Self-employed persons are liable for PRSI at the Class S rate of 4% which entitles them to access long-term benefits such as State pension (contributory) and widow's, widower's or surviving civil partner's pension (contributory). Ordinary employees who have access to the full range of social insurance benefits pay Class A PRSI at the rate of 4%. In addition, their employers make a PRSI contribution of 10.75% in respect of their employees, resulting in the payment of a combined 14.75% rate per employee under full-rate PRSI Class A. (For employees earning less than €356 per week, the rate of employer’s PRSI is 8.5%).
Self-employed workers may also access social welfare supports by establishing eligibility to assistance-based payments such as jobseeker’s allowance and disability allowance. In the case of jobseeker’s allowance they can apply for the means-tested jobseeker’s allowance if their business ceases or if they are on low income as a result of a downturn in demand for their services. In assessing means from self-employment, income from the previous twelve months is used as an indicator of likely future earnings. Given the variety of self-employment situations, the means assessment procedures are applied in a flexible manner to ensure that any circumstances that would be likely to lead to a significant variation, either upward or downward, in the level of a person’s income from one year to the next are taken into consideration. It is recognised that the downturn in the economy had an impact on many self-employed persons and the consequent reduction in their income and activity levels. This may be reflected in any assessment of their means from self-employment for jobseeker’s allowance purposes. As in the case of a non-self-employed claimant for jobseeker’s allowance or disability allowance, the means of husband/wife, civil partner or co-habitant will be taken into account in deciding on entitlement to a payment.
In September 2013, I published the report of the Advisory Group on Tax and Social Welfare on Extending Social Insurance Coverage for the self-employed. The Group was asked to examine and report on issues involved in extending social insurance coverage for self-employed people in order to establish whether or not such cover is technically feasible and financially sustainable, with the requirement that any proposals for change must be cost neutral.
The Group found that the current system of means tested jobseeker’s allowance payments adequately provides cover to self-employed people for the risks associated with unemployment. In this context, the Group noted that almost 9 out of every 10 self-employed people who claimed the means tested jobseeker’s allowance during the three-year period from 2009 to 2011 received payment. Consequently, the Group was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker’s benefit.
The Group also found that extending social insurance for the self-employed was warranted in cases related to long term sickness or injuries. To this end, the Group recommended that Class S benefits should be extended to provide cover for people who are permanently incapable of work, because of a long-term illness or incapacity, through the invalidity pension and the partial capacity benefit schemes. The Group further recommended that the extension of social insurance in this regard should be on a compulsory basis and that the rate of contribution for Class S should be increased by at least 1.5 percentage points.
This recommendation will require further consideration in conjunction with the findings of the most recent Actuarial Review of the Social Insurance Fund which indicated that the self-employed achieve better value for money compared to the employed when the comparison includes both employer and employee contributions in respect of the employed person.
My colleagues in Government and I will reflect on the findings of the Advisory Group on this issue and will further consider the recommendations contained in the report taking into account future developments in terms of the budgetary and fiscal situation.
Self-employed people in receipt of jobseeker’s allowance have access to the full range of activation measures available through the State. Given the scale of unemployment levels, the key objective of activation policy and labour market initiatives is to offer assistance to those most in need of support in securing work and achieving financial self-sufficiency. This policy objective prioritises scarce resources to those in receipt of qualifying welfare payments. Accordingly the employment services and schemes provided by the Department are focused in the first instance on this cohort of unemployed people.
However, many services are available to the formerly self-employed who are not in receipt of a social welfare payment.
Some employment services, such as assistance with job-search activities and the use of online job search tools, are available to people if they register with the Department’s employment services offices, regardless of their social welfare status. Unemployed persons, including the previously self-employed, not in receipt of payments may also be eligible to avail of up-skilling opportunities but are not eligible to receive a training allowance while undertaking the course. Springboard courses are open to people who were previously self-employed, regardless of their social welfare status.
Matters in relation to assisting persons in establishing businesses would be for my colleague the Minister for Jobs, Enterprise and Innovation in the first instance. However, I am aware that a range of supports exist to support such enterprise including the back to work enterprise allowance and the short term enterprise allowance offered by this Department and the start your own business scheme of tax relief.
