your numbers)

If you’re like most clinicians, you were socialized to accept employment by default: predictable paycheck, benefits, and the illusion of security. But as medicine consolidated and admin creep expanded, many W-2 roles turned into a treadmill that ran your life. The PSA flips that script. Under a PSA, your micro-business (PC/PLLC) contracts to deliver defined services on defined terms—separating your clinical work from your employer’s HR system and aligning you with the marketplace as a true professional.

I lived both sides. I started out conventionally employed and felt the slow squeeze—schedule control eroded, inboxes ballooned, and my creative energy got siphoned into committees. When I negotiated a PSA (what I call “Employment Lite”), everything changed: cleaner boundaries, better cash flow visibility, and agency over how and with whom I worked. The result wasn’t just more income; it was more life.

If you want context for the identity shift, I’ve written about debt, distributions, and owner’s pay in several posts—e.g

• Determining Your Salary as a Self-Employed Doctor,

• Can Self-Employed Doctors Save Taxes with Lower Salaries?,

• What Are Business Distributions in a Professional Corporation?

Those mechanics become powerful once you step off the W-2 treadmillT

PSA vs. Employment—what’s the actual difference?

Employment agreement (W-2):

• You sell time and control to an employer.

• Employer withholds taxes, provides benefits, and directs your work.

• Policies, schedules, and productivity targets are set by the organization.

• It’s stable—until it isn’t—and often limits optionality (moonlighting, side ventures, IP).

Professional Services Agreement (1099 via your entity):

• Your micro-business (PC/PLLC taxed as S-Corp for many of you) provides services to a client (the health system/group).

• You invoice for services. You control draws, salary, and distributions at the entity level.

• Scope, deliverables, schedule windows, quality standards, and termination clauses are contracted—not handed down.

• Optionality improves: you can stack clients, protect IP, and right-size your life.

Translation: Employment sells your flexibility; a well-crafted PSA restores it.

For deeper background, see my blog pieces on PSA/Employment Lite:

• Employment Lite for Physicians

• Every Physician Should Explore the Employment Lite

• Physician Employment Contracts: What You Need to Know

• A Case Study for a Professional Services Contract

The critical clauses you should care about

When I negotiated “Employment Lite,” here’s what moved the needle:

1. Scope & Deliverables Define what you’ll do (clinics, call, coverage), what you won’t, and quality metrics tied to outcomes, not raw RVUs.

2. Schedule & Autonomy Windows Lock in blocks you control (e.g., 2 locums weeks/quarter). Protect calendar integrity.

3. Compensation Structure

   • Base Salary vs. per-session vs. per-RVU vs. hybrid.

   • Incentive alignment (e.g., access, patient experience, quality).

   • Payment terms (net-15/30); late-payment penalties.

4. Independence & Non-Compete Clarify independent contractor status, business ownership, and IP. Carve out non-compete distance/duration that’s reasonable—or remove it.

5. Termination & Renegotiation Triggers Mutual 60–90 day without-cause termination; renegotiation on workload/material changes.

6. Professional Liability & Indemnification Tail coverage responsibilities (who pays, when). Limit your indemnification to your negligence only.

7. Compliance & Documentation Clear language acknowledging you control your micro-business and remain responsible for your professional judgment.

Pro tip: Pair PSA re-architecture with an entity-based pay design

How “Employment Lite” changed my life (and can change yours)

• Control of Work: I stopped asking for permission to design my day. My PSA set boundaries; my micro-corp set rhythms.

• Owner’s Pay: I engineered reasonable salary + tax-efficient distributions—on a cadence that supported my family and funded growth.

• Optionality: With a PSA, I could teach, coach, write, consult, and build products without HR handcuffs.

• Energy & Purpose: Agency reduces burnout. Autonomy lets you say no to misfit work sooner—and yes to impact work faster.

For a wider lens on job stacking and flexible income design, see:

• Job Stacking: Creating the Lifestyle You Want

• Hybrid Work for Physicians: Job Stacking Part-Time 1099 and W-2

• Empowering NPs: Job Stacking as Independent Contractors

A simple step-by-step to craft your PSA (“Employment Lite”)

1. Form/confirm your professional entity (PC/PLLC; discuss S-Corp tax election with your CPA).

2. Clarify your value proposition (access, coverage reliability, quality, patient experience).

3. Draft a PSA outline: scope, schedule windows, compensation, compliance, termination, and indemnification. Your employer’s legal department will typically provide the actual agreement, but think about your outline as being the “term sheet”.

4. Establish your independent contractor policies: documentation, malpractice tail plan, HIPAA/BAA as needed.

5. Propose a pilot: 90-day PSA “slice” with pre-defined metrics and a reset call.

6. Invoice professionally (net-15/30), track AR, and implement a basic cash management cadence (salary + distributions).

7. Review quarterly: renegotiate based on workload, outcomes, and mutual fit.

Want talking points for the first conversation? Grab my short free primer: PSAs & Employment Lite Guide and Understanding Professional Services Agreements (e-book)

Case Study (Anonymized): “Dr. R” Moves from W-2 to PSA

“Dr. R,” a mid-career hospitalist, was frustrated. Overtime became expected, not optional. Her compensation blended base + RVU—but meetings and inbox time were invisible.

We redesigned her life with a PSA:

• Scope: 14 shifts/month inpatient + one committee she actually valued.

• Schedule windows: two protected non-clinical weeks/quarter.

• Comp: fixed per-shift rate + incentive for throughput and readmission benchmarks (outcomes > volume).

• Non-compete: trimmed to 10 miles/12 months; explicit carve-outs for teaching and telehealth.

• Termination: 90 days mutual without cause.

Results (Year 1):

• +11% pay with fewer nights/weekends.

• She launched a paid consult service during protected weeks.

• Burnout score dropped; she regained bandwidth for family and creative work.

The big lesson? The PSA forced clarity. Clarity makes better careers.

Common pitfalls (and how to avoid them)

• Mushy scope → Get precise: what counts, what doesn’t, and how quality is measured.

• No autonomy windows → Protect your calendar or you’ll drift back into “employment by another name.”

• Comp tied to the wrong metric → Anchor on outcomes + access; don’t re-create the RVU hamster wheel.

• One-sided indemnification → Limit liability to your negligence; clarify tail responsibility.

• Hidden non-competes → Carve out your other work and IP from the start.

If you want an outside set of eyes on your current agreement, consider: Contract Diagnostics for compensation/contract review and negotiation

Long-form story

If you want the narrative arc of my own W-2 → PSA transformation, read Doctor Incorporated. It’s the playbook I wish I’d had on Day 1. Start with the mini-book here, and then explore the larger series on employment vs. entrepreneurship across my blog.

💬 Lessons from the Field

“This week, one of my coaching clients discovered that shifting from W-2 to PSA—without changing hospitals—recaptured two full days a month for family and added ~$24K/year after taxes. The difference wasn’t ‘working more’; it was contracting smarter.”

📥 Tool of the Week CTA

Tool of the Week: Tips for Discussing Employment Lite with Your Employer. Let us help you create the talking points that will give you the best chance to successfully convert to employment lite

• PSAs & Employment Lite Guide (free e-book) → Download

• Understanding Professional Services Agreements (free e-book) → Download

• Comprehensive Employment Lite Program (done-with-you) → Explore

🚀 Scale with Coaching CTA

Want personal guidance? Our 1:1 coaching and consultations help you execute faster and smarter.

• Book a Strategy Consultation Session → https://www.simplimd.com/500-business-strategy

• Get Started with 1:1 Business Coaching Today → https://www.simplimd.com/pea-business-coaching

P.S. More resources you might like

• Why Employment Lite Is Best (overview landing page) → https://www.simplimd.com/why-employment-lite-is-best

• Every Physician Should Explore the Independent Contractor Model → Read