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Joint Committee on Employment Affairs and Social Protection debate -
Thursday, 8 Nov 2018

Bogus Self-Employment: Discussion

I welcome Ms Patricia Murphy, assistant secretary at the Department of Employment Affairs and Social Protection, and her colleagues, Mr. Seán Reilly, Mr. Dermot Sheridan, Mr. Jim Lynch and Mr. Christopher McCamley. I will invite our guests to make their presentation to the committee and then members will have an opportunity to ask questions.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

I invite Ms Murphy to make her opening statement.

Ms Patricia Murphy

I thank the joint committee for the invitation to attend to discuss the issue of false self-employment. I am the assistant secretary in the Department with responsibility for human resources, facilities and estates management, employment rights policy, PRSI policy and the scope section. Mr. Seán Reilly and Mr. Christopher Mc Camley deal with PRSI policy and the scope section. Mr. Dermot Sheridan has responsibility for employment rights policy, while Mr. Jim Lynch is divisional manager for the mid-west region. His responsibilities include social welfare inspections in that area.

False or bogus self-employment occurs where an employer wilfully and wrongly treats an employee as a self-employed contractor in order to avoid tax and social insurance contributions and other employment rights which attach to employment. There are robust arrangements in place for dealing with complaints of bogus or false self-employment. Social welfare inspectors inspect a wide range of businesses as part of their ongoing compliance operations. Inspections are also undertaken jointly with other agencies, including the Revenue Commissioners and the Workplace Relations Commission. Where evidence of non-compliance is detected, it will be pursued. Officials investigate specific cases referred to the Department's scope section which determines employment status and the correct class of pay related social insurance, PRSI. Where misclassification of workers as self-employed is detected, the correct status and class are determined and social insurance arrears are collected, as required. Where a determination is made that a worker has been incorrectly classified as self-employed, the employer will be required to pay the relevant employer contributions for the period in question. There is no time limit on the period for which PRSI can be collected.

An employer who knowingly and incorrectly classifies a worker as self-employed, rather than employed, in order to evade or reduce the employer's liability to pay social insurance contributions may be guilty of an offence under section 252 of the Social Welfare Consolidation Act 2005. An employer who aids, abets, counsels or procures an employee to misrepresent his or her employment status is also guilty of an offence under section 251 of the Act. Any employer who fails to pay employment contributions and/or makes false or misleading statements may also be guilty of an offence under the Act, section 254 of which requires employers to keep records of employees and people engaged under a contract for services. A person guilty of an offence is liable on summary conviction to a fine not exceeding €2,500 or imprisonment for a term not exceeding six months or both, or on conviction on indictment to a fine not exceeding €13,000 or the amount that is equivalent to twice the amount unpaid or deducted, whichever is the greater, or to imprisonment for a term not exceeding three years or both.

In addition to the work of social welfare inspectors and the scope section, the Workplace Relations Commission has responsibility for promoting and encouraging compliance with relevant employment legislation. Notwithstanding what a contract states, if a worker thinks he or she is an employee and has a complaint about how he or she is being treated in respect of employment rights or equality matters, he or she may bring a complaint to the Workplace Relations Commission. Complaints may be referred for mediation or adjudication and either the mediation agreement or the decision of an adjudication officer is enforceable in the District Court. There are strong penalisation provisions in most employment rights legislation in order that employees can feel safe in enforcing their statutory rights. Members will be aware of the improvements in employment rights in the Employment (Miscellaneous Provisions) Bill which will be brought to the Seanad shortly.

Quantitative data from the labour force survey and elsewhere indicate that the prevalence of false self-employment is lower than is perhaps perceived anecdotally. The self-employed make up less than 15% of the total number in employment.

This is at the lowest level in the 20 years for which data is readily available. It is in line with the average rate of self-employment in the EU and appears from the data to be trending downward.

The committee may be aware of the research published by the Economic and Social Research Institute in August. The document is entitled Measuring Contingent Employment in Ireland. ESRI staff looked at the prevalence of freelance self-employed with no employees in several sectors, including information technology and finance. They concluded that while freelance employment has been increasing steadily since 1998 it remains a relatively minor component of the Irish labour market, accounting for a little over 2% of total employment in 2016. The Department's report on the implications for social insurance and tax receipts of intermediary employment structures and self-employment arrangements was published in January 2018. The report was prepared by officials from our Department, the Department of Finance and the Revenue Commissioners. It was informed by a public consultation with a wide range of stakeholders. The report noted how the available data does not indicate that self-employment is accounting for any significant increase of the labour force. It also noted how the available data indicates that the proportion of self-employed people in the workforce is decreasing. The report explored the use of intermediary employment arrangements as a mechanism through which workers are represented as engaged in self-employment.

There are two main forms of intermediary structures used in lieu of a direct engagement between an end-user of services and the person providing services. These are personal service companies and managed service companies. While the report noted that intermediary arrangements can be abused to the detriment of workers, it also noted that contract for service arrangements can provide flexibility, in many instances for businesses and workers, where such arrangements are freely chosen by both parties. In many cases, the individuals involved are genuinely self-employed. However, where there is only one end-user of the services, over a period the relationship may be more akin to an employer-employee relationship. The worker in this instance does not have the protection of employment rights legislation.

The report also noted that due to the difference in social insurance contribution rates there is an incentive for employers to hire workers as self-employed rather than direct employees. It estimated potential losses based on various employment and earnings scenarios. The potential loss to the State from various self-employment arrangements ranges from a figure of €5,000 per annum at average industrial earnings, to €9,000 per annum at an earnings level of €60,000 and to circa €15,000 per annum at a salary of €100,000. These types of arrangements are more common in certain industries throughout the developed world. Committee members will be familiar with the use of these arrangements in IT, media and aviation. Different countries have tried different approaches, depending on their social insurance traditions. We continue to monitor approaches tested in other countries, including the recent developments in the UK, to ascertain if a new model may be required for dealing with people using these type of arrangements beyond the simple distinctions of employee or self-employed.

Despite the data showing no upward trend in the numbers of self-employed, the issue of false self-employment continues to attract a lot of attention. There have been a number of Private Members' Bills and an amendment to the Employment (Miscellaneous Provisions) Bill in recent months seeking to address the issue. Much of what has been attempted is already covered in existing legislation and case law. Recent efforts draw substantially from the current code of practice for determining employment and self-employment. I will return to the issue of the code shortly.

In May 2018, the Department began a month-long media campaign costing €167,000 on false self-employment and the service provided by the Department's scope section. This followed a recommendation from the report on intermediary arrangements to which I have referred. The focus of the campaign was on the worker who is falsely self-employed, pointing out the implications for social welfare benefits and employment rights, such as holiday pay. The campaign consisted of radio and online advertisements, etc. The campaign directed people to a dedicated page,, which includes information on the tests used to determine employment status and how to request a formal determination from the Department's scope section as well as information about and contacts for the Workplace Relations Commission and Revenue. This information was provided in eight languages. The new web page attracted more than 10,500 visits during the campaign with an average time of over three minutes spent on the page, which is regarded as favourable given the nature of online engagement. The Department engaged directly with ICTU, IBEC and the Construction Industry Federation to share information before the start of the campaign. Contact has been maintained, with trade unions identifying specific employments that could be investigated further.

The level of direct contact with the Department's scope section from individuals as result of the campaign was surprisingly low. In the event, scope section received 50 calls and 30 emails during the campaign from individuals who had become aware of the service directly as a result of the advertising campaign. A higher level of direct engagement had been expected given the extent of anecdotal information on false self-employment. The majority of callers confirmed that they had visited the website first before contacting the Department. A total of 15 formal applications for a scope decision were registered. The types of employment included couriers and van drivers, home tutors, meter readers, personal finance, IT and media, pharmaceuticals and construction.

It has been suggested that one reason for the low response to the campaign is reluctance by individuals to seek a scope determination due to concerns over how an employer will react. If this is the case then the most appropriate way to address the issue will be through inspection. In addition, legislative measures dealing with victimisation may be required. These would be similar to those already contained in employment rights legislation to provide assurance to workers that they cannot be victimised if they raise legitimate concerns regarding their employment status. Although the response was low, the feedback from the campaign will inform the inspection work of the Department, Revenue and WRC, including in sectors other than construction. We intend repeating the media campaign on a periodic basis to keep awareness high and engagement with the sectoral representative bodies is ongoing.

In response to the concerns expressed regarding potential employer misconduct the Department's divisions have been engaged in planning employer inspections by social welfare inspectors based on the feedback gathered during the media campaign. These will focus on the sectors identified and any companies reported to scope section. A targeted control week, which involved inspector visits to 967 employers across all sectors in Dublin Central, took place during the week commencing 23 July 2018. Separately, in conjunction with Revenue a number of inspections in the construction and other sectors were carried out in the west in the second half of May 2018. The focus was on establishing correct insurability status and on challenging any cases where dubious self-employment or sub-contracting was suspected. Leaflets outlining the false self-employment campaign were issued to the main contractors and others as considered appropriate. Revenue and Department of Employment Affairs and Social Protection special investigation unit inspections were undertaken in Galway city on 10 May on three substantial sites. A total of 163 people were interviewed on the three sites and ten of these workers were identified as self-employed contractors or sub-contractors, of whom only one was supplying labour only. A follow-up investigation regarding insurability is under way in this case. Although not determinative of the overall scale of the issue at a national level, the result of this inspection, yielding just one suspected case of false self-employment, is consistent with the labour force survey data indicating that false self-employment may not be as common as the prevailing narrative suggests.

A programme of intensive reviews of potential bogus self-employment in two further divisions, Dublin north and the mid-west, will commence later this month. We are using different approaches in each division, partly to assess the best methodology for use in other divisions. The mid-west operation is adopting a sectoral approach and will focus on particular industries based on local knowledge. The Dublin north operation will follow a geographical approach targeting particular areas, including industrial estates.

Earlier I mentioned the code of practice for determining employment and self-employment status of individuals. This was drawn up by a Government-appointed expert group in 2001 and updated in 2007 with a view to encapsulating the criteria established over time for differentiating employment from self-employment. The code is in need up updating to take account of aspects of recent case law and the development of more complex areas of work such as the use of intermediary employment arrangements, including personal service and managed service companies, platform services, web-based work, etc. Such arrangements may not be adequately addressed by the current code. A working group was established in August to look at updating the code and we hope to have a draft available shortly. We intend consulting with employer and employee bodies before finalising the text. As part of our review we will consider the feasibility of putting the code on a legislative basis while ensuring that it continues to reflect the direction of the courts that each case must be looked at on an individual basis.

In considering whether new measures may be required to tackle an issue such as false self-employment we need to take due account of the available data and evidence on the prevalence and impact of the issue. We should also consider if there are existing measures available in legislation that can be applied to address the issue. Finally we need to be mindful of the labour market impacts of any new measure. One of the characteristic features of the Irish labour market is its flexibility. The flexibility of the labour market is, it has been argued, one of the key factors supporting employment recovery and growth in the post-recession period. The available data indicate that the prevalence of self-employment is in fact diminishing and is now at its lowest recorded level over the past 20 years.

There are already significant legislative powers to investigate and sanction employers and employees who falsely declare their social insurance status as self-employed rather than employed. On balance the view of the Department is that, with the possible exception of anti-victimisation protections, there are already sufficient legislative provisions and powers to enable the State and this Department to identify, investigate and enforce the false declaration of employment as self-employment, including through criminal prosecutions.

The Department considers that the appropriate response at this time should be to increase the exercising of our existing investigative and enforcement powers rather than seek additional powers or impose new and unnecessary restrictions on employment at this point. We will continue to monitor and assess the position and the results of our increased focus on inspections.

We welcome the fact that this committee is shining a light on the matter of false self-employment and look forward to receiving the final report. I am conscious that Deputies and Senators often have local knowledge of employment issues on the ground and we are always happy to investigate any specific cases that they might bring to our attention. We have made available some material on the work of the Department’s scope section and our inspectors and we are happy to answer questions. I should say that for reasons of confidentiality and data protection, we are not really able to discuss individual cases. I thank the Chairman and I welcome any questions from the committee.

I am sure there will be a number of questions. I thank Ms Murphy for her opening statement. I have a general question before going to members. There is a process and Ms Murphy mentioned that social welfare inspectors inspect a wide range of businesses, with inspections undertaken jointly with the Revenue Commissioners. She indicated that officials investigate specific cases referred to the Department and she spoke about the advertising campaign. She said 163 people were interviewed and there was input from ten workers. Taking all the presentation into account, she indicated there was just one suspected case of false self-employment. Across 2018, how many cases were investigated and seen to be false or bogus self-employment? Are there random inspections or is it targeted, information-led and evidence-based work?

Ms Patricia Murphy

We cover all those as we have inspectors, a special investigation unit and a joint investigation unit working with the Revenue Commissioners and the Workplace Relations Commission inspectors. We have not been keeping specific statistics on bogus or false self-employment. Our operation is being built and developed and we are operating on the information that we receive. As we are building our information, both general inspections and the targeted inspections are being used. I commented at the end on where we stand at this moment. Statistics indicate that self-employment is generally decreasing slightly over a period. There appear to be pockets or areas on which we need to focus and sectors that need to be targeted.

I do not want to get into a debate. I am being specific and I am trying to find out how many inspections were carried. If the witness does not have the number, she can forward it to the committee. How many uncovered bogus self-employment?

Ms Patricia Murphy

In 2017, there were 2,698 employer reviews and €2.27 million in savings recorded. We do not keep an absolute record of bogus self-employment and we have not kept such statistics up to now.

I am critical of that because this matter has been around from the formation of the Thirty-second Dáil. If inspections are done, whether targeted or random - both must be done to keep people honest - I am surprised that the witness can tell the amount of money saved but not the number of bogus self-employment contracts. The data need to be more robust.

It is astonishing that the Department does not record the number of cases of bogus self-employment. The opening statement cited several reports indicating bogus self-employment is rife within the State. How can a statement like that be made when the Department does not even keep the records? It is unbelievable and it certainly shines a light on the attitude of the Government and the Department in tackling this very serious and growing issue. It is certainly not subsiding and is increasing daily. More sectors are being drawn into this fraud. It is an act of defrauding the State and the PRSI system. A report from the Irish Congress of Trade Unions reckons that over eight years, it has cost the State what may be a low estimate of €600 million from unpaid employer PRSI. Will the witnesses comment on that? It is by no means insignificant. I can think of many groups of marginalised citizens in the State who could benefit massively from that money and I am sure the Department would welcome €600 million.

This fraud exposes the Government as the Taoiseach, Deputy Leo Varadkar, led a campaign and spent a great amount of money to fight social welfare fraud. The figures bear out the argument that the more substantial fraud within the State is with certain employers. It was a shambolic campaign launched by the Department and this Government and only 50 phone calls and 30 emails were received. That says it all.

I am interested in finding out the number of inspections carried out by social welfare inspectors this year. How many inspections have been carried out by the Revenue Commissioners and Workplace Relations Commission? The point was made about significance. I am not sure if the witnesses are aware of a report carried out in the media sector by Mr. Philip Boucher-Hayes that was widely publicised. He said the phenomenon is endemic in the media sector and rife in the State broadcaster, RTÉ. That certainly does not sound insignificant. It is rife within the construction sector as well. It is also common in public projects funded by the State, including housing projects, schools and other capital projects throughout the country. People are being forced to register as self-employed and going to work as subcontractors. Not only are they missing out on entitlements such as holiday or sick pay etc., there are some recent examples of developers getting State contracts for housing projects going into examinership or receivership, leaving the people forced to register as self-employed and subcontractors high and dry and owed substantial sums of money. That is because they were forced into this ludicrous scenario in the first place. As subcontractors, they will receive a couple of cent in the euro of that debt.

This needs to be addressed. I am aware Members from Solidarity-People Before Profit have brought forward legislation on this and Sinn Féin supports it totally. Are the officials aware of that legislation? The only way to deal with the issue is through legislation. Employment law can be cited but clearly it has not and will not work. We need distinct legislation on this. Have the officials looked at how other countries have tackled this fraud? It needs to be tackled in this State as well.

I am interested in the conclusion to the submission which referred to a need to be mindful of the labour market impact of any new measure. It was stated that a characteristic of the Irish labour market was its flexibility and that it had been argued that flexibility was a key factor supporting employment recovery and growth. That remark says a lot about the determination of the Department to capture what is bogus self-employment, understand it and get the scale of it right. There is something extraordinary about setting up a new web page that has 10,500 hits, with people spending on average three minutes on the page, and then getting a result on the scope section of just 50 calls and 30 emails. There is something wrong there. I suggest the problem is that bogus self-employment is not being captured because it creates a fear, oppression and isolation and is being used increasingly to recruit and exploit the labour of foreign workers, whether they come here through agencies or are resident and have become new members of our communities. That is particularly the case.

Some of us are activists in our communities and trade unions. My trade union, UNITE, has been tackling this for years and I have attended pickets on all of these publicly-financed projects, including the national children's hospital and some of the schools building projects which are now the subject of controversy in Lucan and west Dublin. There have been public housing projects where workers on site have been bogusly self-employed. Instead of being on what is alleged to be the minimum wage or the construction industry norm of approximately €13 to €15 per hour, they end up earning approximately €4 or €5 per hour through that very process of having to create and let on that they have a false company. They are then paid a chunk of money without receiving any protection or entitlement to unemployment or sickness benefit. On top of that, they have to buy their own safety equipment and certificates to cover them to work on sites. These sites are antagonistic to trade union organisation. This is rampant. Producing a document which says it cannot prove it suggests the Department is being entirely ineffective in pursuing it.

Has the Department brought a single prosecution for an instance of bogus self-employment? If so, how many has it taken? Can we pursue more? The Department's legislative procedures appear weak and its determination leaves a great deal to be desired. The Department says the best way to proceed is to identify, investigate and enforce through criminal prosecution false declarations of employment as self-employment. We need to know what results it is getting by way of prosecutions. I note that at the end of the submission, it was indicated that the officials were unable to discuss individual cases. We are going to have to discuss the construction industry, even if it is in broad terms, and the level of abuse taking place within it where State money has been provided, including, for example, money provided to build the national children's hospital, which is the best example I can use.

The following matter has been discussed publicly because of the industrial relations response to it. Does the Department consider that the way Ryanair employs most of its pilots to be a case of bogus self-employment? Ryanair says to an individual that he or she must set up a company and engage an accountant from one of a number of specified firms and that he or she will then be paid through that mechanism. These workers do not get PRSI or pay tax in the countries in which they work and that has led to certain Ryanair pilots being arrested in Germany and the UK by revenue officials because their taxes were being paid here. The workers benefit from the social structures in their countries of residence but they do not contribute to the PRSI system. Does the Department consider that to be bogus self-employment? If it does not, how does it define bogus self-employment? Certainly, I consider it to be bogus self-employment as do the Ryanair pilots. In fact, it has been called social dumping. The costs to the State from the construction industry have already been provided by Congress, but there is a further massive cost to the State from the airline industry and beyond. The Department lists a number of industries, but not the airline industry in which a significant offence is taking place.

I note to colleagues that while the Department may have a view on the issues they raise, other witnesses will certainly have a view. I ask members to bear in mind that other relevant issues will come before us as we proceed. The Department may have some view on some of the issues, but not all of them.

I thank the witnesses for their presentations. I share the shock of my colleagues that this issue is not being monitored. It is completely unacceptable, especially if it was not monitored previously and the Department's title was then changed to include employment affairs in respect of which this is a key piece of work. It means the Department does not even have a baseline to move from. Given that the social welfare Bill is moving through shortly, resources should be allocated to recreate and find information forensically, looking, if necessary, at individual correspondence items from the Department on cases. That would give us a much more accurate and detailed picture.

Others have asked about the number of prosecutions taken. That is not the number of cases or determinations. It is the number of prosecutions. Prosecution in respect of fraud was mentioned extensively in the presentation. One of my key concerns arises from a particular case which I will not mention specifically. Rather, I will speak to the issues arising in relation to it. I have seen a detailed account and much of it was in the public realm in respect of a key case which took place over 18 years ago. However, it is important because, as the witnesses noted, there is no time limit in respect of these issues. It is important and appropriate that there is no time limit because this does not simply hurt people in the moment or when they become unemployed. When one denies someone his or her PRSI contributions, one impoverishes the person into retirement and old age because one is denying him or her a proper pension record. The damage done is significant. I note the Department's own slides. We have heard the figures from the unions which are very high and, I expect, because they have contact with so many members, accurate. Even on the Department's own figures, the potential loss to the State from bogus self-employment arrangements may range from €5,000 to €15,000 per worker per year. If action were taken, the Department estimates the potential gain at €30 million to €60 million per annum. It is a very significant cost to the State.

In the case of the example I referred to, we had a situation whereby the scope unit found someone was in fact an employee. That was appealed to the social welfare appeals office which made a determination on the basis of a social welfare inspection report. A member of staff of that company was cited at length in that determination and the decision of the scope office was overturned. Subsequently, a case was taken by the employee to the Employment Appeals Tribunal at which the company said the stated member of staff had never met with the social welfare inspector. This was later admitted by the Department which said there had been a case of mistaken identity on the part of the social welfare inspector. Nevertheless, no change was made and the determination of the appeals officer was not overturned. In this situation the person with the least power and most to lose, the vulnerable employee, had to try to take a case to the High Court rather than the Circuit Court because the appropriate channel of the Employment Appeals Tribunal had been closed off due to a misrepresentation by the Department which further failed to change its own determination. This is an example. Let us not dwell on the details, to which I am sure the Department will say it cannot speak. What I want to know is the following.

How many determinations by the scope unit have been overturned by the social welfare appeals office? What is the legal basis of the determinations made by that office as opposed to those made by the scope unit? What is the plan when a situation is determined later to have been based on inaccurate information? What actions will be taken in this or other instances? Is there a policy on seeking to find these moneys?

Thank you, Senator.

I have four specific questions.

Another key question relates to the engagement between the Department and the Revenue Commissioners where Revenue is engaging with a company regarding its failure to deliver its full tax component. What is the relationship with respect to the Department regarding PRSI? Can we be assured that in any deal or arrangement-----

Either the Senator has brief questions or I will come back to her.

They are very brief. My other question relates to scope determinations in respect of spouses. Does that relate to an EU directive that came into force about three years ago which directed that persons in family businesses should pay PRSI in respect of their spouses? How has that been evolving and how is it being pushed forward? I will come back in if I have a further question.

Thank you, Senator. I call Deputy Paul Murphy.

I congratulate the committee on taking up this issue. Like other members, I am shocked the Department is not keeping records of bogus self-employment. Such an approach is the definition of putting one's head in the sand when there is this massive perceived issue. I accept the Department has said that the perception is greater than the reality. I would be very surprised, with the benefit of hindsight in ten years' time, if that turns out to be the case. If we consider what is happening internationally, this is a major issue on which various governments, parties, etc., are moving to deal with because of the expansion of bogus self-employment. Some 12% of workers in Ireland are self-employed with no employees. That does not mean they are all bogus self-employed but it certainly opens up that possibility. The information from trade unions and others suggests there is a major level of bogus self-employment in a few specific sectors, namely, in construction, delivery services, courier services and those kinds of areas. They involve quite a number of workers.

On more specific questions and following on from Senator Higgins's question, the overturning of scope decisions is pretty important. It would be extremely important to get the figures, in absolute terms and in percentage terms, of scope decisions that found that people were employees where the social welfare appeals office overturned that decision.

I have another question which might be outside the Department's realm and which I will try to raise at the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach as it might be more relevant to it. Are there tax rulings by Revenue for particular industries or companies that state it considers workers in this area to be self-employed? If it was found that those rulings were not accurate and not legally sound, is it the case that this would amount to illegal state aid, similar to how the European Commission has found that the tax ruling by Revenue with Apple amounted to that, whereby those who were engaging and benefitting on foot of bogus self-employment, were making a substantial saving, perhaps around 30%?

Does the social welfare appeals office rely on the employment status group's code of practice for determining employment or self-employment status of individuals when making determinations? Does the scope unit not rely on it or if it does, what is the legal basis for it to rely on that as opposed to the relevant legislation?

Before I call Ms Murphy to reply, a number of specific questions were asked and she might indicate if she does not have specific answers today. She can correspond with the committee on them. This work will be continuing. Some of those questions were detailed. If she does not have the numerical answers, that is not a problem. She can identify the numbers and submit them to the committee. That will be satisfactory.

Ms Patricia Murphy

I hope I have them but in respect of those I may not have I will do my best and if there is anything I omit to address, the member can raise it with me. Generally, we are very happy to see scrutiny of this issue. There is no doubt it is an issue. The Department does not have specific statistics, as we have said, but we are very much in a monitoring and engagement mode with ICTU and other representative bodies, and working closely with the inspector operation on this. It is difficult for me to comment on the specific figure put forward by ICTU but we accept there is a loss to the Exchequer specifically from employer's PRSI and a loss to the individual in terms of the employment rights as a result of bogus self-employment. In the context of a worker paying PRSI class S as opposed to PRSI class A, the person is still building up contributions for a State pension contributory into the future.

Regarding the number of inspections that have been done, up to September this year, there were 1,465 employer reviews by this Department with savings of €2.7 million. I have figures for joint workers' revenue of 855 visits in 2017 with overall collection, which would include PAYE, of €60.2 million in the construction sector, which has always been a focus for the inspectorate. In 2017, the WRC carried out 4,747 inspections in respect of 99,000 employees who had been paid wages of €1.7 million. That is the general lie of the land regarding inspections.

In terms of the awareness campaign, the Department was ramped up and prepared for a much bigger individual response. In May of this year, the inspectors were all ready to immediately go out on foot of the awareness campaign and that was indicated in our press releases at the time. We accept there is an issue. As the members have said, it appears to be in pockets of areas. It is more difficult when individuals do not come forward to report instances. We were encouraging people to come forward. That process identified to ourselves that we need to have anti-victimatisation and anti-penalisation measures in our legislation and to replicate those measures that are in place in employment rights legislation. There is a fear factor. The message we took on board was that it was very important to get inspectors into the right areas. It may be that the concentration may be geographic as much as sectoral. We welcome the committee examining this issue and we can get feedback from the members and other bodies appearing before the committee as to where we can usefully focus. We have a big operation. We are ramping up specifically on this space. The inspectors will look at the non-payment of PRSI and other areas. We will be increasing the focus on the insurability aspect as we increasingly ramp up on this area.

Regarding prosecutions, the Department has not taken a criminal prosecution against employers because in our joint operations we have used the powers available under the tax Acts to attach and apply administrative penalties, which are far greater than those under the social welfare Acts. Working jointly with Revenue, we have used Revenue powers to ensure employer compliance with the PRSI obligation. It avoids a duplication of the compliance penalty and at this time it would be considered to be more effective and timely. That is the approach taken by the control area. Some €60.2 million overall was collected from employers in 2017. That is the current approach being taken.

On spouses, the law was changed to allow a spouse who works to make class S contributions. That is in place. I will have to come back with the data on appeals.

On the Department's relationship with Revenue, we have a memorandum of understanding. It acts as our agent in the collection of PRSI. We have a high-level group with Revenue that meets very regularly at which we work through a pile of issues. We engage very closely and have been meeting regularly with Revenue on this issue with a view to obtaining sectoral data on where we might focus, both individually and also in our joint operations with agencies.

On the case mentioned by Senator Higgins, the person may come back to the deciding officer for a revised decision should there be any change in facts. The scope section has an active case involving Ryanair. I do not know if I can comment further on that but it is on appeal.

I am unable to respond on state aid. It is a matter for the Department of Finance and Revenue.

The appeals office is reliant on the code. The code outlines the various tests for determining employment and self-employment. They are fundamental. However, the courts have shown that in any case involving the correct rate of PRSI payable, it is the facts of each case, the tests and how they are applied that are critically important. The code outlines these and we are updating it currently. The scope section and the appeals office rely on those tests and the facts of the employment as they receive them. That goes to the heart of the legislation issue and why it is difficult to legislate for this area. The legislation must have the flexibility to allow the tests to be applied to the facts of the individual employment. Each individual employment situation or contract varies and will be different. I used to work in the scope section and dealt with many of them. The tests are standard although the labour market changes. How they are applied can change. Legislation must be approached sensitively.

The awareness campaign, where 10,000 people went to the website and then some of those engaged further, should set off alarm bells because people are not prepared to report their own situation for fear of losing their employment or work. That should be heard loud and clear.

The officials indicated the number of inspections that were carried out and their financial yield. There are particular areas on which I would like more detail. From what we have heard, there are two types of inspections, those the Department does on its own and those it does jointly with Revenue or the Workplace Relations Commission, WRC. What are the criteria around these? How are these decided or determined? Are they purely random or are they evidence-based targeted inspections? What is that programme? Is it geographic or sectoral? The committee does not have this information but the Department has been carrying these out for some time. Surely the information it gets from one year to the next informs decision-making about where those inspections will be carried out, for instance if there was a particular yield in construction within a geographical area. Revenue does exactly that with targeted audits, as well as random ones, each year. Should the Department not do the same with its inspections? There could be a set number of inspections from which is derived the information about numbers determined to have had bogus self-employment contracts.

Ms Patricia Murphy

I will ask Mr. Jim Lynch, a divisional manager, to respond.

Mr. Jim Lynch

We do both random and targeted inspections. Our inspections are often fed by the intelligence we receive. For instance, an employee might come to us looking to access benefits or where there has been a breakdown in communication with his or her employers. They will fill in a form with us-----

That is different. That is a person making a complaint. I am trying to make a distinction between following a complaint made by an individual and policing the system generally where no complaints are made but the Department is monitoring sector by sector, geographically and so on.

Mr. Jim Lynch

The point I was making is that that the level of complaints informs thinking and our interventions afterwards. Equally, something we do is streetscape employment. We might target a high street or target interventions on particular sectors. We do random selection and also targeted selection.

How does the Department determine which of these it does alone and which are done with Revenue?

Mr. Jim Lynch

If we come across clients who are not complying, we liaise with Revenue. If Revenue also has an issue with them, then we target them jointly. Revenue does something similar with us in joint investigation.

Ms Patricia Murphy

Take the education capital building programme, where inspectors looked at the larger sites and projects. We liaised with the Department of Education and Skills on where we might target those inspections. We do that type of targeted approach in particular areas.

I return to inspections and prosecutions. The Department has told us that it undertakes targeted and individual inspections, but we do not know what those inspections entail. For example, could the Department walk onto a building site tomorrow, say the national children's hospital, and go straight to the contractor and demand to see the books, who is paying what and who is employed where? If the Department did that with a deal of scrutiny, it would result in a much tighter report than the one it gave the committee. The report concludes that the prevalence of self-employment is diminishing and I just do not believe that. Just in my own life, I know so many people who are caught in bogus self-employment to make a living in the food, airline or construction industries and elsewhere. I do not believe that the Department cannot do better than this report, to collect the data and provide us with something meaningful. Therefore, I question the level of inspection and what it entails because if it is anything like this report, it is pretty poor.

Huge sums go out on State contracts for schools, hospitals and other buildings and a huge amount of bogus self-employment takes place on those sites. Does the State or can the Department ensure that a series of guarantees and penalties is put into those contracts such that the contractor will not employ on bogus self-employment terms? If the Department is not doing so already, will it please look at doing so as it would be a deterrent and would lead to proper prosecutions if such guarantees were broken?

Has the Department of Social Protection ever prosecuted on the basis of bogus self-employment? What I heard, and it was said quite quickly, was that it was not done through the Department but through Revenue. Have these prosecutions been taken and, if so, how many times has it been done and who has been prosecuted?

I refer to the Department's presentation on the success of the outreach campaign. It said there was evidence that people want anonymity and fear repercussions. It is important that we do not say that we are surprised and that we do say there is disturbing evidence that has come to light in the Department's report. This should be addressed. That is why the issue I raised earlier is important, even if not in that specific case. The question is one of the Employment Appeals Tribunal and issues such as constructive dismissal. What has been the intersection between people who have attempted to take cases there and those who have sought rulings from the Department?

It is very surprising because, for example, information is located in the Department on how many of the 1,097 scope decisions in 2017 were taken to appeals stage. It should have been included in the presentation.

What I asked in respect of spouse class S contributions was what was bringing the matter to the attention of the scope section. Is it proactively looking at the issue or are we relying on individual appeals? Is there a campaign to raise awareness? A huge category of persons are now entitled to make PRSI contributions and they should be supported.

A memorandum of understanding with Revenue was mentioned. Would it be appropriate to share it with the committee? I imagine it addresses some of the issues of concern. Perhaps a summary might be shared. It is very important in assessing whether we can be assured that in a situation where there is an investigation having the full complement of PRSI contributions for each employee is central.

In respect of Deputy Bríd Smith's point about contracts, I have legislation pending. It is an important issue. There is an obligation under EU procurement rules to ensure compliance with International Labour Organization standards. In that regard, it is highly appropriate there be such clauses.

On random and targeted inspections, it would be very useful for the committee to receive a breakdown, sector by sector, indicating where inspections were carried out. There seems to be a heavy emphasis on construction, which is welcome because the problem is rife in that sector. It is also rife in other areas. As such, it would be very useful to learn how many targeted and random inspections have been carried out by the Department, Revenue and the Workplace Relations Commission in the past five years. As I stated, in his report Philip Boucher-Hayes stated it was endemic in RTÉ. I would love nothing more than to see the Department, Revenue and the WRC roll up to RTÉ to carry out targeted inspections. If it has not happened, it should. No sector should be immune.

It is interesting that the Department has not prosecuted anyone and that prosecutions are taken by Revenue. Do the penalties in place need to be looked at and strengthened? I would appreciate a comment on this issue.

I mentioned a Bill and would like to hear the views of the officials on it. There are massive concerns. People are not bringing cases against their bosses because of the repercussions. The anti-victimisation legislation is welcome, but it will not address the issue. There is a need for specific stand-alone legislation.

An interesting point was made about State contracts for school, housing and hospital projects. A provision can be inserted into a contract to ensure a certain number of apprentices will be taken on or that a certain number of local people will be employed. Measures can be put in place and built into contracts. It would be useful to get a view on this issue. If it has not happened, it needs to happen because it is something that needs to be put in place, in tandem with legislation, to tackle the issue once and for all.

Ms Murphy has mentioned a number of times that the prevalence of self-employment is diminishing, but that is not what we are investigating. We are investigating bogus self-employment. We need to be very clear about this and not repeat the same line over and over again that the prevalence of self-employment is diminishing. It is diminishing because total employment is increasing. Ms Murphy has stated the self-employed make up 15% of the total number in employment. That comes to well over 300,000 people. The actual number involved may be exactly the same as it was five or ten years ago, or it may be higher. However, the chart shows a decline from 1998 in the number of people involved. While they make up a smaller percentage of the total number in employment, the number is every bit as great as it was in 1998. While I acknowledge the prevalence, it is a play on words as we are speaking about bogus self-employment contracts. Fifteen per cent of 2.2 million workers is 330,000, which is still a significant number of persons who are self-employed. Therefore, I do not want the diminishing prevalence to be overplayed. My point is that there is still a substantial number of people who are self-employed.

Ms Patricia Murphy

I mentioned that inspectors had gone into schools where construction was taking place and liaised with the Department of Education and Skills. There is a requirement to ensure compliance by contractors, but the Department can certainly look at engaging with various bodies to ensure the requirement for compliance is being observed. I will follow up on this issue.

Is there anything in the contracts about the matter?

Ms Patricia Murphy

I do not know offhand, but it is something on which we can actively engage to ensure there is compliance.

The Department could check it out.

Ms Patricia Murphy

On inspections, we have focused on healthcare, the retail and hospitality sectors, bars, hotels, engineering works, English schools for foreign nationals, the catering sector, State bodies, the charity sector, the diplomatic sector and delivery services.

Will Ms Murphy give us a note on the matter?

Ms Patricia Murphy


It would be very useful to have the figures for the past five years.

Ms Patricia Murphy

While we are not prosecuting at present, we did have a small number of prosecutions of employers. There were two in 2016 and eight in 2015, but they were related to PRSI. I cannot state specifically whether there were cases involving bogus self-employment, but it might have been part of them. However, I do not have the details of each individual case.

On a spouse's class S PRSI contributions, no decision by the scope section is required. I am not aware that we have an awareness campaign, but general information is available on our website to anybody who has a query about it.

I am conscious that I did not address the international position. Countries are grappling with this issue and we are aware of a number that have legislation in place, including the United Kingdom, with the ultimate end-user paying the contributions. This is the recommendation made in the intermediary's report. The United Kingdom has applied a provision to the private sector. Previously it had been confined to the public sector. We have our own legislation that we could use more fully, on which the Department is quite clear. We can be very focused in ensuring customers are paid, but we are increasing our focus on employers all the time. I emphasise that it is a work in progress in building our own operations, as well as joint operations in this area. We have the recommendation made in the intermediary's report. Any legislation introduced will always requires enforcement. We must have boots on the ground with employers interviewing the workers involved. If workers are not coming forward, we must be in there, no matter what legislation is in place. We have reviewed the legislation.

It is quite broad but we believe at the moment that we have the powers we need. If we do not have them we will introduce them.

I was asked to comment on the Private Members' Bills. It is a question of balance, we do not want to inhibit people getting work. We want to ensure they pay the correct PRSI and have the full employment rights they are entitled to. While we are considering the code of practice we are looking to see whether we should put it on some type of statutory basis. It would be a way of possibly requiring employers to read the code before somebody starts work or enters into a contract. It has to be done in such a way that, for example, it does not deal unfairly with people who are genuinely self-employed. There are many genuinely self-employed people and we do not want them to be labelled as falsely self-employed.

Deputy Brady asked several questions about the inspections. Can Ms Murphy please send the information to the committee?

Ms Patricia Murphy

We can provide further information on those.

This is the start of a process. We will bring in other witnesses with information. It is an issue of great concern because as we look to the future, the role of an employee, the protections and what an employee might expect from an employer, especially when auto enrolment pensions are rolled out, will vary. It is quite important that those lines are very clear and workers are appropriately defined as self-employed or are in employment with the benefits that go with that. It will take several months for the committee to do that work. I thank the witnesses for setting the scene for us today. They have left us with as many questions as answers. We will be in touch with them as the committee proceeds with this issue.

The joint committee adjourned at 12.22 p.m. until 10 a.m. on Thursday, 22 November 2018.