New Code of Practice on Determining Employment Status
22 July 2021
The Minister for Social Protection, Heather Humphreys, TD, has published an updated Code of Practice on Determining Employment Status.
‘Employment status’ refers to whether a worker is classified as either an employee or as being self-employed. This classification of a worker as employed or self-employed has implications for the rate of Pay Related Social Insurance (PRSI) and tax that is owed. It also affects the level of social welfare and employment rights protections that are afforded a worker.
The updated code takes into account current labour market practices and developments in legislation and case law. These developments include, for example, new forms of work such as ‘platform work’, where workers are engaged through an app and the gig economy. The code is non statutory, but has been drafted taking account of input from bodies such as the Revenue Commissioners, the Workplace Relations Commission as well as from employee and employer representative bodies. The accompanying press release indicates however that is intended to put the Code on a statutory footing later this year.
The incorrect classification of employment status can have significant consequences for employers and employees, including liability for arrears of PAYE/PRSI together with interest and penalties, in addition to any award that may be made for alleged loss of remuneration or benefits. Changes in work practices have increasingly blurred the distinction between employed and self-employed status and can create uncertainty around whether an individual should be considered as employed or self-employed. The updated Code will assist employers and statutory bodies with the task of determining status. Fundamentally however, it us up to the business engaging the services of workers to ensure that the correct tax, social insurance and employment law treatment is applied to their workers.
The press release and a copy of the updated code can be accessed here.
At BDO, our specialist Employment Taxes team has many years of experience dealing with the Revenue Commissioners, the Department of Social Protection and other statutory bodies on employment status matters. Should you have any queries in relation to employment status issues, please contact Mark Hynes or Pat O'Brien.