Paschal Donohoe (Dublin Central, Fine Gael)
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“Bogus self-employment” is the description commonly given to a scenario where an individual engaged to do a job is wrongly classified as being self-employed by an employer who seeks to avoid employment related obligations.

A person’s employment status has implications for tax purposes, PRSI and employment rights. There are a number of statutory bodies whose remit includes determining the employment status of a person. Each of these bodies make their determinations independently of each other in respect of the particular functions for which they are responsible, based on the separate legislative framework that apply. As such, it should be noted that a decision by one body is non-binding on the other two bodies.

The three bodies are:

• The Department of Social Protection (DSP), which determines employment status with a view to deciding the appropriate class of PRSI for an individual
• The Office of the Revenue Commissioners, where employment status determines tax treatment
• The adjudication service of the Workplace Relations Commission (WRC), which determines employment status as a preliminary issue when adjudicating on employment rights complaints.

I am informed by Revenue that, to combat bogus self-employment, it conducts a full range of compliance interventions to combat all types of tax evasion, focusing on the areas of greatest risk, including risks from the shadow economy. Revenue defines the shadow economy as activity in respect of which businesses and individuals engage in inappropriate practices with the aim of not complying with their legal obligations relating to matters such as taxes, duties, PRSI, licences and employment. Revenue compliance interventions include a focus on the practice of bogus self-employment and challenging the inappropriate classification of workers in accordance with tax legislation and the published Code of Practice.

Compliance interventions are conducted by Revenue acting alone or in collaboration with DSP officers, who examine the PRSI status of individuals as part of such interventions as well as with officers from the WRC, who are responsible for examining employee rights including sick leave and other entitlements. From January 2022 to June 2025, Revenue’s Shadow Economy teams have undertaken over 12,500 outdoor visits across multiple sectors, including construction and the service industry. 24% of these visits were carried out in conjunction with colleagues from DSP and/or the WRC. Of all the sectors visited, 1,533 workers were identified as unregistered, and 41 workers were reclassified as employees.

In a unanimous decision on 20 October 2023, the Supreme Court delivered a detailed judgment in The Revenue Commissioners v. Karshan (Midlands) Ltd. t/a Domino’s Pizza. The case was concerned with whether the delivery drivers were independent contractors under a “contract for service” and taxable under Schedule D of the Taxes Consolidation Act 1997, or employees under a “contract of service”, and taxable under Schedule E of that Act (PAYE). It is important to note that the case was concerned solely with the proper tax treatment of the workers concerned.

Following that judgment, an interdepartmental group comprised of DSP, Revenue and the Workplace Relations Commission reviewed the Code of Practice on Determining Employment Status (“the Joint Code”). In November 2024, an updated Joint Code was published and is available on the Gov.ie website at www.gov.ie/en/department-of-social-protection/publications/code-of-practice-on-determining-employment-status/#code-of-practice-on-determining-employment-status-document. This Joint Code is intended to provide a clear understanding of the employment status of individuals, taking into account current labour market practices and developments in legislation and case law.

There has been a long standing high-level steering group between DSP and Revenue that deals with strategic issues and interactions between the two organisations, typically meeting on a quarterly basis. I am advised by Revenue that the Classification of Employment is a standing item on the agenda.

I am informed that Revenue do not have available statistics on the annual estimated cost in lost revenue as a result of bogus self-employment. It is worth noting that from an individual’s viewpoint, the rates of tax and USC paid are the same, regardless of whether they are considered employed or self-employed for tax purposes. The main difference is the rules relating to certain expenses incurred.

As a body under the aegis of my Department, the Office of the Comptroller and Auditor General has advised that the Comptroller and Auditor General (C&AG) has published two reports in recent years (2022 and 2018) concerning classification of employment for PRSI purposes. Those reports are available on the website of the Office of the Comptroller and Auditor General. The C&AG is an independent Constitutional officer, and further questions regarding his work should be addressed directly to his Office.