The spotlight on “bogus self-employment” and the gig economy has intensified recently with the introduction of a new advertisement campaign from the Department of Employment Affairs and Social Protection. These ads invite individuals who believe they may be in “false self-employment” to make an application to the Department for an assessment of their employment status.
What is “false self-employment”?
The term “false self-employment” has been used in Irish legislation. However, the term has been used to describe a situation where an individual is treated like an employee, e.g. prescribed work schedules, is required to wear a uniform, is given a company email address etc., but is required to provide their services as a self-employed contractor. Typically their services are provided directly or via a company by way of a contractor agreement as opposed to an employment contract.
What is the risk of engaging individuals as self-employed contractors?
There has always been a risk that, depending on how self-employed contractors are treated in practice, they could be deemed to be employees.
This has implications from an employment law perspective, as the individual would be protected under employment legislation, as well as from a Revenue and social welfare perspective. This is because the employer should have applied tax and social welfare contributions and/or deductions to the individual’s pay.
These implications are not new. However, the recent ad campaign from the Department puts them into sharp focus and significantly increases the risk of self-employed contractors trying to ascertain that they are, in fact, employees.
What will happen if an individual applies to the Department for a determination?
The Department will refer the individual’s case to a Social Welfare Inspector for investigation. The inspector will interview both the individual and company separately. The inspector will likely ignore any labels the parties might attach to the relationship. Instead, the Department has said that it will look at a number of factors, including:
- How much control the company has over the individual
- Whether the company provides training
- How often the individual is required to report into the company
- Whether the individual has to personally carry out the work or if they can send a substitute
- Whether the individual is free to work for someone else
- How integrated the individual is into the business
- Whether the company provides the equipment necessary to carry out the role
- Whether the individual can work away from the company’s premises
- How the individual is paid, ie a fixed weekly rate, per task, etc.
The individual and the company may be required to provide certain documents and information. For example, written contracts, lists of duties and instructions, accounts, annual returns, etc.
The inspector will then submit a detailed report back to the Department.
A Deciding Officer will review the report and make a determination. If the determination confirms that the individual has been correctly categorised as self-employed, no further action will be taken.
If the determination confirms that the individual is falsely self-employed, the Department will amend the individual’s PRSI contribution record. This may involve the employer being required to back-pay social welfare contributions.
All determinations can be appealed by either party. Appeals must be sent in writing to the Social Welfare Appeals Office within 21 days of the date of the determination.
The Department liaises with the Office of the Revenue Commissioner to ensure, as far as possible, consistency in decision making in both organisations for the classification of employment. This means that an investigation by the Department could also result in an investigation and further determination from Revenue.
It is also possible that an individual who has been determined to be an employee by the Department / Revenue will use that determination as evidence in a claim before the Workplace Relations Commission to assert employment rights. A claim like this could also lead to the WRC starting its own investigation into the employer’s work practices.
“False self-employment” and the gig economy has been a hot topic across the globe over the last two years. The debate, and indeed the general concern, tend to relate to the lack of job security, the lack of any form of guaranteed wage and the lack of the most basic employment-related protections.
The Department’s ad campaign is the latest and most high-profile Government response to this debate. It shows that it is a topic which is not going away.
Businesses who engage individuals on a self-employed basis should take steps now to ensure that their work practices are appropriate and that they will stand up to scrutiny in the event of an inspection.