In September 2013, I published the Third 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 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.
In addition to the above the Group identified a range of issues associated with the subject of social insurance for the self-employed that should be addressed and made a number of other recommendations in this regard. Among the issues identified by the Group was the simplification of the methodology for assessing means for jobseeker's allowance payments, credited PRSI contributions, modification of the eligibility criteria for non-income support based activation and training schemes to enable the self-employed to gain access to such schemes and the role that information campaigns might play in addressing information deficits, particularly with regard to entitlements to jobseeker's allowance and the importance of making voluntary contributions.
The position in relation to the means assessment applied to self-employed income is that 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. 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 are taken into account in deciding on entitlement to a payment.
The primary purpose of PRSI credits is to secure social welfare benefits and pensions of employees by covering gaps in insurance where they are not in a position to pay PRSI such as during periods of unemployment, illness, etc. The class at which a contributor paid his or her last PRSI contribution determines entitlement to credited contributions. Credits are usually awarded at the same rate as the person's last paid PRSI contribution. For example, class A PRSI contributions may entitle a person to all insured DSP benefits, provided they satisfy the qualifying conditions. Credits are not available to a person who has only class S contributions.
If income from self-employment falls below €5,000 in a contribution year or a person is unable to work, he or she may opt to pay voluntary contributions. To become a voluntary contributor a person must:
- have paid at least 468 weeks PRSI (since 6 April 2014) in either employment or self-employment,
- apply within 12 months of the end of the tax year during which he/she last paid compulsory insurance or were last awarded a credited contribution,
- agree to pay voluntary contributions from the start of the contribution week that follows the week in which he/she leaves compulsory insurance.
- To become a voluntary contributor on or after 6 April 2015 a person must have previously paid 520 weeks PRSI.
The annual voluntary contribution charge for the self-employed is a special flat rate payment of €500. The payment of voluntary contributions allows the self-employed to maintain their PRSI record and qualify for State pension (contributory), widow's, widower's or surviving civil partner's contributory pension and guardian's payment (contributory).
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 my 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.
The Department undertakes advertising and awareness activities to ensure that all members of the public are made aware of their rights and entitlements and that they are kept informed of significant changes and improvements in schemes and services as they occur.
Information on the full range of social welfare schemes and services is available from the Department's INTREO/local office network and the nationwide network of Citizens Information Centres. In addition, many people access information on the Department's and Citizen Information Board's websites.
My colleagues in Government and I will continue to reflect on the findings of the Advisory Group on the various issues outlined above and will consider the recommendations contained in the report taking into account future developments in terms of the budgetary and fiscal situation.
