Bogus self-employment in government cross hairs



Cabinet to review bogus self-employment proposals

Minister for Employment Affairs & Social Protection, Regina Doherty recently announced that she will make proposals to Cabinet that a new standalone team is put in place to investigate alleged incidents of bogus self-employment in large companies along with complex cases involving the practice.

Recent employment law reform

Although the topic of bogus self-employment was discussed during debates on the Employment (Miscellaneous Provisions) Act, it was decided that the recently enacted employment law update was not the best way to regulate bogus self-employment. According to Minister Doherty, bogus self-employment will be back on the agenda for 2019.

Existing legislation

Sections 251 and 252 of the Social Welfare Consolidation Act 2005 prohibit employers from misclassifying employees as being self-employed. Sanctions include fines of up to €13,000 or imprisonment for a term of up to 3 years or both. The SCOPE section in the Department of Social Protection currently determines employment status and ensures that the correct class of PRSI is being applied to workers.

WRC and Revenue Inspections

There has been an increase in workplace inspections with a specific focus on detecting cases of false/bogus self-employment. The Revenue regularly works in collaboration with the Workplace Relations Commission in determining the appropriate employment status.

Changes in the world of work

Advances in technology are changing the way business is being done including the nature of the employment relationship. Workers providing services for collaborative platforms like Deliveroo, for instance, are currently deemed to be self-employed. As legislators struggle to keep up with new technologies, there is a risk that workers in the ‘gig economy’ are being wrongly classified as self-employed. Bogus self-employment may be costing the state as much as €300 million in unpaid PRSI every year and if workers are wrongly classified as self-employed they lose access to a suite of employment rights under Irish and EU law.

Revenue Code of Practice

Revenue’s Code of Practice for Determining Employment or Self-Employment Status of Individuals sets out specific criteria for considering employment status for tax and social insurance purposes:

Criteria indicating an employee

  • The person is under the control of another person who directs, how, when and where work is to be carried out.
  • Supplies labour only
  • Receives a fixed, hourly, weekly, monthly wage
  • Cannot subcontract work out
  • Does not supply materials or equipment for the job
  • Is not exposed to personal financial risk
  • Does not assume any responsibility for investment and management
  • Does not have the opportunity to profit from sound management in the scheduling of engagements
  • Works set hours or a given number of hours per week or month
  • Works for one employer
  • Receives expenses /subsistence
  • Entitled to overtime (pay /TOIL)

Criteria indicating self-employment

  • Owns their own business
  • Is exposed to financial risk by having to bear the cost of making good, faulty or substandard work carried out.
  • Assumes responsibility for investment and management
  • Opportunity to profit
  • Control over what, how, when and where work is done.
  • Can hire other people
  • Can provide the same service to more than one business
  • Provides materials for the job
  • Provides equipment and machinery
  • Fixed place of work where materials can be stored
  • Costs and agree prices
  • Provides own insurance
  • Controls hours of work

Updates to the Code of Practice expected

Minister Doherty has reported that the departments increased level of inspections have resulted in a very low level of false or bogus self-employment, however in response to the ongoing concerns they have set up a working group to review the Code of Practice for Determining Employment and expect the group to report its findings in the first half of 2019.

Clarify the nature of employment relationship at the outset

Each case needs to be assessed on an individual basis. It is not always possible to determine whether an individual is self-employed or employed just by going through the above criteria. We advise clients, therefore, to seek advice before engaging an individual to carry out work as a self-employed contractor to ensure that the contract is one that governs a situation of genuine self-employment.

If you have any questions about the line between welfare and medical capability, please call 01 886 0350 to speak with a consultant.

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