Dáil Éireann díospóireacht -
Tuesday, 8 Mar 1994

Vol. 440 No. 1

Written Answers. - C45 System.

Proinsias De Rossa

Ceist:

26 Proinsias De Rossa asked the Minister for Social Welfare if his attention has been drawn to the increasing incidence of some contractors requiring building workers to work under the C45 system; if his attention has been further drawn to concerns, expressed by trade unions, that this system offers scope for social welfare abuse and that it further leaves workers without social welfare entitlements; his views on the system; if he intends to have any discussions with the building industry regarding this matter; and if he will make a statement on the matter.

Minister for Social Welfare (Dr. Woods)

Recent years have seen a growing importance of self-employment in the construction sector. The result of this change in working patterns has given rise to extensive use of the C2/C45 system. These are forms issued by or on behalf of the Revenue Commissioners. To qualify for a C2 a sub-contractor's tax and PRSI affairs must be in order. If the sub-contractor does not have evidence of C2 status, the contractor is required to deduct 35 per cent of any moneys paid to sub-contractors as a retention tax and sends this money to the Revenue Commissioners. For those not holding C2s, the main contractor gives the sub-contractor a form, C45, which sets out the gross amount of money to the sub-contractor as well as the amount deducted for tax, and the amount actually paid to the sub-contractor.

I am aware of recent controversy in relation to the issues which are raised by the use of these forms in the construction sector. I have arranged for a review of the operation of the system and its implications for the social welfare system. I can confirm that the review will involve consultations with the trade unions concerned and with representatives of employers as well as with the Revenue Commissioners and other interested State bodies.

Under the Programme for Competitiveness and Work the Revenue Commissioners will be asked to take measures to ensure that the C45 system is applied only to genuine sub-contract situations. Revenue will discuss the matter with my Department to see if procedures can be strengthened further. In addition the black economy monitoring group will be asked to carry out a thorough review of the operation of the C45 scheme and to make recommendations on action to curb any abuse and to improve the scheme generally. Pending the outcome of the review, the Revenue Commissioners will take measures to prevent the C45 system being applied where PAYE would be the appropriate system.

As Minister for Social Welfare I am concerned that moves from employed to self-employed status should be genuine and not simply devices to avoid the payment of employers' social insurance contributions thus leaving workers without vital social welfare cover when, in reality, the employer-employee relationship is still in existence. The whole question of determining between employee and self-employed status is a complex one and is surrounded by a considerable body of case law. My Department decides on these matters on a case-by-case basis taking into account previous interpretations of the courts on the nature of employment.

My concern is the possibility that sub-contractors may be left with insufficient cover in the event of an accident on the construction site.

It was this concern that prompted me to provide in the Social Welfare Bill at present before the House for regulatory powers under which entitlement to certain occupational injuries benefits may be extended to categories of workers not covered at present for those benefits. It is my intention to use the regulatory powers to extend occupational injuries benefits to workers whose work arrangements have changed in recent years requiring them to become sub-contractors, and thereby insured for PRSI pensions only, rather than remain as workers insured for the full range of social insurance benefits. It is my intention that changes in working arrangements in the construction industry will receive particular attention.