Payroll for a Multi-Provider Behavioral Health Group: 1099 or W-2

A therapist who chooses their own hours, sets their own rates or accepts the practice's fee schedule by choice, isn't required to take a specific caseload, and could see clients from other referral sources too, generally supports a contractor classification. A therapist working a fixed weekly schedule the practice sets, using only the practice's EHR and intake process, and required to accept assigned clients looks like an employee, regardless of how the group prefers to structure it.

Many groups default every therapist to 1099 because it's administratively simpler, but that default doesn't hold up if the actual working relationship looks like employment. Review each provider's arrangement individually rather than applying one classification across the whole roster.

When a therapist works from home in one state and sees a client physically located in another, state income tax withholding generally follows where the therapist is actually performing the work, not where the client is sitting. This is a common point of confusion, since people assume the client's state matters more, but for payroll purposes it's usually the provider's work location that drives the obligation.

Track each therapist's actual work location, including if they work from a different state part of the year, and confirm your state registrations match where your W-2 clinicians actually work.

Gusto works well for a practice with mostly W-2 therapists in one or two states and a straightforward pay structure. Its contractor payment flow is simple enough for a practice manager to run for a handful of 1099 providers too.

Rippling's broader multi-state handling and more structured contractor payment tools tend to matter more once a group runs a large roster of 1099 therapists across many states, or once telehealth expansion means providers regularly work from different states throughout the year. If you're manually tracking which state each contractor worked from before issuing a 1099, that tracking is usually the sign a more structured system would help.

Say a therapist is paid a percentage of each session's collected fee, after insurance adjustments, rather than a flat per-session rate. That percentage-of-collections figure typically isn't finalized until the claim is adjudicated, which can be weeks after the session itself. A therapist paid on a flat per-session rate gets a predictable number right away; one paid on a percentage of collections has a built-in lag that needs to be communicated clearly.

Neither Gusto nor Rippling calculates the collections percentage from your EHR or billing system directly, so that calculation happens upstream and the resulting payment amount gets imported into whichever platform runs the actual pay run.

A pre-licensed associate or intern working toward full licensure often requires supervised hours, and how those hours are compensated, sometimes at a lower rate than fully licensed staff, sometimes not compensated at all if structured as a training arrangement, needs to be clearly documented and consistent with your state's specific rules for supervised practice.

An unpaid or under-compensated supervision arrangement that doesn't meet your state's requirements for a legitimate training exception can create a wage claim risk, so review this structure with an employment attorney rather than assuming an industry-standard practice is automatically compliant everywhere.

Before a therapist starts seeing clients located in, or working from, a new state, confirm both their clinical licensure in that state, which may be eased by a relevant interstate compact for their license type, and separately confirm whether your practice needs new payroll tax registration there.

These are two different compliance checks running on two different timelines, and clearing the licensure question doesn't automatically clear the payroll question.

Before a therapist sees clients tied to a new state, check:

• Clinical licensure in that state, which may be eased by an interstate compact for the therapist's license type.
• Whether your practice needs new payroll tax registration, remembering that withholding follows where the therapist physically works, not where the client sits.
• Whether each therapist's schedule, caseload, and control over clients still support their 1099 or W-2 classification.
• How percentage-of-collections session pay will be finalized, since claims may not be adjudicated until weeks after the session.