Employers warned over bogus self-employment


Employers warned over bogus self-employment

Regina Doherty. Photo: Frank McGrath
Regina Doherty. Photo: Frank McGrath

EMPLOYERS have been warned that they risk huge fines for incorrectly classifying staff as being self-employed contractors.

Accountants TaxAssist said fines of €50,000 are now commonplace for cases where bogus self-employment is proved.

There is now an increased focus by Revenue and the Department of Social Protection on firms that treat members of their workforce as self-employed contractors when they should be treated as employees, according to Michael Scanlan of TaxAssist.

Treating someone as self-employed means there is no employer PRSI (pay related social insurance) of 10.95pc paid on total pay.

Where Revenue finds that workers’ employment status is incorrectly classified it demands backdated employer PRSI be paid by the employer, at a minimum.

Mr Scanlan, the technical manager at TaxAssist, said Revenue was getting stricter on the issue of bogus contractors.

“From the employers’ point of view, because a lot of these contractors tend to be earning high amounts, the unpaid tax bill and therefore the risk of classifying them wrongly is often quite high. In fact, we’ve seen bills of over €50,000 recently.

“When the Revenue have focused on the employer, they will often then turn their attention to the contractor themselves and pursue them to ensure their taxes were correctly filed.”

According to the Irish Congress of Trade Unions (ICTU), the State could be losing up to €240m each year because of bogus self-employment, which is particularly a problem in the construction industry.

Some employers consider workers as self-employed, despite them effectively being staff members. ICTU told a recent Oireachtas Committee on Employment Affairs meeting that 24.3pc of those working in construction were classified as self-employed with no employees, compared to a level of just 3.9pc in industry in general.

Cabinet recently signed off on a range of measures to clamp-down on bogus self-employment. These include a review of the code of practice used to determine if someone is self-employed.


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Officials are examining whether this can be updated and put on a legal footing.

The Work Relations Commission is also set to be granted wider powers in order to tackle the problem of people being unfairly treated if they ask for their status to be reviewed.

Employment Affairs and Social Protection Minister Regina Doherty said recently that inspections are set to ramp up as part of a Government crackdown.

Ms Doherty writes of a need to “recalibrate our current inspection regime”.

“Now unemployment has fallen significantly, we have an opportunity to focus inspection resources on employment issues. In this regard, my department has engaged in a programme of training for its inspectors with a view to more intensive employer inspections from here on,” she said.

A dedicated team is also set to be in place by soon to specifically target larger companies that are misclassifying workers as being self-employed.

Legislation to tackle the issue has also been brought forward in Private Members Bills by members of the Opposition members Senator Ged Nash of Labour and Bríd Smith of the People Before Profit party.

But employers’ group Ibec claimed legislation to tackle bogus self-employment with “draconian” penalties will hurt the economy.

Online Editors


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