To become more competitive, employers are constantly seeking new ways to cut costs. Some are taking on workers as self-employed contractors rather than employees. This yields substantial savings for the company but needs to be used with caution.
There is no statutory definition of an employee – the authorities use a series of tests/questions where the reality of the relationship is viewed in its entirety rather than just the contract between to worker and the company.
Even where the contract uses words like “self employed” and “contractor”,
* if the answer is yes to any of the following questions, then it may be judged to be an employee/employer relationship –
- Is the worker under the control of another person who directs as to how, when and where the work is to be carried out?
- Is the work for set hours or a given number of hours per week or month?
- Does the company supply all or most materials and equipment for the job?
- Is the worker free from personal financial risk in carrying out the work?
- Does the worker receive a fixed hourly/weekly/monthly wage?
- Is he/she entitled to extra pay or time off for overtime or receive sick pay?
- Does he/she receive expense payments to cover subsistence and/or travel expenses?
- Does the worker supply labour only?
- Is the worker not allowed to subcontract the work?
- Does the worker not assume any responsibility for investment and management in the business?
- Does he/she not have the opportunity to profit from sound management in the scheduling or performance of engagements?
- Is the worker covered under the employer’s public liability insurance?
- Does he/she only work for one person or for one business?
It is important to make the distinction between an employee and a self-employed contractor because different rights and responsibilities apply to each.
And generally speaking, where a worker is deemed by the Revenue Commissioners to be an employee rather than a contractor, the onus is on the employer to pay the backlog of PAYE, PRSI and levies, plus any penalties, interest and fines.
*Text paraphrased, partially taken from and subject to copyright of the Revenue Commissioners. See link below for full text:
Revenue Commissioners – Determining the Correct Employment Status of a Worker.
If you would like to discuss any issues raised in this article please contact us at 01 276 4245 or email alanj@accountingforgrowth.ie
