The Minister for Social Protection, Heather Humphreys, TD, recently published an updated Code of Practice on Determining Employment Status.
The term ‘employment status’ refers to whether a worker is classified as either an employee or as being self-employed. This classification has implications for the rate of Pay Related Social Insurance (PRSI) and tax that is owed. It also affects the level of social welfare and employment rights protections that are afforded a worker.
Employment status can be a complex area, so the purpose of the Code of Practice is to set out the key characteristics that are used to inform decisions on employment status, taking into account current labour market practices and developments in legislation and case law. These developments include, for example, new forms of work such as platform work and the gig economy. It is intended to be a ‘living document’, which will continue to be updated to reflect relevant changes into the future.
Minister Humphreys commented:
“I share the concern expressed by many commentators over the years that employees should be correctly classified for social insurance, taxation and employment rights purposes. We all want to ensure that workers’ rights and entitlements are protected and in particular that workers are not incorrectly, or falsely, classified as self-employed.
“The publication of this updated Code of Practice is an important and necessary step in guiding and informing people who need to understand this complex issue. The Code sets out the law as has been developed in the courts through case law over many years.
“I believe this updated code will prove to be of great benefit to many people, including employers, employees, independent contractors, legal, financial and HR professionals, statutory investigators, decision-makers and adjudicators.”
In Ireland, there is a wide range of ways to work and to operate a business. Specific legislative protections for workers apply to each type, including self-employment, full-time employment, part-time employment, temporary agency work and fixed-term contracts.
It is important to ensure that workers are correctly classified in a way that matches the reality of the relationship between the worker and the business. The choice of business model should not serve to exclude any worker from their proper entitlements.
The misclassification of a worker as being self-employed when their terms and conditions mean that they are, in reality, employees, is a matter of concern. Misclassification reduces contributions to the Social Insurance Fund and excludes workers from full Pay Related Social Insurance (PRSI) and employment rights protections.
It is also a criminal offence under Section 252 of the Social Welfare Consolidation Act 2005 for an employer to knowingly and falsely classify a person as being self-employed, subject to a penalty on conviction of up to three years’ imprisonment.
In order to address concerns relating to a false self-employment the Department has established a dedicated team of Social Welfare Inspectors to investigate employment arrangements across all sectors. Where misclassification occurs, PRSI and tax must be paid for the full period concerned. As there are no limits on the amount of retrospective PRSI or tax that may be due, the amounts owed can be substantial.
The Code acknowledges the existence and significant value to the economy of genuine self-employment. Currently there are over 300,000 self-employed workers in the Irish economy. The Code is not intended to bring genuinely independent contractors into the employee category.
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