Locum tenens work is the most underrated strategic move in early physician practice. Most residency programs barely mention it. Most career advisors dismiss it as "gig work" for the uncommitted. That advice is wrong, and it costs new graduates real money, real opportunities, and in some cases, their entire career trajectory.
The decision to start with locums versus jumping straight into a permanent role is not a binary right-or-wrong question. It is a strategic calculus that depends on your financial situation, your specialty, your geographic constraints, your mental state after residency, and your tolerance for administrative friction. I am going to break this down specifically, because the standard answer ("it depends") helps nobody.
Let me state the position upfront: for a meaningful subset of graduating residents and fellows, doing 6 to 24 months of locums before committing to a permanent position is the higher-EV play. For another group, it is a trap that delays real career momentum and hemorrhages money through poor benefits planning. The difference between these outcomes is not luck. It is preparation.
This article addresses physician compensation structures, independent contractor tax obligations, employment contract considerations, and malpractice coverage nuances that affect locum tenens arrangements. The information provided here is for educational purposes only and is not financial advice, not legal advice, and not tax advice. Figures vary significantly by specialty, geography, and market conditions; consult a qualified professional before making career decisions based on compensation projections.
The Core Challenge: Why Most Graduates Botch the Locum Decision
Here is the pattern I have watched repeat itself dozens of times. Resident finishes training, feels burned out or uncertain about geography or practice setting, drifts into locums as a default rather than a choice, stays for two or three years without building equity in any practice, never develops the patient panel that drives long-term income, and ends up stuck. The locum assignment that was supposed to be a bridge becomes the destination.
The pitfalls are predictable. Let me name them.
The Benefits Vacuum. Permanent positions come with benefits worth 25% to 40% of base salary when properly valued: health insurance, retirement matching, malpractice tail coverage, CME allowance, paid time off, disability insurance, and often signing bonuses. Locum work provides none of this as standard. A new graduate who earns $300 per hour as a locum but is paying $1,800 per month for a family health plan on the marketplace, has no employer 401(k) match, and is funding their own retirement contribution is not actually earning more than their permanent-employed peers. The hourly comparison is a trap.
The Credentialing Grind. Every locum assignment requires fresh credentialing at the facility. The process typically takes 60 to 120 days, sometimes longer. That means gaps between assignments. That means weeks where you are technically licensed to work but cannot bill. The credentialing nightmare is the single biggest operational complaint from locum physicians, and it is the reason that experienced locum doctors often restrict themselves to two or three states and a handful of agencies. New graduates entering the market without that playbook lose months to paperwork.
The Tail Coverage Trap. This one destroys careers. Malpractice claims-made policies, which most locum agencies provide, only cover you while the policy is active. When you stop working or switch carriers, you need "tail coverage" to protect against claims filed after the policy period ends. A new graduate who does two years of locums, then takes a permanent position, may face a tail premium of 15% to 25% of annual premiums, often $20,000 to $60,000 out of pocket, depending on specialty. Some permanent employers will pay for prior tail coverage as part of signing, but many will not. Get this wrong and you carry personal liability for years.
The Commitment Penalty. There is a persistent, though diminishing, bias in some hospital systems and group practices against physicians with extensive locum backgrounds. The stereotype: "cannot hold a job," "difficult personality," "running from something." Most of this is unfounded nonsense, but hiring committees are human. A CV showing 14 locum assignments in 18 months raises questions that a CV showing one stable permanent role does not. This is changing as locum work becomes more normalized, but it remains a real consideration.
The Geographic Mismatch with Long-Term Goals. Locum work rewards flexibility, but building a referral base, owning a home, putting down roots in a community, and developing the professional relationships that drive partnership tracks all reward stability. The longer you stay in locum mode, the harder the transition back becomes. Three years of locums is harder to exit than one year.
Before you take the plunge, understand the nuances of locum tenens versus permanent roles to determine if this path aligns with your long-term goals.
Here is how to navigate these successfully.
First, treat locum work as a strategic tool, not a default. Define the specific question you are using locums to answer. "I do not know whether I want to practice in a critical access hospital or a tertiary academic center" is a question locums can answer. "I am burned out and do not want to think about my career right now" is not a question locums can answer; it is a signal you need a sabbatical or a different kind of break entirely.
Second, run the actual math. Do not compare locum hourly rates to permanent base salary. Compare total compensation: locum gross income minus health insurance premiums minus retirement contribution you should still be making minus self-employment tax (15.3% on net earnings, the rate no employed physician ever faces) minus estimated tail coverage minus credentialing downtime. The number that emerges is often 10% to 20% lower than the headline locum rate suggests, and sometimes lower than the permanent alternative.
Third, set a hard exit timeline before you start. Twelve months is a reasonable window for most scenarios. Twenty-four months is the outer edge. Beyond that, the opportunity cost starts compounding. Write the timeline down. Tell your spouse or partner. Tell your recruiter. The locum lifestyle has a seductive inertia to it, and without a predetermined end point, you will drift.
Fourth, build your state licensure strategically. The Interstate Medical Licensure Compact (IMLC) exists for exactly this purpose. As of recent years, more than 40 states participate. If your specialty and target states align with compact membership, you can leverage your home-state license to obtain additional state licenses through an expedited pathway. Do not wait until you have accepted an assignment to begin this process. The physicians who do locums well are credentialing 90 days ahead of need, not 30 days behind.
Fifth, negotiate benefits into the locum arrangement where possible. Some agencies offer 401(k) plans through professional employer organizations. Some facilities offer partial benefits for physicians working minimum hour thresholds. Some locum physicians form S-corps or LLCs to access certain benefit structures. This is where the compensation math gets complicated and where the disclaimer at the top of this article matters most. Talk to a CPA who understands locum physician taxation. The standard W-2 employee deduction playbook does not apply.
Actionable Next Steps: The 90-Day Plan
If you are balancing multiple career interests, consider how locum tenens work supports academic teaching and research during your transition.
If after weighing the considerations above, locum tenens still feels like the right strategic move for your situation, here is the sequence.
Step 1: Specialty-Specific Market Scan (Week 1-2)
Identify the locum demand profile for your specialty. Not all specialties are equal. Family medicine, internal medicine, hospitalist work, emergency medicine, psychiatry, and anesthesia have robust locum markets with assignments starting at competitive rates within weeks of credentialing. Surgical subspecialties, pediatric subspecialties, and certain academic-leaning fields have thinner markets where locum opportunities may be limited or lower-paying. Check current demand through staffing agency postings (Weatherby Healthcare, CompHealth, LocumTenens.com, AMN Healthcare). The agencies publish their open assignments online; you can see supply and geographic distribution in an afternoon.
Step 2: Financial Baseline (Week 2-3)
Meet with a CPA experienced in 1099 independent contractor taxation. Calculate your break-even hourly rate after self-employment tax, health insurance, retirement contribution (target 15% to 20% of gross), and estimated quarterly tax payments. Compare that break-even to current locum rates in your specialty. This number tells you whether locum work is financially viable at all, or whether the headline rates are misleading.
Step 3: Licensing Acceleration (Week 3-8)
Apply through the IMLC if eligible. Begin the FSMB credentialing verification process. Most locum agencies will handle facility-level credentialing once you sign with them, but they cannot help with state licensure. The state license is on you, and it is the bottleneck. Do not skip this step to "save money on applications you might not need." The applications you start now are the assignments you can accept in three months.
Step 4: Agency Selection (Week 4-6)
Sign with two, not one, locum agencies. Having competing recruiters expands your assignment options and improves your negotiating leverage on rates and locations. Specialization matters: some agencies dominate hospitalist locums, others own the anesthesia market. Ask each agency for references from physicians currently on assignment. A good agency will produce these within a day. A great agency will introduce you to existing locum physicians in your specialty for an unfiltered conversation. That conversation is worth more than any contract.
Step 5: Contract Review (Ongoing)
Every locum contract requires review. Specifically, examine: (a) malpractice coverage type and tail obligations, (b) cancellation clauses and how they affect your income, (c) non-compete provisions that may restrict where you work permanently afterward, (d) payment schedules and how quickly facilities actually pay (60 to 90 days is common, sometimes longer), (e) whether the agency or the facility holds the contract with you. This is where legal counsel earns its fee. A 30-minute review with an attorney who understands physician contracts costs less than one bad assignment that locks you into an unfavorable position.
Step 6: The First Assignment (Month 3-4)
Accept your first assignment with intention. Pick a setting that answers a real question about your career direction. If you do not know whether you want academic medicine or community practice, take one of each. If you are undecided between hospitalist and outpatient internal medicine, take a hospitalist assignment first. Use locums as a data-gathering exercise, not as a holding pattern.
Step 7: Quarterly Reassessment
Every three months, ask yourself: "What have I learned that I did not know three months ago, and what permanent opportunity is this learning pointing me toward?" If you cannot answer that question, you have drifted into the trap. Reassess the exit timeline. Move toward a permanent role when the data justifies it, not when you are tired of credentialing.
Key Takeaways
The locum-versus-permanent decision for new graduates is not about chasing the highest hourly rate. It is about answering a specific career question with the lowest possible opportunity cost. Locums are a tool. Used strategically, they produce clarity, geographic flexibility, and short-term income that buys time. Used as a default, they produce credentialing fatigue, benefits gaps, and stalled career momentum.
Prepare before you start. Crunch the after-tax numbers. License multiple states in advance. Sign with two agencies. Review every contract. Set a hard exit timeline. And above all, treat locum work as a means to a permanent end, not as a permanent end in itself.
The physicians who navigate this well end up in stronger permanent positions because they chose them with data rather than desperation. The physicians who navigate it poorly end up still doing locums at year five, wondering why their career never quite started. The difference is the plan.
Further Resources
- Interstate Medical Licensure Compact (IMLC), imlcc.org
- Federation of State Medical Boards (FSMB), fsmb.org
- Weatherby Healthcare, CompHealth, LocumTenens.com, AMN Healthcare, agency postings reveal real-time market demand
- Your specialty society (ACP, AAFP, ACEP, ASA, APA), most publish locum-specific career guidance
- National Association of Locum Tenens Organizations (NALTO), agency accountability standards
