Crackdown on bogus self-employment underway
Government crackdown on bogus self-employment
Reports have emerged that the Department of Social Protection and Employment Affairs is working on developing new measures to tackle bogus self-employment.
Independent ‘professional’ contractors in focus
The issue of bogus self-employment tends to arise when employers are trying to reduce costs. It can be more cost-effective for businesses to employ people on contracts for service rather than on employment contracts. Ambiguities around employment status can develop when independent contractors are effectively on a company’s payroll and working under the company’s instruction. In these circumstances, it may be difficult to determine what the contractor’s correct employment status is.
Bogus self-employment has traditionally been associated with the use of sub-contractors in the construction sector but the government believes that further regulation of the growing cohort of self-employed contractors or ‘portfolio workers’ in the professional sectors is now required.
Union support for the proposals
Unions are backing the government’s proposals. The Irish Congress of Trade Unions estimates that bogus self-employment may deprive the exchequer of up to €300 million in unpaid PRSI contributions and unions also point out that people who are misclassified as self-employed contractors are denied their statutory employment rights under Irish and EU law.
Existing regime does not have teeth
It is reported that Minister Regina Doherty believes the existing regime does not act as a deterrent to employers who classify ostensibly permanent staff as self-employed contractors. It is understood that the range of proposals will include increasing the number of prosecutions against employers and raising the maximum fine in the Circuit Court from €13,000 to €25,000 and from €2,500 to €4,000 in the District Court.
The department is also taking legal advice around the feasibility of introducing a new law that would protect workers who want to query their employment status against penalisation. Minister Doherty has reportedly had meetings with workers who would not query their employment status as they did not want to suffer negative work-related consequences.
Standalone bogus self-employment unit
The Minister has also set up a “standalone” unit to manage cases of bogus self-employment which is due to start work in the coming months. The unit will initially comprise five dedicated inspectors with 340 social welfare inspectors working on an “increased level of employer inspections”.
Legally binding Code of Practice
A new legally binding code of practice on bogus self-employment is under development and is being sent to employer groups and unions for their comments. The code is expected to clarify what constitutes self-employment and make it harder for employers to dispute employment status.
Contract of service or Contract for service
As the number of portfolio workers increases, employers will need to keep tabs on government activity in this area.
In the meantime, it is important that contracts (with employees and independent contractors) properly reflect the true nature of the relationship between both parties.
If you have any questions in relation to employment status, please contact the advice line on +353 1 886 0350 to speak with one of our experts.
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