I thank the Chairman and the committee for the invitation to appear today.
The scope section of the Department makes decisions or determinations on respect of a range of PRSI-related matters for which our deciding officers have a number of powers and functions under the Social Welfare Consolidation Act 2005, as amended. One of the determinations our deciding officers can make is on a person’s employment status. We can decide whether a worker, or former worker, is or was an employee or is or was self-employed. From that decision flows the appropriate categorisation for PRSI purposes. The most common is class A for an employee and class S for a self-employed person.
Cases that involve decisions on employment status may arise from requests from employers, employees, employer representative groups, employee representative groups, the Department's own social welfare inspectors, departmental officials working in central social welfare scheme areas, or even, on occasion, from the Revenue Commissioners.
Of the cases scope section deals with each year, those involving the employment status of workers constitute a small proportion. For example, of the 1,000 or so decisions made by the section so far this year, approximately 5% related to employment status.
When a request for a determination on employment status is received, the scope officials will do some checks to see if there are any prior, relevant records. Then the relevant parties will be contacted. The case is typically referred to one of the Department’s social welfare inspectors in the relevant geographical region who will conduct further in-depth and, usually, in-person checks. When the relevant factual information or evidence is returned, our deciding officers then make a determination based on the law.
In every case, the decision is an individual one and in every case, the decision may be appealed to the social welfare appeals office. As the chief appeals officer may outline, there are further avenues of recourse after that. I assure the committee that no individual worker who seeks a decision from scope section is turned away and that there are no group decision but only individual decisions. Each case turns on its own facts and the law is applied without fear or favour to those facts.
Our deciding officers are guided by their own statutory powers and the case law that has evolved in the courts over many decades. An important guide for them is the code of practice for determining employment or self-employment status of individuals, which was originally developed in the early 2000s and has been amended since. It is being updated again by an interdepartmental working group comprising our Department, the Revenue, and the Workplace Relations Commission, WRC. The new guidance on determining employment status, as it will be called, does not create new law; it only reflects the up-to-date position as it has emerged in the courts and in legislation. It sets out the key tests or factors that have been found by the courts to determine whether a person is employed or self-employed. In this regard, the courts have found that the determination as to the appropriate insurability classification must be arrived at by looking at what a person does, the way in which it is done and the terms and conditions under which the person is engaged, be they written, verbal or implied. It is also clear from the relevant case law that no one factor may be taken as determinative of either state. A next-to-final draft of the updated guidance is ready to go to the social partners for their observations. The Minister, Deputy Doherty, has highlighted how she intends to put this revised guidance on a statutory footing next year once it is completed.
We are acutely aware of the allegedly increasing prevalence of false self-employment in the economy. However, the numbers relating to this are, frankly, not compelling. Figures from the CSO show that the number of self-employed workers as a proportion of all workers in Ireland has remained largely stable for more than 20 years. In fact, the most recent figures from the labour force survey show a slight drop in the number of self-employed persons, as well as a slight decrease in the number of self-employed people with no paid employees. These self-employed people with no paid employees are the most obvious candidates for the false self-employment label. However, we know this figure is not increasing, as some have suggested.
Nevertheless, regardless of these facts and figures, it is the case that concrete examples of false self-employment have been found and it does exist. Additionally, in the view of the Department, it is a worthwhile and important enterprise to reduce the number of persons who are incorrectly or fraudulently categorised as being self-employed when they are, in fact, operating as employees. The Department takes this very seriously. As a consequence, we are engaged in an intensive nationwide inspection and compliance campaign to better understand the prevalence of this issue, to identify sectors where it may be a particular problem, and to tackle and reduce any instances of it.
In that regard, we have first increased resources in the scope section. Second, we have set up a new inspection unit called the employment status inspection unit, which is dedicated to inspecting employer PRSI and the classification of workers. Third, our inspectors nationwide are conducting employer inspections at an increasing rate, some of which are done jointly with Revenue and the WRC. Fourth, legislative provisions are being developed to encourage workers to apply to scope section for clarity about their employment status. These are anti-victimisation measures that will allow workers to make a complaint to the WRC if they are victimised by employers because they sought a determination from scope section. Fifth, the Minister is seeking to introduce a specific new criminal offence of the deliberate and knowing misclassification of a worker as being self-employed, which will carry appropriate penalties.
While it is unlikely to be possible ever to eradicate false self-employment, the Department is committed to minimising its potential and to detecting and dealing with it wherever it does occur. This is critically important because it has a twofold benefit. First, it reduces leakage on the Social Insurance Fund, which pays for a wide range of social protection schemes. Second, it gives workers access to our robust employment rights legislation. I hope the steps I have set out demonstrate the Department’s determination in this regard. Ms Dowling and I will endeavour to answer any questions that members may have.
