An increasing area of focus in Revenue audits is whether individuals hired by a business are correctly classified as employed or self employed. The contract in place between the two parties has no bearing in determining the correct status. Each case is individual and must be considered on its own merits.
Industries which Revenue has focused on to date include medical & healthcare professionals such as locum dentists, doctors, pharmacists; IT contractors; & Administrators. Guidelines issued should be carefully reviewed to determine whether the correct status is being applied. Listed below are criteria which indicate whether an individual is an employee or self employed. In most cases there will be factors pointing towards employment & other factors pointing towards self employment. The position must be considered on balance to determine the correct status.
| Persuasive criteria that individual is employee |
| All of the following may not apply, but an individual would normally be an employee if: |
| > Directed by another person as to how, when and where work is carried out |
| > Cannot subcontract the work |
| > Supplies labour only- does not supply materials or tools (other than small tools) |
| > Receives a fixed hourly/ weekly/ monthly wage |
| > Does not assume responsibility for investment and management in business |
| > Cannot profit from sound management of the work |
| > Is not exposed to any financial risk in carrying out the work |
| > Works for one person or for one business |
| > Is entitled to extra pay/ time off for overtime |
| > Receives expense payments to over subsistence or travel expenses |
| Persuasive criteria that individual is self employed |
| All of the following may not apply, but an individual would normally be self employed if: |
| > Owns own business |
| > Controls what work is done and how, when and where |
| > Can subcontract the work |
| > Provides own insurance |
| > Has a fixed place of business |
| > Provides service to more than one business at same time |
| > Provides materials for the job |
| > Provides equipment and machinery for the job other than small tools |
| > Is exposed to financial risk |
| > Can profit from sound management of the work |
| > Responsible for investment and management of the business |
Consequences
An individual’s status as employed or self employed will effect:
- The way in which PAYE, PRSI and USC is paid to the collector general under either the PAYE or self assessment system
- The deductibility of expenses incurred in the course of self employment
- Social welfare entitlements in particular unemployment and disability benefits
- Rights and entitlements under employment legislation such as maternity leave, protection from unfair dismissal