Seanad Éireann díospóireacht -
Thursday, 22 Feb 2007

Vol. 186 No. 6

Social Welfare Code.

Mr. O’Toole

I thank the Cathaoirleach for allowing me to raise this matter and I thank the Minister of State for dealing with it. It is not the responsibility of the Department of Enterprise, Trade and Employment but the Minister of State is an accountant and it was an accountant who brought this to my attention.

Why is a married person working for his or her spouse who is a sole trader, in the context of equity, fairness and equity, not allowed to claim social welfare benefits, including maternity benefit, disability benefit and the State contributory pension? This is invidious discrimination that is unacceptable and there would be a strong argument for taking a constitutional case on the issue. It arises with sole traders, including accountants, farmers, shopkeepers and other professional people, who in order to run their businesses have spouses working with them. I am talking about people who do a day's work, clock in in the morning in a recorded fashion, finish in the afternoon, take the holidays to which they are entitled and pay PRSI. When these people come to claim social welfare benefits, the most obvious examples being maternity benefit or superannuation — contributory State pension — they are advised they have no such entitlement. The only reason for non-entitlement is their marriage to their employer. I had thought we had outgrown such provisions years ago. We have discussed progressive matters such as civil partnerships and various other relationships.

I will ask the Minister of State to come back to me on this matter. For example, from my reading a woman working for her accountant husband and paying her PRSI each week could find she is not entitled to any claim on it. If they were to get technically divorced in the morning and continued the same arrangement, would she then be entitled to claim full social welfare benefits? Let us consider another example. A woman might be working for a man in a normal employer-employee relationship. They might fall in love and continue the exact same arrangement with the woman paying class A PRSI contributions. Suddenly she would lose all her benefits, which is utterly unacceptable in this day and age.

A strong argument could be made for taking a constitutional case. I do not believe the answer the Minister of State will give will reassure me — I suspect I could have written it myself. I believe this case needs to be taken. I have sought legal advice on the issue. For the layperson, Kelly’s Irish Constitution updated by Gerard Hogan and Gerry Whyte is very clear. My reading is that under Article 40.1 of the Constitution, which requires us all to be treated equally before the law, it is invidious discrimination to do this. It has a wide impact. It impacts on farmers, accountants, shopkeepers, architects etc. Something is fundamentally wrong.

The provision exists because people believe that a wife may not really be working for her husband and is simply perverting the system. I do not suggest we should allow ourselves be duped by people who do not deal with this matter on an honest basis. However, the two cases I have looked at relate to people who clock in in the morning, work the full year, take holidays only when the office is closed and work as long as their bosses. I would appreciate hearing the view of the Minister of State before he even reads the script. In fact he should throw away the script and give me his own thoughts. If he worked in such a situation, would he not regard it as being utterly wrong? If I were to launch a constitutional case on this matter would the State be of a mind to fight it or would it simply recognise the reality and come to an honest agreement that people working and paying PRSI are entitled to their social welfare benefits?

I always say to people that if they can get money easily from the Department of Finance they should not take it and should ask a second question. People get back only two kinds of payment by return of post from the Department of Finance. People seeking return of their pension contributions are paid immediately because it does not want to pay people a pension. The other is this one. A person who informs the Department that she has been working for her husband for 35 years paying class A PRSI and asks for her entitlements will receive a letter advising that she is not entitled to it but informing her that she will be sent all her payments and a little bit more in the post the following day. This is the reason I know it is wrong.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. M. Ahern)

I am standing in for the Minister for Social and Family Affairs and will give the official response. The Senator could have gone further because it may also apply to a sister working for a brother who is a sole trader.

Mr. O’Toole

I should have said that. I just took the example of a husband and wife.

Mr. M. Ahern

I am very pleased the Senator has raised the matter because I have had many a battle to have it changed.

Mr. O’Toole

So the Minister of State is on my side.

Mr. M. Ahern

I would be on his side. However, I will also give him the official reply. Employments under a contract of service as an employee or under a contract for services as a self-employed person involve a formal agreement between two or more parties. All contracts bring with them rights and responsibilities that, in this instance, include compliance legislation relating to PRSI, taxes and employment rights. Spouses of employed or self-employed contributors are specifically excepted from liability for social insurance contributions in respect of their working activity with their spouses.

Social welfare provisions recognise that family members regularly support each other without having any intention of entering into formal contractual arrangements. In domestic arrangements, the presumption is that the help and assistance provided are based on mutual affection without expectation of, or liability for, compensation. In general, close family members must show an express agreement in order to overcome the presumption that parties did not intend to be bound in a legally bound contract. Evidence of a partnership between spouses or the incorporation of a business will overcome this presumption. For self-employed workers working together, evidence of a partnership will establish liability for class S PRSI contributions, providing that income is above the annual threshold of €3,174. Where couples work in a legally incorporated entity and each earns more than €38 per week, both will pay social insurance contributions in their own right and accrue entitlement to benefits accordingly. These provisions apply to all couples working together engaged in business activities, for example in retailing, providing professional services or farming.

The exception of spouses from PRSI liability in the case of a shared occupation does not preclude them from accessing the voluntary contribution scheme which will maintain a social insurance record towards pension entitlement. Access to the voluntary PRSI contribution scheme requires a minimum of 260 paid contributions. Where a person has been previously insured as an employee or a self-employed person, is no longer compulsorily insured and is under 66 years of age, he or she can opt to pay voluntary social insurance contributions. Voluntary contributions will maintain social insurance cover for pensions such as transition and contributory State pension, widow and widower contributory pension, guardian contributory payment and bereavement grant, depending on the rate at which the voluntary contribution has been paid. Alternatively, a spouse may gain social insurance coverage by working for another as an ordinary employee where she or he earns more than €38 per week. PRSI contributions paid on these earnings would accrue entitlement to the full range of social insurance benefits.

The question of whether these social welfare provisions are discriminatory has been previously considered with further examination of the provisions being progressed as follows. We have traditionally provided for both individual and derived rights for social insurance related payments. However, a significant Bill now before the Dáil provides for payment of the State pensions qualified adult allowance directly to a qualified adult for the duration of the period of entitlement of the State pensioner. These provisions will apply to the State contributory pension, State transition pension and State non-contributory pension, and will come into effect from September 2007. As most qualified adults are women, this decision will be of particular benefit to them as it will, in most cases, transform the payment into what is in effect a woman's pension in her own right as distinct from being a dependant allowance. These payments will be made directly to the qualified adult.

The issue of whether the social insurance arrangements accord with obligations to ensure equality in the social welfare system is to be considered in the context of a wide-ranging review of the social welfare code that is now under way. The purpose of the review is to examine the entire social welfare code, namely, the schemes and services provided for in primary and secondary legislation as well as the administrative schemes operated by the Department of Social and Family Affairs to identify any instances of, or potential instances of, direct or indirect discrimination on any of the nine grounds identified under the Equal Status Act 2000, as amended, which are gender, marital status, family status, sexual orientation, religion, age, disability, race, membership of the Traveller community; and ensure that any difference of treatment on any of the discriminatory grounds under the Act are justified by a legitimate social policy objective, and that the means of achieving that objective is both necessary and appropriate.

Phase 1 of the review involved carrying out a scoping exercise to identify the most appropriate approach and methodology for the review. That exercise, which was carried out by consultants following a tendering process, is now complete and arrangements are being made for the main review, phase 2, to be put out to tender. The request for tender document will issue shortly.

The access of women to social insurance coverage, including those currently excepted from liability, will be considered in the review. This is a complex undertaking, the findings of which will be addressed when the examination is finalised. Senator O'Toole raises this issue at an appropriate time.

Mr. O’Toole

I appreciate the Minister of State's answer. That people might have mutual affection for each other and should not expect to be rewarded with a salary is quite an appalling suggestion to come from the Department of Social and Family Affairs. Under the nine grounds cited in the Equal Status Act, this is discrimination on the grounds of marriage.

One issue with which I did not deal and which I will not discuss at length now, namely, the idea of forming a partnership which involves allocating a salary, capital and part of the business, is completely and utterly wrong. It is discriminatory and unacceptable and affects many people unfairly.