Ruairi Quinn (Dublin South East, Labour)
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Question 117: To ask the Minister for Finance if the Revenue Commissioners have encountered a growing trend of workers reclassifying themselves as self-employed service providers; the figures as to the nature and scale of the trend; if the assertion by the two parties to a contract is accepted by the Revenue Commissioners as determining the outcome; the legal test used by them to decide whether a worker is indeed self-employed or is in reality an employee; the number of such cases inquired into or challenged by them in recent years and the breakdown of the outcome; the implications for the Exchequer and the Social Insurance Fund, in the short and long terms; if policy implications arise for consideration by the Revenue Commissioners in deciding their approach to this issue; if so, if there has been discussion on such policy implications with him or his officers; and if he will make a statement on the matter. [37329/05]

Joan Burton (Dublin West, Labour)
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Question 120: To ask the Minister for Finance if the Revenue Commissioners have encountered a growing trend of workers reclassifying themselves as self-employed service providers; the figures as to the nature and scale of the trend; if the assertion by the two parties to a contract is accepted by the Revenue Commissioners as determining the outcome; the legal test used by them to decide whether a worker is self-employed or is in reality an employee; the number of such cases inquired into or challenged by them in recent years and the breakdown of the outcome; the implications for the Exchequer and the Social Insurance Fund, in the short and long terms; if policy implications arise for consideration by the Revenue Commissioners in deciding their approach to this issue and if so, if there has been discussion on such policy implications with him or his officers; the breakdown by sectors for example construction industry, meat processing, forestry, etc., of the numbers involved; and if he will make a statement on the matter. [37396/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 117 and 120 together.

I am informed by the Revenue Commissioners that statistics are not available which would allow them to determine the numbers of workers moving out of employment status and becoming self-employed service providers. While overall numbers in both employment and self-employment continue to grow, Revenue has no hard data that might indicate the existence or otherwise of any substitution trend: that is of workers in employment reclassifying themselves as self-employed.

I am informed that Revenue does not accept at face value contractual assertions as to self-employment status; the true nature of the relationship between the parties is looked at having regard to criteria derived from extensive case law, for example, the degree of control, obligation, integration or exclusivity involved in the relationship. These criteria are published in a Code of Practice in Determining Employment Status that was compiled with the assistance of the Irish Congress of Trade Unions, the Department of Enterprise, Trade and Employment and the Department of Social and Family Affairs. A copy of the code of practice is annexed to this reply.

Revenue operates an extensive audit programme to police compliance with tax laws, including obligations to apply PAYE and PRSI in cases where they are satisfied that the true nature of the relationship is that of employer and employee. I am informed that in cases and sectors where there is a particular risk of mis-classification, the matter of employee-subcontractor status is generally examined as a routine part of a Revenue audit.

Special projects are also undertaken from time to time in this area, for example, in 1998-99 the tax status of some 63,000 persons within the relevant contracts tax scheme was reviewed — involving approximately 7,000 visits — and close to 90% of principal contractors visited were found to have either correctly classified their employees/contractors or agreed to abide by Revenue's ruling as to the correct treatment. Other examples of sectors looked at closely by Revenue in this regard include the security industry, the courier business and the education and health sectors. However, no detailed outcome statistics are available on these sectors.

As regards the Exchequer and Social Insurance Fund implications of any trend away from employment and into self-employment, this would mainly impact on PRSI: the employer's PRSI contribution is, for most employees,10.75%. There may also be some reduction in income tax receipts because of the different rules for allowable expenses between self-employed Schedule D taxpayers and employees.

On the question of policy implications for Revenue, Revenue's function in this area, as in all other areas of its mandate, is to maximise compliance with tax laws. It selects cases and sectors for audit and compliance programmes on a risk management basis. It will take appropriate action where it finds that an employee has been wrongly classified as a contractor.

On the breakdown in the three sectors referred to in the questions, I am informed that the number of sub-contractors on Revenue's register for relevant contracts tax is as follows: construction industry, 59,982; meat processing, 771; and forestry, 1,392. These figures include both individuals and companies. I am informed that Revenue does not have reliable and up-to-date statistics for the number of employees in these three sectors. I am assured by the Revenue Commissioners that they fully recognise the particular risks of mis-classification in the relevant sectors of the economy and they will continue to monitor the situation.

The Code of Practice below was compiled with the assistance of the Department of Enterprise, Trade and Employment; Department of Social and Family Affairs; Department of Finance; Irish Congress of Trade Unions; Irish Business and Employers Confederation and the Revenue Commissioners and was published in July 2001.

Code of Practice for determining

Employment or Self-Employment status of Individuals.

Code of Practice in determining Employment status

This leaflet has been prepared by the Employment Status Group set up under the Programme for Prosperity and Fairness. The group was set up because of a growing concern that there may be increasing numbers of individuals categorised as 'self employed' when the 'indicators' may be that 'employee' status would be more appropriate. The purpose of the document is to eliminate misconceptions and provide clarity. It is not meant to bring individuals who are genuinely self-employed into employment status.

In most cases it will be clear whether an individual is employed or self-employed. However, it may not always be so obvious, which in turn can lead to misconceptions in relation to the employment status of individuals.

The criteria below should help in reaching a conclusion. It is important that the job as a whole is looked at including working conditions and the reality of the relationship, when considering the guidelines. The overriding consideration or test will always be whether the person performing the work does so "as a person in business on their own account". Is the person a free agent with an economic independence of the person engaging the service?

Criteria on whether an individual is an employee

∙While all of the following factors may not apply, an individual would normally be an employee if he or she:

∙Is under the control of another person who directs as to how, when and where the work is to be carried out.

∙Supplies labour only.

∙Receives a fixed hourly/weekly/monthly wage.

∙Cannot sub-contract the work. If the work can be subcontracted and paid on by the person subcontracting the work, the employer/employee relationship may simply be transferred on.

∙Does not supply materials for the job.

∙Does not provide equipment other than the small tools of the trade.

∙The provision of tools or equipment might not have a significant bearing on coming to a conclusion that employment status may be appropriate having regard to all the circumstances of a particular case.

∙Is not exposed to personal financial risk in carrying out the work.

∙Does not assume any responsibility for investment and management in the business.

∙Does not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from the engagements.

∙Works set hours or a given number of hours per week or month.

∙Works for one person or for one business.

∙Receives expense payments to cover subsistence and/or travel expenses.

∙Is entitled to extra pay or time off for overtime.

Additional Factors to be Considered:

∙An individual could have considerable freedom and independence in carrying out work and still remain an employee.

∙An employee with specialist knowledge may not be directed as to how the work is carried out.

∙An individual who is paid by commission, by share, or by piecework, or in some other atypical fashion may still be regarded as an employee.

∙Some employees work for more than one employer at the same time.

∙Some employees do not work on the employer's premises.

∙There are special PRSI rules for the employment of family members.

∙Statements in contracts considered by the Supreme Court in the 'Denny'case, such as "You are deemed to be an independent contractor", "It shall be your duty to pay and discharge such taxes and charges as may be payable out of such fees to the Revenue Commissioners or otherwise", "It is agreed that the provisions of the Unfair Dismissals Act 1977 shall not apply etc", "You will not be an employee of this company", "You will be responsible for your own tax affairs"are not contractual terms and have little or no contractual validity.

∙While they may express an opinion of the contacting parties they are of minimal value in coming to a conclusion as to the work status of the person engaged.

Criteria on whether an individual is self-employed

While all of the following factors may not apply to the job, an individual would normally be self-employed if he or she:

∙Owns his or her own business.

∙Is exposed to financial risk, by having to bear the cost of making good faulty or substandard work carried out under the contract.

∙Assumes responsibility for investment and management in the enterprise.

∙Has the opportunity to profit from sound management in the scheduling and performance of engagements and tasks.

∙Has control over what is done, how it is done, when and where it is done and whether he or she does it personally.

∙Is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken.

∙Can provide the same services to more than one person or business at the same time.

∙Provides the materials for the job.

∙Provides equipment and machinery necessary for the job, other than the small tools of the trade or equipment which in an overall context would not be an indicator of a person in business on their own account.

∙Has a fixed place of business where materials equipment etc. can be stored.

∙Costs and agrees a price for the job.

∙Provides his or her own insurance cover e.g. public liability cover, etc.

∙Controls the hours of work in fulfilling the job obligations.

Additional factors to be Considered:

∙Generally an individual should satisfy the self-employed guidelines above; otherwise he or she will normally be an employee.

∙The fact that an individual has registered for self-assessment or VAT under the principles of self-assessment does not automatically mean that he or she is self-employed.

∙An office holder, such as a company director, will be taxed under the PAYE system. However, the terms and conditions may have to be examined by the Scope Section of Department of Social, Community and Family Affairs to decide on the appropriate PRSI Class.

∙It should be noted that a person who is a self-employed contractor in one job is not necessarily self-employed in the next job. It is also possible to be employed and self-employed at the same time in different jobs.

Consequences arising from the determination of an individual's status

The status as an employee or self-employed person will affect:

∙The way in which tax and PRSI is payable to the Collector-General—

∙An employee will have tax and PRSI deducted from his or her income

∙A self-employed person is obliged to pay preliminary tax and file income tax returns whether or not he or she is asked for them.

∙Entitlement to a number of social welfare benefits, such as unemployment and disability benefits.

∙An employee will be entitled to unemployment, disability and invalidity benefits,

∙whereas a Self-employed person will not have these entitlements.

∙Other rights and entitlements, for example, under Employment Legislation:

(a)An employee will have rights in respect of working time, holidays, maternity / parental leave, protection from unfair dismissal etc.

(b)A self-employed person will not have these rights and protection.

∙Public liability in respect of the work done.

Deciding Status — Getting Assistance

Where there are difficulties in deciding the appropriate status of an Individual or groups of individuals, the following organisations can provide assistance.

Tax and PRSI

The Local Tax Office or The Local Social Welfare Office, (a listing of Tax and Social Welfare Offices is in the telephone book). Scope Section in the Department of Social, Community and Family Affairs may also be contacted for assistance.

If there is still doubt as to whether a person is employed or self-employed, the Local Tax Office or Scope Section of Department of Social, Community and Family Affairs should be contacted for assistance. Having established all of the relevant facts, a written decision as to status will be issued.

A decision by one Department will generally be accepted by the other, provided all relevant facts were given at the time and the circumstances remain the same and it is accepted that the correct legal principles have been applied to the facts established. However, because of the varied nature of circumstances that arise and the different statutory provisions, such a consensus may not be possible in every case.

The Employment Rights Information Unit of Department of Enterprise, Trade and Employment may also be contacted for information on labour law issues.

The report of the Employment Status Group is available for viewing on the following websites.

Revenue: www.revenue.ie

Department of Social, and Family Affairs: www.welfare.ie

Department of Enterprise Trade and Employment: www.entemp.ie

Irish Congress of Trade Union: www.ictu.ie

Irish Business and Employers Confederation: www.ibec.ie

Useful Revenue contacts for information and leaflets

Revenue Inquiry Offices at Cathedral St., O'Connell St., Dublin 2,

Level 2, The Square, Tallaght, Co Dublin, or any Tax Office.

EMPLOYER PAYE ENQUIRIES — LoCall 1890 236 236

Department of Social, and Family Affairs

Scope Section,

Department of Social, and Family Affairs,

2/3 Parnell Square East, Dublin 1.

Telephone: 7043075 or Any Social Welfare Local Office

Department of Enterprise, Trade and Employment

Employment Rights Information Unit,

Davitt House, 65A Adelaide Rd.,

Dublin 2.

Telephone: 01 6312121, Fax: 01 6313267

Irish Congress of Trade Unions

31-32 Parnell Sq.,

Dublin 2.

Telephone: 01 8897777, Fax: 01 8872012

Irish Business and Employers Confederation

Confederation House,

84/86 Lower Baggot Street,

Dublin 2.

Telephone: 01 6601011, Fax: 01 6601717

Employment Appeals Tribunal

65A Adelaide Rd.,

Dublin 2.

Telephone: 01 6312121,

Lo-call: 1890 220 222, Fax: 01 6764810

Health & Safety Authority

Temple Court,

Hogan Place,

Grand Canal St.,

Dublin 2.

Telephone: 01 6620400, Fax: 01 6620417

Labour Court

Tom Johnson House,

Haddington Rd.,

Dublin 4.

Telephone: 01 6608444,

Lo-call: 1890 220 228,

Fax: 01 6608437

Labour Relations Commission & Rights Commissioners

Tom Johnson House,

Haddington Rd.,

Dublin 4.

Telephone: 01 6609662,

Lo-call: 1890 220 227,

Fax: 01 6685069