Oireachtas Joint and Select Committees
Thursday, 5 March 2026
Public Accounts Committee
Report on the Accounts of the Public Services 2024
Chapter 17 - Classification of Workers for PRSI Purposes
2:00 am
John Brady (Wicklow, Sinn Fein)
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This morning, we will engage with the Department of Social Protection to examine the Comptroller and Auditor General's Report on the Accounts of the Public Services 2024, chapter 17 - classification of workers for PRSI purposes. On behalf of the committee, I welcome the following officials: Mr. John McKeon, Secretary General, and Ms Deirdre Shanley, assistant secretary general, from the Department of Social Protection; and Mr. Niall Cody, Chairman, Mr. Tom James, assistant secretary general, and Ms Leeann Kennedy, principal officer, from the Revenue Commissioners. We are also joined by officials from the Department of Enterprise, Tourism and Employment who are attending in a representative capacity. They are: Ms Maedhbh Cronin, principal officer; Ms Audrey Cahill, director general of the Workplace Relations Commission, WRC; Mr. Enda Murphy, director of knowledge, information and advisory services at the WRC; and Ms Fiona O'Dea, director of adjudication services at the WRC. From the Office of the Comptroller and Auditor General, we are joined by the Comptroller and Auditor General, Mr. Seamus McCarthy, who is a permanent witness to the committee, and Ms Eileen Glynn, audit manager. All of the witnesses are welcome.
Before we begin, I want to explain some limitations to parliamentary privilege and the practice of the Houses as regards references the witnesses may make to other persons in their evidence. The evidence of witnesses physically present, or who give evidence from within the parliamentary precincts, is protected, pursuant to both the Constitution and statute, by absolute privilege. This means they have an absolute defence against any defamation action for anything they say at the meeting. However, witnesses are expected not to abuse this privilege. It is my duty as Cathaoirleach to ensure that it is not abused. Therefore, if witnesses' statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction. Witnesses are also reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity either by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity.
I call on the Comptroller and Auditor General to make his opening statement.
Mr. Seamus McCarthy:
Chapter 17 of my Report on the Accounts of the Public Services 2024 reviews the systems and procedures underpinning the classification of workers for pay-related social insurance purposes. As members will understand, the misclassification of a worker’s employment status can result in an individual not receiving the social insurance benefits to which they are entitled and lost contributions to the Social Insurance Fund. I previously reported on this topic in my 2017 and 2021 reports. I considered it was appropriate to report on the matter again last year given the judgment of the Supreme Court delivered in 2023 in what is generally referred to as the Karshan case involving pizza delivery drivers. I was also conscious of the continuing lengthy process of review of the employment status of certain workers in RTÉ, and the rapidly evolving nature of work engagements facilitated by online platform technology.
It remains the case that the terms "employee" and "employer" are not formally defined under Irish or EU law. As a result, the Department of Social Protection, the Office of the Revenue Commissioners and the Workplace Relations Commission make determinations on the employment status of workers for their respective purposes and within their individual legislative frameworks. This has given rise to apparently anomalous treatment of certain workers in the past, including home tutors, sub-postmasters, social welfare branch office managers and coroners. In 2024, following the Karshan judgment, the Department, the Revenue Commissioners and the Workplace Relations Commission jointly published a revised and updated version of the Code of Practice on Determining Employment Status.
The revised code outlines a framework of five steps for consideration in the process of arriving at a determination of employment status. This is intended to enable employers and employees to determine someone's correct employment status in the first instance in order to ensure that workers are treated appropriately and consistently in respect of tax, social insurance and terms and conditions of employment. Where an employee or an employer or both are unclear about the correct classification, either or both can apply to the Department’s scope section for a decision on the matter. If the decision is disputed, then an appeal can be submitted to the social welfare appeals office.
The key risk to the completeness of collection of PRSI contributions requires the Department of Social Protection to ensure that workers incorrectly classed to class S, with lower PRSI contribution rates, are identified quickly and reclassified to the correct class and rate. The Department’s employment status investigation unit was established in 2019 to investigate the social insurance classification of workers. From the investigations carried out over the period 2019 to 2024, the classification of workers was amended in 10% of cases examined. By the end of December 2024, a total of €3.9 million in PRSI arrears had been identified by means of inspections carried out by the unit. The briefing material supplied by the Department and Revenue refers to substantial further arrears identified in 2025 and 2026.
While the level of investigative activity undertaken by the Department has increased in recent years, the reviews undertaken have generally been targeted at areas where it is believed that the risks of misclassification are highest. Selecting at least some cases for review on a random basis could enable the Department to establish reliable estimates of the extent of misclassification of employment status and of the associated losses in contribution receipts. While the Department receives considerable information on PRSI contributions from Revenue, this does not include information on the economic sector of the taxpayer or on the source and type of income giving rise to class S PRSI contribution receipts. Better data about class S contribution receipts could allow the Department to plan more effective targeted employment status compliance activity. I understand that the Department and Revenue are undertaking collaborative work to establish the potential in that regard.
John Brady (Wicklow, Sinn Fein)
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I thank Mr. McCarthy for that. I invite Mr. McKeon to deliver his opening statement on behalf of the Department of Social Protection. He has five minutes.
Mr. John McKeon:
Ireland's social protection system is a mixed system comprising payments where entitlement derives from and is funded through social insurance contributions and, separately, means-tested payments financed by general taxation. For 2026, approximately €14.8 billion - over 50% of expenditure - is estimated to be funded through PRSI, with the balance funded by the Exchequer. PRSI also funds the redundancy and insolvency payments scheme. Where PRSI funds are insufficient to cover benefit expenditure, the Exchequer steps in. Since 1953, Exchequer financing has been required in 53 out of 72 years, most recently in 2021. Due to demographic factors, it is projected that there will be an increasing reliance on the Exchequer from 2034 or so. This will result in a projected cost of approximately €500 billion out to 2076.
As legislated for by the Oireachtas, PRSI is not a system for the classification of workers per se; it is a system which classifies income according to its source, including non-employment income and income earned by people who are neither employed nor self-employed. There are 11 different classifications with different contribution rates and benefit entitlements. The classifications have evolved over time to reflect the circumstances of the day. For example, recognising that the Exchequer already funds occupational benefits, including illness and pension entitlements, for public sector workers recruited before 1995, their income attracts a lower social insurance charge with a reduced range of benefits compared with that of workers recruited after that date. The extension of class K social insurance in 2011 is another example whereby income derived from holding public office is subject to social insurance. This was to demonstrate the solidarity of public office holders with other workers, while recognising the entitlement of such holders to publicly funded pension and end of service entitlements. In 2017, the PRSI class for local authority office holders changed to class S.
Class S social insurance was introduced in 1988 for income derived from self-employment to give people access to contributory State pensions. The contribution rate was set at the lower employee rate. This was done partly to reduce the cost on small owner managed enterprises. Reflecting the lower contribution rate, the range of benefits to which class S gave entitlement was restricted in comparison with other classes. This has changed over time. Class S contributions now qualify for most benefits. In addition, as an increasing number of people derived income from sources other than employment, class S was expanded in 2014 to include what is known as unearned income, for example, rental and investment income. Class S, therefore, now applies to income from most but not all self-employment, income from public office holders in local authorities and unearned income. Approximately, 129,000 of the 400,000 class S contributors are in fact paying contributions in respect of unearned income, with about 1,000 paying contributions in respect of public office income.
Where people have multiple sources of income, each source are classified separately. For example, contributions from a self-employed farmer who also works as an employee may be recorded in respect of their self-employed income as class S and class A in respect of their employee income.
The allocation of social insurance contributions varies between classes. For most classes, contributions are allocated on a contribution-week basis, whereas class S are allocated on a full-year basis. In the first instance, the collection of social insurance contributions is a matter for Revenue acting as an agent of the Department. Contributions are collected in-year as part of the PAYE system or annually based on tax returns in respect of self-employed and other income. These latter returns must be submitted by November in the year following the relevant tax year. This means that there can be a lag of ten months or more in the collection of these contributions. In most cases, the correct class of social insurance is readily apparent to the contributor. Where there is any doubt, contributors or their employers can seek a determination of the correct class from the Department. Every applicant is entitled to an assessment on the basis of the facts of their individual case. If dissatisfied with the determination, he or she can appeal, with the right to seek a review from the chief appeals officer and, from there, to go before the courts.
With respect to class S cases, the Department’s deciding officers use the code of practice for the determination of employment status. The genesis of this code can be traced back to work done by the Department in the 1990s to identify criteria to be used in decision-making, and, notably, the case of Henry Denny and Sons v. the Minister for Social Welfare in 1997, which subsequently informed the content of the first code under the Programme for Prosperity and Fairness in 2001. The code has been updated on several occasions with most recently the judgment of the Supreme Court in the case of the Revenue Commissions v. Karshan.
Previously, this committee and the joint committee on social protection expressed concerns that despite official statistics showing a reducing incidence of self-employment, there were anecdotal reports of a growing level of misclassification. Insofar as this issue affected social insurance classifications, the committee recommended that the Department take a number of measures, including a public awareness campaign, the compilation and publication of sectoral statistics relating to class S and the establishment of a unit dedicated to the identification and investigation of potential cases of misclassification. The Department accepted and implemented each of these recommendations. In addition, in parallel with the public awareness campaign, the Department organised a number of large-scale inspection projects during 2018 and 2019. As previously reported, neither the public information campaign nor the increased inspection activity identified any significant level of misclassification.
The Department is acutely aware that the exploitation of any perceived loophole, even by a small number of employers and workers, does not just deprive the Social Insurance Fund of revenues and reduce the entitlements of workers, it also undermines confidence in the system. For this reason, the Department established the dedicated employment status investigation unit, ESIU. This now comprises 19 experienced staff. Its work was described in the report of the Comptroller and Auditor General, and updated statistics reflecting the outcomes have been provided to the committee. I will be happy to elaborate on this work during the discussion.
One point I would stress is that when cases of misclassification are determined the Department holds the employer accountable for full payment of arrears with no time limit as to retrospection. In addition, the employer is required to pay the employee contribution for the full period and has no legal recourse to recover this amount from the worker. In effect, this is an in-built premium of about 40% on sums that were underpaid due to misclassification.
The chapter under review noted that it is difficult to reconcile the data from various sources. To address this data issue, which is common throughout Europe, and to allow a reliable estimate of the incidence of dependent self-employment, the European Union mandated that national statistics authorities gather additional data from self-employed respondents relating to the number of clients they served and as to whether these clients dictated the time of work. On the basis of this data, the European Labour Authority estimates that the level of dependent self-employment in Ireland in 2021 equated to about 6% of all self-employed people. This would seem to set a reliable upper limit estimate for the extent of misclassified self-employment.
The Comptroller and Auditor General made one recommendation in the chapter to the effect that the Department should examine the scope for receiving more complete sectoral information to better identity the source and type of income giving rise to class S. This recommendation was accepted. To that end, a subgroup of Revenue and the Department is exploring the issue. In parallel, the Department’s chief statistician has analysed the data that is available in more detail. This has enabled the provision of the information supplied in tables 6 and 7 in the pack circulated last week.
Although it may not be as widespread as may have been thought, the Department is still committed to minimise misclassification of income. It will continue to build its compliance capability with a particular focus first, on using data analytics to target investigations and second, on pursuing clarification from the courts on its powers to pursue cases where workers and employers use intermediary companies as the basis for classifying income as class S. There are several significant cases currently before the courts. Separately, it is notably that Ireland is an outlier internationally in applying the lower employee social insurance rates to self-employed income.
As suggested by the Tax Strategy Group report of 2020, moving to align our approach to that of other countries would reduce any financial incentive for misclassification, help address Social Insurance Fund challenges and promote greater equity of treatment among workers. I acknowledge the work of the Department’s staff and thank them all, including the staff in our control teams, in the scope unit, in the ESIU and in our appeals office who work each day on this complex issue.
These are staff who are dedicated in their work and on whom we rely to protect the social insurance system.
John Brady (Wicklow, Sinn Fein)
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I thank Mr. McKeon. I now ask the chair of the Office of the Revenue Commissioners to deliver his opening statement.
Mr. Niall Cody:
I thank the Cathaoirleach for the opportunity to make my opening statement.
I understand that today’s meeting is to focus on the classification of workers for PRSI purposes, as well as other classification related matters. A number of State bodies have separate and unique roles and responsibilities as they pertain to employment status. Revenue’s role relates to the determination of employment status for income tax purposes. It is important to note that there is no difference in the tax rates that apply to employees or those who are self-employed. The main difference for tax purposes is the different rules that apply to employees and those who are self-employed in respect of allowable expenses. A worker’s employment status is not a matter of choice; rather, it depends on the terms and conditions of the role. While it is usually clear whether an individual is employed or self-employed, it is not always obvious.
The Supreme Court judgment in what is commonly referred to as the Karshan case provided clarity on the steps to take in determining employment status for tax purposes. By way of very brief background, Revenue’s view that the delivery drivers of the taxpayer in question were employees for tax purposes was appealed by the company to the Tax Appeals Commission, the High Court and the Court of Appeal. When the Court of Appeal ruled against Revenue on the matter, Revenue appealed that decision to the Supreme Court. In October 2023, the Supreme Court ruling set aside the decision of the Court of Appeal and held that the Tax Appeals Commission determination that the delivery drivers were employees of the company was correct. The judgment provides an extensive review of relevant case law and summarises its application through the provision of a five-step decision-making framework, which now assists employers to correctly determine whether workers are employed or self-employed. Revenue published detailed guidance to explain the implications of the judgment for tax purposes. Additionally, with inputs from Revenue and the Workplace Relations Commission, WRC, the Department published an updated Code of Practice on Determining Employment Status.
In September 2025, Revenue announced the availability of a disclosure opportunity for employers who acted in good faith prior to the Supreme Court judgment, but who may have misclassified employees as contractors. The deadline for making a disclosure was 30 January 2026. Just over 280 submissions were made involving gross tax adjustments of €26.7 million relating to over 6,600 employees. The tax risks associated with misclassification are not new. However, the reality of the Karshan judgment is that the landscape has changed for businesses operating in a wide range of sectors.
Businesses in some sectors who would have ordinarily engaged what they regarded as contractors for certain work, didn’t see themselves as impacted by Karshan. However, the judgment and the decision-making framework is relevant across all sectors and is not limited to the taxation of delivery drivers. The disclosure opportunity has shown that businesses have now recognised that the Karshan judgment has changed the environment in which they operate.
In addition to the disclosure opportunity, Revenue targets tax risks associated with misclassification through a series of ongoing compliance interventions across a wide range of sectors. Revenue also undertakes targeted outdoor visits across the construction, courier and delivery services sectors, registering new employees and reclassifying individuals as employees, as necessary.
In relation to the C and AG chapter, while the Department has responsibility for the determination of employment status for PRSI, Revenue collects the vast majority of PRSI receipts in respect of both employees and self-employed individuals, on behalf of the Department, on a statutory basis. In 2025, Revenue collected PRSI of €19.5 billion on behalf of the Department. Through the joint high-level steering group, the Department and Revenue are actively progressing the recommendation made by the C and AG.
To conclude, I draw the Committee’s attention to section 851A of the Taxes Consolidation Act 1997 and my obligation to uphold taxpayer confidentiality. Subject to this constraint, I am happy to answer the committee’s questions.
John Brady (Wicklow, Sinn Fein)
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I thank Mr. Cody. To note, we will suspend the meeting at about 12 p.m. for a short break and we will resume shortly afterwards. We now open the floor to members. Today, the first speaker is Deputy McAuliffe who has 15 minutes. All other members have ten minutes. On conclusion of that and if time permits I will allow members back in for a short supplementary round of questions.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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I thank all of the witnesses for being here today. It is the first occasion we have had the WRC before us in my time anyway, so they are particularly welcome and I am sure the witnesses hope they will not be back soon.
Having the organisations and their representatives in the room together will hopefully help to provide some definitive clarity in this space. Have the four entities met together privately on this issue before?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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I am not suggestion the witnesses are co-ordinating their answers in any way. We would like to see more proactive measures rather than the relevant bodies being brought before the committee. To tackle this issue of bogus self-employment, has the Department, Revenue and the WRC in particular, met on these issues?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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This is what happens when we have two Accouting Officers.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Does it meet on an ongoing basis?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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When was the last time a meeting was convened?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Did Ms Shanley say the employment status working group?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Had the working group existed prior to the Karshan judgment?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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If there are minutes of the meetings of that group and the witnesses are in a position to share them with the committee, can they examine that and see if-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Of course.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Let us take a step back for a second. I remember the first time I looked at this area of case law, it was egregiously titled the law of master and servant. I remember being appalled by that description but it does demonstrate that we have been tackling this issue since the 1800s.
This question is to each organisation individually. Do they accept that the Karshan judgment was a clarification of the law, rather than a change of the law?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Essentially, in a five-step process it combines the control test, the integration test, the mix test -all of those- and it provides greater clarity. It was a clarification rather than a change. Would Mr. Cody accept that?
Mr. John McKeon:
It was a bit more than a clarification. The seminal Irish case on this prior to Karshan is the Denny case from 1997. In between the Denny case and the Karshan case, there were a number of other cases. There was the Barry case including the Department of agriculture, the Brightwater case involving our Department and the Castleisland Cattle Breeding Society case involving our Department. In those cases, the courts had kind of established this idea of mutuality of obligation. The way that was interpreted by the court was there had to be an ongoing mutuality of obligation, a commitment to offer work and if work was offered, to accept it. What Karshan clarified and, in fact, restored was the situation in the Denny case that mutuality of obligation was about control and that each individual engagement could be looked at in its own right.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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That is a fair obligation.
Mr. John McKeon:
That was a restoration. During the intervening period, there was a lot of confusion about it. The judgments of the courts seemed to indicate a mutuality.
The other point of Karshan that is important from the Department's perspective is that it looked at a number of UK cases, particularly the Atholl House Productions and Autoclenz cases, where employees were engaged through intermediary companies. The court made the observation in passing that the fact there were different contractual arrangements had to be considered but was not determinative and, in fact, you had to look at the reality of the situation. From our perspective, that is an important statement.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Does the WRC accept it was a clarification of the existing law rather than a change?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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We have a good understanding of the role of the WRC. Does Ms Cahill accept that Karshan clarified the law rather than changing it?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Having accepted it was a clarification rather than a change, the second question is what is the role of the Committee of Public Accounts here. There are joint committees to look after the rights of workers. The finance committee talks about public finances and so on. We want to get to the bottom of whether there are arrangements or governance issues that result in the State losing money here. I would argue that the Revenue Commissioners, by and large, find a way for you to pay your taxes no matter what, regardless of whether you are self-employed or an employee. I would argue that the WRC carries out its work in good stead and applies employment rights where it does. The problem lies with the Department of Social Protection. The principal gap here is the absence of the employer contribution where there is a misclassification. The absence of an employer contribution is incredibly significant. Employers could be contributing up to 11%.
Before Mr. McKeon responds, I want to ask whether each of the witnesses accepts that the WRC could rule that employment rights are accruing because it is a contract of service rather than a contract for services. Mr. Cody might rule one way in relation to self-employment or subcontracting and Mr. McKeon might rule differently in the same case. Do the witnesses accept that a gap currently exists in which the three bodies can make different determinations? Will each of the witnesses respond briefly?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Will Mr. McKeon-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Let us answer my question first and then we can expand.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Does Mr. McKeon accept that the three bodies can make different determinations?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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They are all operating off their own legislation.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Does Mr. McKeon accept the reality that the three bodies can make different determinations as to whether someone is an employee or self-employed?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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The Comptroller and Auditor General also made that observation, not remarkably. He is essentially saying there is a gap between the three bodies. One of the suggestions the Comptroller and Auditor General is making, and it is not a new suggestion but something that the Committee of Public Accounts has been dealing with for some time, is that, given the complexities of the law, which we have just talked about, and the reality of the three different bodies that have responsibility, there is a need for more random reviews of cases. When examining individual employees and employment circumstances, that is the only way we are going to get to the bottom of a problem that may be costing the State millions of euro. Would that be fair?
Mr. John McKeon:
I do not think so. I do not agree that random investigations generate any benefit at all, to be honest. To give the Deputy an idea, we did 12,000 employee inspections around PRSI and employers last year. Those done by the ESIU, which were targeted, generated approximately 3% where we had to-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Those were targeted by the Department.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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How are industries or sectors identified within the Department to be targeted?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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The question is how cases are targeted.
Mr. John McKeon:
They are targeted in a number of ways. For the ESIU, we use data analytics. I do not want to get into the factors. I do not want to give a cheater's charter by describing the factors we use to identify. We would have a look at the feedback from our general inspector cohort, which also does a lot of investigations. We take input from the social partners, who give us intelligence. Those are the things that inform. We also look at the data about what sectors have the highest percentage of self-employed people, particularly own-account self-employed people. We would look at those sectors.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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The targeted investigations are based on the data to which the Department has access. Given the complexity, there are people who have anecdotal data or who have experiences that perhaps the Department would not be able to observe. I am citing the testimony given by Mr. Martin McMahon to this committee in 2021. The Comptroller and Auditor General referenced sub-postmasters, social welfare branch managers and RTÉ. None of those were targeted. Am I correct?
Mr. John McKeon:
The sub-postmasters and social welfare branch managers are specifically provided for in legislation to be class A. They are not class S. We follow the legislation. They are self-employed people, but for those cases, and this is going back a long time in history, the State decided those particular workers should pay social insurance at class A. That is the law. They are self-employed. That is why I say that not all self-employed people-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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It could also be described as a conflict of law between the legislation and the common law.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Yes, it was.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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The point I am making is that the random nature of it, while it may have a lower yield, brings new data or new areas. It also prevents inadvertent bias being applied. My point is that random reviews are the only way of testing whether there is an issue.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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What the Comptroller and Auditor General is saying is that the Department does not do enough of them.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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May I ask a question?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Are the determinations of the WRC used by the Department as a source of intelligence to identify-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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The Department has access to the determinations of the WRC.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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They are used to develop targeting.
Mr. John McKeon:
We would use them. For example, we have targeted hairdressers. We did a paper recently. We have targeted the construction industry. We have targeted what are called "aesthetic clinics", opticians, dentists and locums. A lot of that targeting would be based on information not just from the WRC, but from-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Can Mr. McKeon point to an amount of money that has been recouped by the Department in this space as a result of investigations?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Our suspicion and fear is that the available figure out there for recouping is multiples of that. Without the data, it is very difficult to do. How does the Department allay the fears of this committee and of the Comptroller and Auditor General without responding to the request to increase either the random nature of investigations or increasing the resources for targeted investigations?
Mr. John McKeon:
It is partly what I said. We do some random stuff. I referenced the European Labour Authority report where there are specific statistics, which are mandated by the EU. Those are national statistics that people have to take into account to identify an upper limit on what might be the level of dependent self-employment, a subcategory of which would be misclassification. The authority's estimate for Ireland is that there are 6% of such self-employed people. Self-employed people represent approximately 13% of the workforce, and 6% of those 13% is less than 1%.
In 2018 and 2019, we visited 3,000 workers on construction sites. One worker was misclassified. From our perspective, we must ask where we can get the best bang for our buck. If I were to do purely random inspections that would give you a reliable estimate, I would have to investigate 15,000 employers. It would require 15,000 employers and an awful lot more staff to give a statistically valid result. We do not have the resources to do that.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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I have only a couple of seconds.
As we head towards the end of the year, we are talking about transposing the European directive around platforms and the false assumption that people using some of those algorithmic platforms are employees rather than self-employed. Will we be able to meet that target?
Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank the witnesses for attending and for their opening statements and briefing documents. On the estimated level of self-employment in the State, the Comptroller and Auditor General put together some figures. The variations between the Revenue number, the CSO number and the Department of Social Protection number are striking. Revenue, in terms of returns, is at about 318,000. The Department of Social Protection has a figure of 396,000. There is quite a variation there, with 78,000 of a difference. Part of the problem, as Deputy McAuliffe has said, is that we do not know what we are dealing with here in terms of scale. I would ask both groups to reply to that initially.
Mr. John McKeon:
There are two key points I would make. As I said in the opening statement, class S is not a measure of self-employment. There are 129,000 people with unearned income in class S. There are 1,000 office-holders in class S. People who earn less than €5,000 a year and are self-employed are not in class S. Prescribed family members of someone who is self-employed are not in class S, even though they would be self-employed. Taking the class S figure and just comparing it to the Revenue figure is like comparing apples and oranges. Since the report was published, we have done a reconciliation exercise and the figure is down to a difference of less than 1%.
Séamus McGrath (Cork South-Central, Fianna Fail)
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What is the figure?
Mr. John McKeon:
The number of Revenue individual taxpayers with a class S liability is 244,211. The Revenue figures are tax units that were published in the report, not taxpayers. A unit could be more than one person. The number of individual taxpayers is 244,211. Our measure of class S who are self-employed as opposed to in receipt of other income or office-holders is 247,632. The difference is 3,421, which is 1%. We would be happy to share that paper.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Mr. McKeon is confident that we have an accurate enough picture. Both entities would agree it is around that figure of 244,000 or 245,000.
Séamus McGrath (Cork South-Central, Fianna Fail)
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That is fine. We have some level of clarification there. On Revenue and the disclosure opportunity it opened in September 2025 and closed in January 2026, that led to a reclassification of 6,600 workers and brought in €26.7 million to the State. Is that the tip of the iceberg?
Mr. Niall Cody:
The response rate is very interesting. We are analysing the data and breaking it down into sectors. There is a range of sectors affected, some we would have expected and probably a couple of sectors that we did not expect. Certainly there are issues around the voluntary group. There were a lot of representations made in January from the voluntary sector about the challenge this will present to them and how they are funded. That is probably one of the areas where we were a bit surprised. The normal piece was there; that is, the sectors we always knew about, such as entertainment, media, construction and hospitality. Certainly while the Karshan case clarified the legislation, there are parties who would not have thought that people they had engaged were employees. I think representations were made to various Deputies.
Séamus McGrath (Cork South-Central, Fianna Fail)
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They were genuine misclassifications as opposed to deliberate misclassifications.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Can you give us a sense of the disclosures that came in during that period? In your opinion, how many were deliberate misclassifications as opposed to genuine misunderstanding?
Mr. Niall Cody:
Our disclosure opportunity was made available to people who genuinely thought they were misclassified. Those who should have been applying PAYE under all the guidance that was out before and were not did not qualify for the disclosure. What we have to do with the people who have made the disclosure is-----
Séamus McGrath (Cork South-Central, Fianna Fail)
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There must have been a crossover there, surely.
Mr. Niall Cody:
We have to examine them, and that process has only started. What is also interesting is the idea of elements who have not made the disclosure, who are in related areas. We will also be looking at that. In any disclosure regime we work on, we are also very interested in who did not make a disclosure. That process will take time.
Séamus McGrath (Cork South-Central, Fianna Fail)
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That work is ongoing.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Why is it taking so long? The judgment was in October 2023. That was two and a half years ago. Why is it taking so long to get a handle on this?
Mr. Niall Cody:
The work started on the Karshan case probably in 2008, and the judgment of the Supreme Court took place in 2023. The lead official who worked on the Karshan case retired after 50 years' service once the Supreme Court decision was complete. He stayed for the Supreme Court decision. The Supreme Court found that each case has to be judged on its merits. There is not a blanket solution across this. It is a complex area.
Séamus McGrath (Cork South-Central, Fianna Fail)
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It is confusing and a complex area. I still say that two and a half years on, we still seem to be trying to unravel-----
Séamus McGrath (Cork South-Central, Fianna Fail)
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Since time began.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Is it fair to say that if the voluntary disclosure brought in €26.7 million, there is significantly more money to be collected in terms of proper classification? Is that a fair comment?
Séamus McGrath (Cork South-Central, Fianna Fail)
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At this point in time, we have no idea of the level of that.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Mr. Cody has been through various collection processes over many years. In his experience, if that amount comes forward on a voluntary basis, we can probably multiply that in terms of what the real figure is.
Séamus McGrath (Cork South-Central, Fianna Fail)
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This has real implications for workers in terms of their rights and entitlements. If employer PRSI is not being paid, it has implications for workers in that sense. That is for the Department of Social Protection.
Mr. John McKeon:
Where people are classified as class S and should properly be classified as class A, the main difference is that they would not have access to the illness benefit payment. Most other payments are now accessible at class S. That is the main issue. That begs the other question I raised at the end of my opening statement about whether the class S rate is properly calibrated, to be honest. That is a separate discussion. The biggest issue we have, which does not get enough attention, is class M. It is a zero-rated PRSI rate which is meant to be used in cases of what is known as subsidiary employment or prescribed relatives in family businesses. We find the highest level of misclassification is people classified as class M who should be at class A. That is a bigger problem.
Séamus McGrath (Cork South-Central, Fianna Fail)
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As I have a minute left, I want to move to Revenue and the MV Matthew. I am sure Mr. Cody is expecting my question on this one. I thank him for providing an update in the briefing document. He will appreciate that we are approaching a cost to the State of €14 million now in terms of the upkeep and maintenance of the MV Matthew. It is in Revenue's possession effectively since October 2023. Revenue got the go-ahead from the courts to dispose of it in December 2024. We are two and a half years on from it being first seized. It is costing €14 million and at this point, Revenue is not in a position to give us a disposal timeline.
Mr. Niall Cody:
I knew this would be raised. Both Karshan and the MV Matthew happened in October 2023.
As I outlined at our December meeting, and again in the briefing document, we have continued our work in relation to certification. We are engaged with two potential customers. There is still a process around the flag country and authorisation to move the vehicle. We are very hopeful that we are getting closer to the endgame but it is still a matter of clear uncertainty. The uncertainty is added to by events that are taking place internationally in relation to shipping and all that goes with that.
Séamus McGrath (Cork South-Central, Fianna Fail)
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If all the regulatory issues were resolved, is there an end use? Mr. Cody mentioned two potential options. If all the paperwork, documentation and regulatory stuff were complete, could we be in a position to dispose of the ship quickly?
Séamus McGrath (Cork South-Central, Fianna Fail)
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Do we have a buyer or is it going to be disposed of? Is it going to be scrap?
Séamus McGrath (Cork South-Central, Fianna Fail)
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There are disposal options on standby, therefore, if we get the regulatory stuff sorted out.
Séamus McGrath (Cork South-Central, Fianna Fail)
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It could be for either scrapping or reuse.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Revenue does not expect any sale value.
Paul Murphy (Dublin South West, Solidarity)
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I am sorry; I had to step out for a question. I apologise if I repeat any questions.
I will start with Revenue in relation to this disclosure opportunity, which effectively is like an amnesty scheme. It was stated it is "for employers who acted in good faith prior to the Supreme Court judgment, but who may have misclassified employees as contractors." How does Revenue know that the employers acted in good faith?
Mr. Niall Cody:
In any disclosure opportunity, we set conditions. We will be examining the disclosures to see what the reality is. As I said just before the Deputy came in, in a preliminary look at some of the sectors involved in the disclosure opportunity, there are probably a couple of sectors we would not have had a huge focus on, such as the voluntary sector. I know representations were made that this will have an implication on the financing of some elements of the voluntary sector and their parent Departments will have to be given money to pay for the issue. What we will do with the arrangements is we will look at the facts and circumstances of the case. That is what we do with any disclosure regime. That will take time.
Paul Murphy (Dublin South West, Solidarity)
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What sort of thing is Revenue looking at? Let us say I am an employer and, after the case, I come and say, "Sorry, I misclassified my employees and didn't pay employer PRSI on that basis". What sort of thing is Revenue looking at to see whether I was acting in good faith?
Mr. Niall Cody:
What we will look at it is the evidence that you provide to support that. We look at whether the amendments do not arise, and this is well set out in our approach, from careless or deliberate behaviour. That is a key issue when people do not pay what they should pay. It is what evidence they have. The reality is, as I outlined in my opening statement, the Court of Appeal felt that Karshan were not employers. As the Secretary General outlined, there was a lot of uncertainty around the classification. There were decisions of the high courts in Ireland that ran counter to what Karshan provided. The judgment in the Karshan case is 193 pages. This is a complicated area. We will look at the circumstances of the case, as we would in any case.
Paul Murphy (Dublin South West, Solidarity)
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I am not quite clear but Mr. Cody is the expert on this, not me. What sort of documentation would illustrate good faith or a lack thereof? A problem potentially is that a lot of it is in the mentality and thinking of the person who was doing it and whether they knew they were in breach of the law and were misclassifying their employees. How does that express itself in the kind of documentation Revenue would examine?
Paul Murphy (Dublin South West, Solidarity)
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Just hypothetically, though. When Mr. Cody said Revenue would look at the documentation and it will know from that whether the employer was acting in good faith or not, what-----
Mr. Niall Cody:
We will look at the disclosure and will discuss the issue where we feel that it is out of sync with what is happening across those sectors. What we will do is a sectoral analysis. We will compare and contrast. If I am in a line of business, and most of my peers predominantly have employees and I have had none, then we would look at that case and ask how they came to that conclusion.
Paul Murphy (Dublin South West, Solidarity)
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You would have a more critical eye-----
Paul Murphy (Dublin South West, Solidarity)
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Let us say Revenue finds that one of these employers, or multiple employers or whatever, was not acting in good faith. What happens then?
Paul Murphy (Dublin South West, Solidarity)
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In terms of the number of people who are wrongly classified as bogus self-employed, the Department of Social Protection figures, going from the EU, are that there is an upper limit of 6%, which gets us to 10,902 people. We are saying that there have been 6,600 disclosures so far. Does Mr. Cody concur with the Department's estimate of the 6% being a top limit and that, therefore, we are getting to see most of it?
Mr. Niall Cody:
All our evidence over a number of years is that the vast majority of employees are treated as employees. A feature that is different, and I talked about this at a previous attendance at the public accounts committee, is the growth in the use of limited liability companies, such as personal service companies, PSCs, and managed service companies, MSCs. In 2018, I think, there was a consultation about the treatment of PSCs and MSCs. If we look at a sector like the IT sector, there are a lot of personal service companies. It would appear to everybody working there that it is "Niall Cody", but it is "Niall Cody Limited" and we cannot look through the limited liability. There is a growth in that.
We had various projects on contractors and contractors' projects. I talked in here, and the C and AG did a report, on the contractors' project where we looked at what would once have been higher paid employees but are now limited companies. We do not have the legislation to look through that, but what we looked at there is probably abuse of expenses regimes, employing members of one's family to reduce tax liability, etc. That is probably the sector with the biggest growth over the last number of years at the higher end. It is a very legitimate process and it is in accordance with legislation. It is the abuse of the expenses regime that we worry about there.
Paul Murphy (Dublin South West, Solidarity)
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I will turn to the Department. Will the officials explain the issue of intermediary companies? Is this a growing issue in response to the Karshan judgment? How does that work? How is different from, say, the construction sector, where there are these subcontracting companies, which has been the practice for a long time?
Mr. John McKeon:
It is different from the subcontracting business in the construction industry. As the chairman of Revenue said, there are a number of sectors where the use of intermediary companies as a basis to take on someone who, from our perspective, looks like a worker is increasing. That is a legitimate and legal thing.
The question we have is whether it changes the fundamental relationship between the end-user employer, for want of a better term, and the service provider who is the worker. We have taken several decisions where we have found there has not been one. There are five cases currently going to the courts, with one being a leading case that is due for mention again in the courts in May. It involves a very large employer that uses this almost as a default, and we are hoping we will have some clarity after that case.
I referenced the Karshan judgment and the case of Atholl House. Atholl House was a case concerning the presenter on BBC, who was using one of these intermediary companies. In the UK courts, they determined the employer was the BBC and not the intermediary company. The law in Ireland is different to the law in the UK in terms of statute. However, one of the things the Karshan judgment said was this was a matter which could only be resolved when it came back to the courts, and we are bringing it back to the courts.
Mr. Niall Cody:
On that issue, one of the representations we received in January regarding the disclosure regime, was from a particular sector where a worker was making a complaint to us that the employer group was saying Revenue said they had to set up a limited company to get work from it. We were very clear that Revenue has no role in advising anybody. In a way, that is part of the challenge of anything to do guidelines. Guidelines and codes of practice also provide a framework for how you move yourself outside of a code, and that is a challenge.
Paul Murphy (Dublin South West, Solidarity)
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Is this a growing issue, post Karshan?
Paul Murphy (Dublin South West, Solidarity)
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My final question relates to the EU directive on platform workers. This mandates member states to have a legal presumption that platform workers are employees. Is the Department confident this will be in place and it will be in a position to effectively police it by the October 2026 deadline?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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I welcome all the witnesses here today. I find it disturbing that a decade ago, the Irish Congress of Trade Unions estimated that €600 million had been lost to Revenue from bogus employment, but I have since heard estimates of €1 billion that has been lost. I am worried now when I see the C and AG has said it is €26.7 million in 2026, from 280 submissions. How much of that has been recouped?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How much has been recouped?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Has any of it been recouped yet?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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The witnesses have it all.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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So, there is no remaining amount left.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Have they entered instalment arrangements?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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That is okay. Revenue is happy enough that it will get that money in. There has been a huge loss of revenue to the State from this issue in the past ten years - a decade ago.
I would like to get into the nitty-gritty of the inspections the Department of Social Protection and Revenue are working on together. First, on bogus self-employment and Revenue, the witnesses said they are investigating this bogus self-employment through a joint investigations unit. Is that correct?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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I might just get into staff then. How many staff were assigned from Revenue in 2019 to that unit?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How many are from Mr. McKeon's Department?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How many is it for the ESIU specifically?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Mr. Cody said there are 30. Is that correct?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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That unit was not available. Are there any numbers available in that unit in 2019?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Again, in the social welfare department, how many people are employed in the special investigation unit in total, Mr. McKeon?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How many investigations have been carried out?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How many investigations were there?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How much did the Department recoup last year?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Was that just relating to bogus employment?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How much did the Department recoup from misclassified employees under bogus employment?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How much is the State losing with class M?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Was it €3.4 million?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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What does that mean again?
Mr. John McKeon:
The law says that if you are a prescribed relative of somebody who is self-employed, or you are employed as a prescribed relative, that is, a sibling, child, parent or grandparent, and working in a family business associated with the home, you do not pay social insurance. However, if you are a relative and, for example, you are working as part of your father's law firm or pub, that is not associated with the home and you should be paying class S insurance. Those are the cases we found most fruitful.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Again, going back to the first question Deputy Murphy asked, it is interesting to see Revenue, the Department of Social Protection and the WRC do not have meetings to decide on this. This seems to be going on for a long time, according to the C and AG report, and it has not been resolved yet. There is a lot of outstanding money and people still in bogus employment. Why has this not been resolved yet?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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But the Department does not have meetings with the WRC, does it?
Ms Deirdre Shanley:
We have an established high-level group between the Department of Social Protection and the Revenue Commissioners. We meet at a very senior official level four times a year and sometimes more often than that. From that group there are subgroups that deal with specific issues, including the work of the joint investigation unit. Obviously, we have a lot of other areas of work and interaction with Revenue. There are a number of subgroups of that group that have regular meetings, perhaps once a month, also, at principal officer level. There is quite an ongoing engagement with the Revenue Commissioners.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How often does that working group meet?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Why has this issue not been resolved then?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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We set targets that we know when it is going to be finalised-----
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Is there a timeline?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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How come we still have people in bogus employment then?
Ms Deirdre Shanley:
It is like everything, such as social welfare fraud. There are always going to be issues that we have to continue to address. That is why we continue to work together, exchange intelligence, identify sectors where we have found issues or problems and work together. We work independently as well. Our own officers, as the Secretary General has said, work on the ground to identify potential areas of risk. We work jointly also.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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I want to come back to Mr. Cody and what is going on at the moment in relation to diesel and petrol. I am just worried. Could Mr. Cody give me an estimate of how much the State charges people in relation to excise duty, carbon tax and the 23% tax? Would I be right in saying it is 50% that the Government charges people? Would it be a 50% addition?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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So, Mr. Cody knows it off by heart.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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So it is 50%. The State takes 50%.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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So, it is 50%. When I fill up my car and am charged, 50% of that is going to the Government. Is that correct?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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It is not very fair or just at the moment when people's oil refills and car refills have gone up to nearly double the amount, or are going to go that way by the look of it.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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That is okay. I thank Mr. Cody.
Joe Neville (Kildare North, Fine Gael)
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I thank the witnesses for coming. I will not lie; this is quite a complex one in front of us and I do not mind saying that as an accountant. As someone who would know, I do not mind saying it is a complex, tricky and very specific item we are covering here. I am not going to pretend to be an expert on what we are doing here today. I might try to bring us out of the specific and into the general so I can get a better understanding of where the challenges are. I do not have the benefit of having had this sort of discussion with the witnesses before.
I will ask this question individually to the three groups. In one or two sentences, how would the witnesses determine what an employee is versus what an employee is not? Perhaps Mr. McKeon will reply first.
Mr. John McKeon:
In practice, we have statutory deciding officers in our scope team who will make decisions. Those decisions are based on the application of what is now the Karshan test. Prior to that there was the code of practice which informed it. There are a number of things to look at. One is whether the person is under the control of the employer. I am trying to remember the Karshan test off the top of my head. Another is whether the person is integrated into the business. Is there an exchange for money for work? Is it a personal service, so I cannot substitute somebody? Is it for-----
Joe Neville (Kildare North, Fine Gael)
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Can Mr. McKeon clarify that?
Joe Neville (Kildare North, Fine Gael)
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Fine, I get exactly what Mr. McKeon means.
Mr. John McKeon:
If substitution is in case, that would point more towards self-employment than employment. It depends how integrated I am to the business. It depends whether I am working on my own account or on the account of the employer. Karshan gave a good example of the distinction between a chauffeur and a taxi driver. The taxi driver is working on their own account; a chauffeur is working on the account of the person they are working for. They are the issues. The other issue is enterprise - can I improve my return through my own entrepreneurial effort or my own innovation? Do I have the ability to earn more or to reduce my own costs? They are the kind of factors.
Joe Neville (Kildare North, Fine Gael)
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I am conscious of my time here. I know I have asked a potentially general question. Could Mr. Cody give me a quick answer on the same thing, or would he say he is fully on the same page?
Joe Neville (Kildare North, Fine Gael)
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The burden of responsibility is on the employer.
Ms Audrey Cahill:
From a WRC perspective, our independent adjudicators apply the Karshan test that my colleague has just described. That is the way we train them for consistency purposes. However, the WRC does not determine employee status. The independent cases arise from the facts and the merits of each person before them. They may enter the system on the basis of a unfair dismissal case or an equality case and a preliminary issue that might arise is the respondent saying the person is not an employee. That preliminary issue has to be worked through, using the Karshan test, before the case can proceed to establish-----
Joe Neville (Kildare North, Fine Gael)
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Typically, do potential employees come to the WRC wanting to be designated as an employee or what way does it come to the WRC?
Joe Neville (Kildare North, Fine Gael)
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When would it come across Ms Cahill's desk?
Joe Neville (Kildare North, Fine Gael)
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Is it a redundancy type of issue?
Joe Neville (Kildare North, Fine Gael)
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The example of unfair dismissals makes sense to me, where a business says somebody was never an employee and the person says they were. I can imagine that.
Ms Audrey Cahill:
They may have acquiesced in that relationship for a long time until the relationship has broken down and when they come in the preliminary argument may be that they were not an employee when they say they are an employee. The Karshan test is then applied before the case can proceed or not.
Joe Neville (Kildare North, Fine Gael)
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Okay. With the change in the economy in general we have all seen people with second and third jobs and the gig economy for want of a better term. Moving away from the Karshan side of things and considering all the classes, are we struggling to catch hold of that? Is it proving difficult? What would Mr. McKeon say is the main challenge in ensuring everyone is categorised correctly?
Joe Neville (Kildare North, Fine Gael)
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Is there a risk? Ultimately, I am asking from a Revenue perspective if there is a risk of leakage.
Mr. John McKeon:
As the Chair of Revenue said, in the first instance it is a matter for the employer. It is a self-declaration system. The scope unit in our Department then looks at cases where a worker or an employer wants guidance on the self-declaration. We also have our inspection teams. Generally, while the economy is growing the proportion of workers who are self-employed is falling. In particular, the proportion of workers who are self-employed on their own account - in other words, they do not have any staff - of the overall workforce is falling. The data indicates it is not becoming a bigger issue as a proportion of the workforce. Obviously, as the workforce is growing the number in each category is increasing but the number in the category of self-employment is falling relative to the others. I do not think it is a particular issue. On the platform workers-----
Joe Neville (Kildare North, Fine Gael)
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What about the second job where people might have an employment and then in the evenings they go off and do something else so they are self-employed in other, different ways. How is that captured?
Joe Neville (Kildare North, Fine Gael)
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How do we know we are capturing them? Is there a risk that their primary employments are covering that?
Mr. John McKeon:
No. Under law, they have an obligation to return a form 11 tax return to Revenue for their non-employment income. That happens by November of the following year, so we pick it up. The Deputy is talking about people in the shadow economy who are not declaring their income at all, which is a different thing. That is where our inspector teams, such as our 110 in the special investigation unit, SIU, and our 350 general inspectors-----
Joe Neville (Kildare North, Fine Gael)
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Yes, but let us think of the stereotypical person. I do not want to say "influencer", but someone who has a job and, in the evening, they do bits and pieces elsewhere. That could be in all different areas. They might do a bit of advisory work or whatever. That is the sort of thing that did not happen 25 years ago, but a lot more people are engaged in it now.
Joe Neville (Kildare North, Fine Gael)
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Have we seen an increase over the past 20 years of people declaring that dual status?
Joe Neville (Kildare North, Fine Gael)
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Anecdotally, I would say that many more people are engaging economically in that way. I am just surprised - obviously, I am wrong-----
Joe Neville (Kildare North, Fine Gael)
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I did not want to use the influencer example because it was almost a lazy by me. I am just talking about someone who operates in a company - it could be an accountant like me, for example - and then does a few hours for someone else in the evening. I do not want to just castigate influencers.
Joe Neville (Kildare North, Fine Gael)
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In a way there never was before.
Joe Neville (Kildare North, Fine Gael)
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That is what I am getting at.
Mr. Niall Cody:
Technology has changed the nature of work. Technology has changed what we are talking about here and how people can work. We are always looking at what is happening in the economy. We pay close attention to that. The thing about technology is it also leaves a footprint. There are some brilliant platforms that link customers with suppliers or tradespeople across the whole range of areas that would have traditionally been in the shadow economy but are now brought far more into the regular economy-----
Joe Neville (Kildare North, Fine Gael)
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Like Shopify?
Mr. Niall Cody:
A lot of the work that went on in local services was arranged by word of mouth, traditionally. If you went back in time, you would have a little ad in the local newspaper or put a sign in the supermarket. These are things we pay attention to. The little ad in the supermarket is now on social media. The reality is people can provide services across the country from wherever.
Joe Neville (Kildare North, Fine Gael)
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Across the world.
Mr. Niall Cody:
Yes. We look at that. There is reporting by platforms. Increasingly, that is at EU and OECD levels. This year, for example, we are legislating for cybercurrency reporting across the EU. That will provide a really interesting trove of information.
In a self-assessment system, the responsibility is on the individual who is carrying on the business to make a return. Some of them do not even know they have that responsibility. They have just been doing stuff and ended up getting money out of it. They all have an obligation to do make a return and we pay attention to that.
If people have a liability, we would much prefer they come to us rather than us finding them because you have much better opportunities then. There is no reason anybody should ever appear on the tax defaulters list, given that there are opportunities to correct a situation. Anybody who ends up being published on the tax defaulters list has ignored all opportunities. The Deputy will be familiar with the tax arrangements.
As Deputy Bennett asked, will we ever reach the end of bogus employment? We will never be at the end of anything because that is the nature of things. That is why we are here.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Let us not forget the MV Matthew.
Joe Neville (Kildare North, Fine Gael)
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The fox will always try to get into the hen house but you might not always be able to keep him out.
Joe Neville (Kildare North, Fine Gael)
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It is just more of a point about self-employed people on pensions and how they work. I know I did not raise it there in my questions, but at the same time, it is obviously a key issue for people when they talk about classes, payments and contributions. The State has probably struggled to grapple with this over the last number of years. Can we come to a solution on that?
Joe Neville (Kildare North, Fine Gael)
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There is that thing where someone might have got injured or hurt when they were 60 and they are now caught between worlds in terms of their class and contributions because they were employed by themselves.
Joe Neville (Kildare North, Fine Gael)
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Individuals are struggling with it. People who are affected by it are struggling with it.
John Brady (Wicklow, Sinn Fein)
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I have a number of questions myself-----
Mr. Niall Cody:
Sorry, but before the Cathaoirleach asks his questions, I have found some figures on excise and VAT for Deputy Bennett. Before this week, the total excise duty, carbon tax and VAT on a litre of petrol would have been just short of 87 cent. The last time I filled up with petrol before anything happened, it was about €1.72 a litre. On diesel, the tax burden was 75.7 cent. As the price increases, the only element of tax that goes up is VAT. The excise and carbon tax is a fixed amount but VAT is a percentage of the total, so there will be a slight increase when the VAT rate goes up.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Does Mr. Cody know off-hand whether other European countries charge similar levels of excise duty as us or do we charge more in Ireland?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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It always seems cheaper to me.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Could the Government do more to reduce that?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Deputy Bennett is eating into the Cathaoirleach's time.
Joe Neville (Kildare North, Fine Gael)
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That is Sinn Féin time.
John Brady (Wicklow, Sinn Fein)
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Deputy Bennett will have another opportunity because there will be a second round.
Paul McAuliffe (Dublin North-West, Fianna Fail)
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As the Leas-Chathaoirleach, I will protect the Cathaoirleach's time.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Deputy McAuliffe is very good.
John Brady (Wicklow, Sinn Fein)
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I thank the Leas-Chathaoirleach for that.
As number of members said, it is a deeply complex issue, but the bottom line here is it is about workers' rights, workers' entitlements and the denial of those rights and entitlements. It is also about funding to Revenue and the social protection fund. Those are key and core issues. To bring it back to its simplest terms, it is about the protection of all of those and trying to address what has been described as a huge issue, namely, bogus self-employment. Reference has been made to ICTU, which has done comprehensive work on this issue. It released a report a number of years ago that cited a loss of about €600 million a year as a conservative figure. That figure could be up to €1 billion, as has been highlighted.
I see how that contrasts with the opening statements here. To go back to the Department's opening statement, it indicated that inspection campaigns in 2018 and 2019 did not identify any significant level of misclassification. However, in the opening statement from Revenue, post the Karshan judgment, it mentioned the voluntary disclosures and the amnesty for the 280 employers, which related to over 6,600 workers and equated to €26.7 million in tax adjustments.
How do Revenue and the Department reconcile those two positions and say that it is not a significant issue? To me, there is a very significant level of disclosure in that amnesty. Will Mr. McKeon respond?
Mr. John McKeon:
It is a significant issue but the thing is the scale. The figure €26 million, with whatever number of employers Mr. Cody referenced, is a significant number. In the context of the overall labour market, the revenues of the Social Insurance Fund, for example, are about €19 billion this year. If we assume that €26 million includes PRSI and tax, but even if it all related to PRSI, it is 0.00-something of a percent. I use that context because it is relative. That is not to say it applies to each individual case. The Chair mentioned workers' rights, and I am very concerned----
John Brady (Wicklow, Sinn Fein)
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The point is that the campaign in 2018 and 2019 that Mr. McKeon referenced did not identify any significant level of misclassification, yet in the amnesty a huge number, 280 businesses, came forward to say they had misclassified their workers. How does the Department reconcile that position?
Mr. John McKeon:
We have to look at it as 280 business out of hundreds of thousands. In the 2018 and 2019 campaign, to give the committee some of the colour of it, we worked closely with ICTU. We particularly identified the construction sector and some employers that it said are particularly guilty. ICTU's concern was that the workers were not working for the main contractor. They were paying class A. From a social insurance perspective, they were correctly classified. The employment rights perspective is a different thing in terms of the workers' ability to go back to the primary contractor. By the way, the figure the Cathaoirleach quoted from ICTU was over eight years, not a single year.
John Brady (Wicklow, Sinn Fein)
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I will move on to the 280 employer disclosures. Reference was made to the voluntary sector being one identified in that. What sector came through predominantly in the disclosures?
Mr. Niall Cody:
It is very early to give a breakdown. We will be publishing a breakdown. I would rather wait until we have done our analysis fully to give the definitive breakdown. We expected sectors like delivery, where the case came from originally, to be part of that process, and hospitality. None of this is surprising really. There is also a piece around the media sector and the entertainment world. The reality is that we will find at the end of it that a lot of the people who were employees were very much part-time employees. That is a key feature of Karshan. That brings it into the area of workers' rights because the case was very clear that it was determining the tax treatment. Other workers' rights depend on the legislation that applies to workers' rights. Terms and time in the employment are relevant in that regard. That is what the court really indicated. It expects further-----
John Brady (Wicklow, Sinn Fein)
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When will the analysis of those different sectors be completed?
John Brady (Wicklow, Sinn Fein)
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Have any sectors emerged that were not on Revenue's radar previously?
John Brady (Wicklow, Sinn Fein)
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That is a huge sector. What specifically within the voluntary sector?
Mr. Niall Cody:
Some of it is to do with sporting bodies and the nature of the service. There is an interesting case going on in the UK Supreme Court. It has found in favour of officials at professional soccer matches and that has been referred back to the tribunal to determine. That brings in coaches, referees and all sorts of areas. Sporting bodies are one area that made representations around this. Our guidance set out various examples of areas-----
John Brady (Wicklow, Sinn Fein)
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I want to move on. That is a huge number, 6,600 workers. If that is spread out across the 280 disclosures, it equates to about 23 workers per disclosure. Obviously, that is not accurate. What is the highest number for a single business?
John Brady (Wicklow, Sinn Fein)
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For one business?
John Brady (Wicklow, Sinn Fein)
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Would that be the delivery or hospitality sector?
John Brady (Wicklow, Sinn Fein)
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Mr. Cody cannot give any detail.
John Brady (Wicklow, Sinn Fein)
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Hundreds of employees were misclassified for PRSI purposes.
John Brady (Wicklow, Sinn Fein)
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Irrespective of whether they were full time or part time, workers'-----
John Brady (Wicklow, Sinn Fein)
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-----rights and entitlements were denied up to that point.
John Brady (Wicklow, Sinn Fein)
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When Revenue has those figures-----
John Brady (Wicklow, Sinn Fein)
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I am sure Mr. Cody will be back in at some stage. As soon as the figures are available and they can be shared with the committee, it would be extremely useful.
Mr. Niall Cody:
We will be publishing them. That is what we do with all stats. We publish details of them. The disclosure regime is not an amnesty. It requires the payment of tax and PRSI. It is absolutely not an amnesty. It is very important I state that it is not an amnesty, and the disclosures regime-----
John Brady (Wicklow, Sinn Fein)
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I want to move on. I am conscious of the time. Within that disclosure regime----
John Brady (Wicklow, Sinn Fein)
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I described it as an amnesty. I want to go back to 2022 and on foot of the C and AGl's report at that stage, the Department of tourism made a disclosure on the misclassification of 11 workers. I think it ultimately cost hundreds of thousands. There were penalties worth €200,000. Within the disclosure process, did any Departments come forward?
John Brady (Wicklow, Sinn Fein)
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Public bodies have come forward in this process.
John Brady (Wicklow, Sinn Fein)
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Are they agencies or Departments?
John Brady (Wicklow, Sinn Fein)
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Is there a sizeable number of cases?
John Brady (Wicklow, Sinn Fein)
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Is Mr. Cody concerned about that?
John Brady (Wicklow, Sinn Fein)
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On foot of this case back in 2022, which highlighted it, and the Karshan judgment in 2023, Departments did not use the time regularise people who may have been miscategorised as contractors, and only did so when this amnesty or disclosure process came about. I find it very concerning that Departments used this process to regularise the misclassification of workers.
I find that deeply disturbing. Does Mr. Cody not?
John Brady (Wicklow, Sinn Fein)
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So on foot of this, going back to 2022-----
John Brady (Wicklow, Sinn Fein)
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-----was there any memo sent out to other Departments?
Mr. Niall Cody:
On a regular basis, I write to the Secretaries General of all Government Departments advising them of trends. Following Karshan, I wrote to them around the new trends. There is a range of activities that public bodies are taxable on, with the proper operation of PAYE, PRSI, VAT, professional services withholding tax, PSWT, and relevant contracts tax, RCT. I specifically referenced the Karshan judgment as an area that needed to be looked at-----
John Brady (Wicklow, Sinn Fein)
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At that stage, on foot of the note that went out-----
Mr. Niall Cody:
I said that they also needed to look at it in the context of the bodies under their aegis. I also mentioned - the Secretary General will remember this - at one of the meetings of the Secretaries General that I attend. At that meeting, I made a point of saying that Karshan is an issue they need to have regard to and-----
John Brady (Wicklow, Sinn Fein)
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Okay. On foot of that going out to-----
Mr. Niall Cody:
Sorry, Chair. We carry out regular interventions and, generally, they do not lead to publication in the defaulters list but they do lead to publication by the Comptroller and Auditor General on the accounts. There is fairly regular note in the accounts of the various bodies of tax settlements across all the bodies. I am absolutely serious about what we do and the requirement on everybody to do things right. That does not mean it is always simple and straightforward.
John Brady (Wicklow, Sinn Fein)
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Okay. I get that but I am deeply concerned on foot of everything outlined Mr. Cody there. I refer to the engagement post Karshan, and to the memo or letters - however you want to describe it - that went out to each Department on foot of that. I would be interested to see, on foot of that going out, how many cases had been regularised for workers. It was civil servants, essentially, who had been misclassified. Mr. Cody might give us those figures if he has not got them-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Local authority members.
John Brady (Wicklow, Sinn Fein)
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Okay. If Mr. Cody could furnish a note in relation to that-----
John Brady (Wicklow, Sinn Fein)
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Okay. There are a lot of other areas I want to cover here. I am conscious that it is 12 o'clock. Members have indicated that they would possibly like to continue. I am not sure whether there are too many supplementary questions. I probably have a few. I would like to touch on-----
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Chair, perhaps rather than taking a break and keeping everybody for 20 minutes, we could do the supplementaries now, if the witnesses were in agreement.
John Brady (Wicklow, Sinn Fein)
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That is the proposal I was going to put. We should be no longer than 20 minutes or half an hour max. Are our witnesses happy to proceed or do people want to take a short, five-minute break?
Paul McAuliffe (Dublin North-West, Fianna Fail)
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Once they do not take a High Court case against us for keeping them.
John Brady (Wicklow, Sinn Fein)
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We are happy to proceed. No longer than half an hour.
John Brady (Wicklow, Sinn Fein)
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I will open it up to members. Does Deputy McGrath have a supplementary? Sorry, Deputy McAuliffe is first.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Not right now, Chair.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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I will go back to Mr. McKeon and my line of questioning for my supplementary. I get that there was €3.4 million but Mr. McKeon said that was class M, right?
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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On the bogus self-employment in relation to Revenue, I never hear how much is being recouped there.
Mr. Niall Cody:
Our settlements, which we publish details of, relate to additional liabilities under PAYE and under tax. We publish all that. It is not specifically categorised into bogus self-employment. I can provide our total settlement yield last year, which was something in the region of €750 million. That covers all taxes. I can formalise a breakdown of the various tax heads for the committee.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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That is okay. I was trying to see whether, given that the WRC, Revenue and the Department of Social Protection are working together, we should have recouped more money at this stage. When all those staff are being allocated, should we make sure that money is being recouped? Should there not be more recouped from both Departments - from Revenue and the Department of Social Protection?
Mr. Niall Cody:
We collect the additional liability we identify in a compliance intervention. The disclosure regime was a process we did to try to get a sense of what was there and to try to bring certainty.
The critical issue in relation to the disclosure regime is what happens going forward to ensure that people are being taxed properly in the right class for PRSI, and anything that flows from that around workers' rights. That is the key issue. The thing I am really interested in is making sure that things are right right now. That is the most important issue.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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I will come back to Mr. McKeon in relation to the Department of Social Protection. Maybe he could explain something to the general public in relation to their pensions. I have different people come into my office in regard to their pensions and they have not got enough stamps. I am not sure what the right terminology is for that.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Contributions. That is the one I was thinking of. Could Mr. McKeon give me a breakdown of how many contributions a person needs in their lifespan? If they have been in and out of work during their lives, could Mr. McKeon let the general public know what they have to do to ensure they have the proper contributions?
Mr. John McKeon:
There are a couple of things. The minimum number of paid contributions you need is 520. That is ten years of paid contributions. That qualifies you to claim a pension. The maximum number you can have is the equivalent of 40 years, which is around 2,048, I think. That will get you a full State pension. The amount you get in between depends on the number of contributions you have got. That is the total contributions approach.
In parallel, there is a separate approach. There are 35 ways you can qualify for a pension. In parallel, you have got what is called an averaging approach. That was the old way of doing it, which recognised social insurance as only introduced in 1953. A lot of people who were retiring could not get 40 years' contributions. It was based on your average number of contributions over your entire working life, and that was for that purpose. People who do not have a full working history can get credits, once they have ten years. If you are a homemaker, you can get credits. If you are a carer, you can get 20 years' contributions, which are the equivalent of paid contributions.
The important thing for people to do - they can do it online - is to check their contributions. If they have a gap, they can query it with the Department if they do not think the gap should be there. They should also have a look at what credits they could be claiming with regard to their gaps in employment. If they are unemployed and in receipt of a social welfare payment, they should automatically get credits. If they are a homemaker, they get homemaking periods under the total contributions approach. They can get homemaker credits under the averaging approach. If they are a carer, they can get the 20 years. They are the main things.
There are two other things you can do, which are important. One is voluntary contributions. Within five years of giving up work, you can make voluntary contributions for any gaps but you have to start that process within five years. Those contributions are normally paid at a rate of €500, which is an incredibly cheap payment to get a pension, by the way.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Anyone can do that within five years.
Cathy Bennett (Cavan-Monaghan, Sinn Fein)
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Okay. That is very good. I thank Mr. McKeon. Those are all my questions for today.
John Brady (Wicklow, Sinn Fein)
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I thank Deputy Bennett. I will go back to the issue of disclosures. Did the Department of Social Protection make any disclosures in that process?
John Brady (Wicklow, Sinn Fein)
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Nor Revenue, okay. I will go back to the figure of self-employed. A figure of about 245,000 self-employed was given. Am I correct with that figure?
John Brady (Wicklow, Sinn Fein)
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Yes. Mr. McKeon then gave the percentage based on European data.
John Brady (Wicklow, Sinn Fein)
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It is 6%, so that equates to about an upper limit, potentially, of misclassification of about 14,700.
John Brady (Wicklow, Sinn Fein)
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Yes. I think that is what it works out at, so if we were to do the maths based on the disclosures that came through, that would be just over €27 million. We could then say that the upper limit in respect of funding to the State revenues equates to less than €60 million a year, based on those figures. Is that realistic?
Mr. John McKeon:
Based on those figures - they are European Labour Authority figures; I think somebody said they were Department figures - the average gap between class S and a class A contributor is about €2,700 a year. We would multiply the difference by €2,700, and that is what would give us the figure.
John Brady (Wicklow, Sinn Fein)
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Yes. It is based on those. Mr. McKeon is probably aware that the BBC did a big piece of work that has come to light over recent days. It estimates a loss of about £8.5 billion a year in Britain. Again, there are differences in legislation and everything else in Britain, but that is a huge figure and a huge mismatch in terms of the upper limits being portrayed and presented to us here today. That total loss of £8.5 billion for Britain is based on exhaustive research work done within the BBC.
Mr. John McKeon:
I do not know what the BBC research was. What I can say is that the research of the European Labour Authority, and I can provide a link to it, is a very exhaustive and very professional piece of work. I do not know what the BBC one is. The European Labour Authority did its estimate across all European countries. In most countries, it is about 4% to 5% who are in dependant employment. In Ireland, it is about 6%. It is as high as 8% to 10% in some countries. Ireland would be above the average but not at the top.
John Brady (Wicklow, Sinn Fein)
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Mr. McKeon would be happy to stand over that figure - that the upper figure of misclassification for PRSI purposes would be less than 15,000 within the State.
John Brady (Wicklow, Sinn Fein)
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Well, Mr. McKeon is presenting those figures.
John Brady (Wicklow, Sinn Fein)
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I would seriously question it, just based on evidence on the ground. From speaking to people in different sectors, I would say that figure would probably equate to one county alone in reality, but we could dispute these figures all day.
I just want to touch on enforcement and prosecution. Under the social welfare Act, since 2015, and even for last year if Mr. McKeon has the figures, how many criminal prosecutions have been initiated for systemic PRSI misclassification?
Mr. John McKeon:
There have been 33 cases since 2016. The difficulty is that the standard to take a case is that we have to be satisfied that the employer knowingly and deliberately misclassified. As was referred to earlier, even in the example of the Karshan case, the Court of Appeal, which is a court above the High Court, found one decision but the Supreme Court found another decision. We are, therefore, in that complex area where establishing that someone knowingly and deliberately misclassified is difficult. One of the important points here-----
John Brady (Wicklow, Sinn Fein)
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Would it be safe to say the Department is very slow to initiate criminal proceedings?
Mr. John McKeon:
No. We are not slow at all, but we have to be satisfied if we are going to expend public money on a prosecution that it will work. There are two important things here. Where we have taken these matters up with employers, we have found that they have refunded the full amount. They have not challenged the finding. In addition, as I said earlier, there is a 40% premium - or penalty, if you want - because an employer has to pay the full employee as well as the employer contribution. This is a message that I want to go out to employers: if they misclassify, not only will they pay the 11% that they should have paid, but they will also pay an extra 4.35% on top of that. That is a big penalty. Paying 40% extra is a significant penalty.
John Brady (Wicklow, Sinn Fein)
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Mr. McKeon might just provide us with the data on those 33 cases, including the year they happened, the financial penalties and the recovery of PRSI.
John Brady (Wicklow, Sinn Fein)
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Okay. Was that in each of those cases?
John Brady (Wicklow, Sinn Fein)
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That was the maximum fine.
John Brady (Wicklow, Sinn Fein)
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Yes, I absolutely get that. It is nowhere near the limit available to the courts. Mr. McKeon might provide that information to us. In contrast, how many cases have been resolved through administrative regularisation over that period?
John Brady (Wicklow, Sinn Fein)
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Mr. McKeon might furnish us with it. I do not expect him to have that detail.
Mr. John McKeon:
Generally speaking, once we take up an issue with an employer, they will say it is fine and accept the judgment. Some employers appeal. There have been appeals. Some are before the courts, where they go through the courts process. Generally speaking, we find that they pay the full amount and we go back for the full period of employment. There is no four-year time limit. It is for the full period of employment.
John Brady (Wicklow, Sinn Fein)
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In his statement, Mr. McKeon indicated that there is no time limit on the recovery of PRSI arrears in cases of misclassification. In practice, how frequently are employers required to pay arrears for periods beyond six years?
John Brady (Wicklow, Sinn Fein)
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Can an example be given of a case where there was a significant back payment in respect of PRSI exceeding that timeframe?
John Brady (Wicklow, Sinn Fein)
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Mr. McKeon might provider us with-----
Mr. John McKeon:
We have to be careful because these are cases that are in the public domain. Like the Cathaoirleach, I am constrained. I cannot give information which would enable somebody else to identify those involved in a specific case. I have got to be careful because the numbers are small, and some of the cases are in the public domain. There are also individuals’ data protection rights in some cases.
John Brady (Wicklow, Sinn Fein)
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Mr. McKeon might provide us with some information on some significant historical liabilities, without encroaching on the rights of the particular businesses or whatever the entity was.
John Brady (Wicklow, Sinn Fein)
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Off the top of his head, could Mr. McKeon give any figures for significant historical liabilities?
John Brady (Wicklow, Sinn Fein)
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Taking on board what Mr. McKeon said about the rights of clients, customers or businesses, an area that this committee has devoted significant effort and time to is the whole issue of RTÉ and the matter of bogus self-employment within it. We know a significant piece of work commenced in the Department examining just under 700 cases, going right back. Would Mr. McKeon be at liberty to give us an update on that undertaking?
John Brady (Wicklow, Sinn Fein)
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When Mr. McKeon says “most”, how many cases were examined?
John Brady (Wicklow, Sinn Fein)
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How many have been resolved?
John Brady (Wicklow, Sinn Fein)
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About 30% have been successfully reclassified.
John Brady (Wicklow, Sinn Fein)
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RTÉ would say that. Of course, the staff - the workers - would describe themselves as having been bogusly self-employed and denied rights and entitlements. I know RTÉ has already said that it had made a payment of €1.2 million to Revenue in respect of 35 cases of misclassification. This is from the last report we had, which is probably dated now at this stage, given the significant progress that has been made.
The figure was 35 cases and the number has increased because 208 cases have been reclassified. Has RTÉ made any subsequent-----
John Brady (Wicklow, Sinn Fein)
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To Revenue, including the moneys, how much has been paid by RTÉ?
John Brady (Wicklow, Sinn Fein)
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Does that cover the entire 208 cases?
John Brady (Wicklow, Sinn Fein)
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What is the figure?
John Brady (Wicklow, Sinn Fein)
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Obviously a lot of these issues go back as far as the 1980s and some cases go back even further. What does the repayment of €5.2 million include for the staff who were wrongfully categorised as self-employed? What do they benefit from that in terms of rights and entitlements?
Mr. John McKeon:
I can only speak to the social insurance situation. These people will be reclassified from class S to class A for the full period of their employment. That means the only real payment people do not get at class S but do at class A is illness benefit. Employment rights are a separate matter for the WRC. They are not for my Department.
John Brady (Wicklow, Sinn Fein)
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The legacy payments are non-payments in terms of employer's PRSI. Is that backdated to the time when people commenced in RTÉ?
John Brady (Wicklow, Sinn Fein)
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I want to conclude on one area and it relates to State contracts. Some high-profile cases involved major contractors within the State with significant State contracts, with BAM being one example where there were a number of cases where workers were forced to register as self-employed to be able to work on some sites, including a significant site in Waterford. Those workers claim that when they raised their issue with scope, they were subsequently let go from their employment and the contract expired or was terminated. What process is involved when it comes to State contracts? When State contracts are being handed over is it the Department of Social Protection, the Revenue Commissioners, the Department of enterprise or another organisation that has the responsibility to ensure that the main contractor is fully compliant with the laws of the land in terms of employment rights?
Mr. John McKeon:
The Cathaoirleach has quoted a case and I must be careful with what I say. We obviously determine that the workers involved for social insurance purposes were class A. An issue now arises and I think those workers are bringing a case to the WRC or have done. I do not know but I understood that was going to be the case. There are anti-penalisation provisions in employment law that are meant to stop employers from taking disciplinary action against somebody.
John Brady (Wicklow, Sinn Fein)
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Who is responsible?
John Brady (Wicklow, Sinn Fein)
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Perhaps someone from that Department can give us an update or information on the imposition of those penalties.
John Brady (Wicklow, Sinn Fein)
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Not specific to the case that I referenced.
John Brady (Wicklow, Sinn Fein)
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Yes, the public procurement piece.
John Brady (Wicklow, Sinn Fein)
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Yes, but can anyone provide information on the financial penalty piece? Has it ever been implemented and utilised? Have penalties been imposed on any contractor who availed of State contractors?
Ms Audrey Cahill:
If we are referencing cases going to the WRC, as my colleague has said, each case would be an individual case and would have an individual outcome. Where there is an award made by an adjudicator on the basis of the facts and the submissions made, then those amounts would be published and the respondent would have to pay. Where payment does not happen, then there are processes which they need to go through to enforce those payments.
John Brady (Wicklow, Sinn Fein)
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That is all of my questions.
John Brady (Wicklow, Sinn Fein)
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Yes, of course.
Mr. Niall Cody:
This is an area that we pay a lot of attention to. We look at projects in relation to public capital projects. What we try to do is follow the money down through the cascade, as we call it. How the construction sector works is the principal contractor will get the public sector contract, and their terms and conditions are laid down, and generally in relation to the proper employment of properly registered subcontractors, at that level it works really well. The challenge then is as it goes down through the cascade. The principal contractor engages a subcontractor, who is also a principal contractor who engages a subcontractor, who may also be a principal contractor and then engages a subcontractor at the end. One of the concerns we have is that there will be leakage through the system. There are issues that we are concerned about around what are loosely called payment agencies, which are only supplying labour-only people in the construction sector. As I have said here at this committee before, we are concerned around some elements there. We have been looking at the idea and analysing whether there are ways we can strengthen the legislation to ensure that the principal contractor ensures that down through the chain, things are looked at properly. That would require legislation and it is not easy.
John Brady (Wicklow, Sinn Fein)
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Does Mr. Cody think that the current system or legislation is being abused?
Mr. Niall Cody:
The reality is that relevant contracts tax system was introduced in 1971 to deal with subcontracting within the construction sector. It is an area we pay close attention to. By and large, there are really good compliant companies and businesses in the construction sector but there are some that abuse the system. What we try to do, and I am very conscious that with the public capital programme, it is really important that we secure the public money within the system and make sure that there is proper compliance. We have projects on all those major public construction projects to try to track through the money through the cascade.
John Brady (Wicklow, Sinn Fein)
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Does enforcement and the imposition of penalties lie with Revenue or with someone else?
John Brady (Wicklow, Sinn Fein)
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Are there any current projects?
John Brady (Wicklow, Sinn Fein)
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Are there projects of serious concern that have been highlighted to the Minister?
John Brady (Wicklow, Sinn Fein)
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Are there current significant contracts that Revenue is so concerned about that it has expressed a view to the Minister that that particular contractor should not get any further contracts?
John Brady (Wicklow, Sinn Fein)
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Has Revenue asked for a change in legislation?
John Brady (Wicklow, Sinn Fein)
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I am conscious that Deputy Dolan has come in at the tail end of the meeting, but I have one final question, and it might be a question to each of the three bodies here. The current model has the WRC, Revenue and the Department of Social Protection. Maybe Mr. McKeon will go first. Does he think the Department of Social Protection that is the right body to be adjudicating on people's employment status? Does he think there is a better model or a better fit?
Mr. John McKeon:
Strictly speaking, we are not adjudicating on employment status. We are adjudicating on income source. That is the point I made at the beginning. We only do it for social insurance purposes, which is broader than employment. The issue you are getting to the crux of, and the Karshan judgment acknowledged this, is that if you look at employment law, under the Karshan judgment, somebody who does one engagement with an employer this week, another engagement in three weeks' time and another in four weeks' time is an employee for each engagement. Under employment law, they are not an employee because it has to be continuous. There are differences in legislation and that is why we are each involved in it. If the legislation could be brought together so that there would be one judgment and employment status is the only thing that determines, and if that were to be the case, I do not believe it should be us. We are not experts in employment law, to be honest.
John Brady (Wicklow, Sinn Fein)
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Where should that lie?
Mr. Niall Cody:
As I said earlier, we do not determine employment status. The employer determines the facts and the circumstances determine. What we are interested in is ensuring that tax is paid under the proper system, whether it is schedule E and the PAYE system, which is great, because there is a withholding tax, or it is paid under schedule D and the self-assessment system. One thing that I probably should have mentioned earlier is that, when people talk about the estimate of what is lost, the reality is, and this was very clear in the judgment, a worker who is incorrectly classified as liable to self-assessment, provided they pay and declare their self-assessment income, the tax is paid. There may be slight changes in relation to the tax treatment in expenses. What happens sometimes when we do our interviews with people who we think have been wrongly classified is that there are people who we think should be treated as employees who want to be treated as self-employed. You might interview five people. We reckon five of them are employees. Four of them are happy to be employees but the other is adamant that they are self employed. There are swings and roundabouts in this area.
Ms Audrey Cahill:
From a WRC perspective, the framework within which we work is the 62 or so pieces of employment law legislation that come under our remit. We do not contribute to policy or the creation of legislation. That is a matter for the Oireachtas. My colleagues have alluded to it quite a bit today. We work hand in glove from an inspector's perspective to make sure that every effort is made. We go into 5,000 employers a year and, at times, we spend some time with them. When it comes to the matter of the individual cases coming before us, there is not a pathway into us to establish employment status. It generally is a preliminary issue that provides a pathway into those other key pieces of legislation, as I mentioned, UD or redundancy. We are quite limited. For that to change would require significant legislative overhaul.
John Brady (Wicklow, Sinn Fein)
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I thank the witnesses for that. I am conscious, prior to Deputy Dolan coming in, that we said we would keep this stint very short. Hence we did not take a break at 12 p.m. I am just conscious of that but I will allow Deputy Dolan in.
Albert Dolan (Galway East, Fianna Fail)
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I do not need the full ten minutes, but I appreciate that. What I was most curious about was how the Department decides whether it is going to go with a formal or an informal investigation. How does it decide what is required and the extent of it?
Albert Dolan (Galway East, Fianna Fail)
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I apologise if that had been asked already.
Ms Deirdre Shanley:
Sometimes workers would come to us and look for an investigation. Whenever a worker wants a formal decision from scope, that is what is offered to them. Sometimes we may, through our inspection work and particularly through the work of the ESIU, visit an employer's premises and discover that there is an issue of classification. It is not always employment. It may be self-employment, as we talked about earlier. It may be another class. It could be a class M categorisation or some other PRSI class.
Generally, we would work with that employer and make an informal decision, especially if the employer is willing to agree that there is a misclassification. They pay the PRSI. Obviously, we would engage with the worker as well to make sure that they were informed fully of the picture from their perspective. In any instance, if an informal decision is not agreed, it becomes a formal decision. Generally, that is the way it happens. Our inspectors can work with an employer and establish what is on the ground. Sometimes agreement about classification happens that way.
Albert Dolan (Galway East, Fianna Fail)
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What will be some of the main reasons for a decision not to proceed?
Albert Dolan (Galway East, Fianna Fail)
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Since the Comptroller and Auditor General's report was completed, what improvements have been implemented in how the Department documents these decisions?
Mr. John McKeon:
We have not changed that. I think the Comptroller and Auditor General's report stated that there is full documentation of the formal decisions. In an informal decision where an employer agrees the reclassification, to be honest, I would prefer to have my inspectors out and the decision-makers going after other employers in other formal decisions than documenting a decision which everybody agrees to.
Albert Dolan (Galway East, Fianna Fail)
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Understood. How could State bodies such as RTÉ incorrectly classify workers for PRSI purposes? How could that have arisen?
Mr. John McKeon:
We spoke about it at length earlier on. The law on this has evolved since the 1800s. The Karshan case from 2023 has clarified the law and restored a prior understanding of the law, but in between there were court cases, including in the Karshan case, at the Court of Appeal, which has some of the most distinguished legal minds in the country, which found otherwise. The argument that employers, including RTÉ, would make is that they thought they were correctly classifying people, but the law has changed under them. That would be essentially the argument.
Albert Dolan (Galway East, Fianna Fail)
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Regarding the reclassification to class A and that figure being at 11%, do the witnesses consider that number to be significant?
Mr. John McKeon:
When we reclassify, the employer becomes liable for the full PRSI, including the employee for the period that they were not paying. It is actually closer to 15%. That is pretty significant. I keep trying to make this point. If you are an employer looking at the classification of your workers and are tempted to go one way or the other, if you go the wrong way, you will end up paying a lot more than you would have paid if you had gone the right way.
John Brady (Wicklow, Sinn Fein)
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That concludes our engagement for today. I thank the Secretary General and his officials from the Department of Social Protection and the chairman and his officials from the Office of Revenue Commissioners for attending today. I also thank officials from the Department of Enterprise, Tourism and Employment and the Comptroller and Auditor General for their attendance once again. Is it agreed that the clerk will seek any follow-up information and carry out any agreed actions arising from today's meeting? Agreed. The committee will meet again on Thursday, 19 March 2026 to discuss adapting flood risk management to climate change impacts with the OPW, the Department of housing and Met Éireann.