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Description

A revised Code of Practice on Determining Employment Status has been published in October 2024 following a review by the Department of Social Protection, the Revenue Commissioners, and the Workplace Relations Commission (WRC), incorporating principles from the 2023 Supreme Court judgment in Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza. It is intended to assist employers, workers, and professionals in accurately determining employment status by reflecting contemporary labour practices, legislation, and case law.

The Code highlights that there is no single, definitive legal definition of "employed" or "self-employed" under Irish or EU law. Instead, it advocates for a five-step framework established by the Supreme Court judgement to assess the reality of the working relationship. This involves:

The question of whether a worker is an employee can be resolved by firstly having regard to the following three ‘filter’ questions:

(i) Does the contract involve the exchange of wage or other remuneration for work? (ii) If so, is the agreement one where the worker is agreeing to provide their own services, and not those of a third party, to the business? (iii) If so, does the business exercise sufficient control over the worker to render the agreement one that is capable of being an employment agreement?

If any one of these questions are answered negatively it means that there can be no contract of employment.

(iv) If the first three conditions are met, the overall nature of the arrangement must be assessed. This involves examining whether the terms of the agreement, viewed alongside the practical realities of how the work is carried out (the "factual matrix"), align more closely with a contract of employment or an alternative type of contract. The key question is whether the worker is effectively working for themselves or for the business. (v) Finally, any specific legal requirements tied to the relevant legislative framework should be considered. For example, a worker might be classified as an employee for social insurance purposes but as self-employed for employment law or tax purposes.

The framework requires decision-makers to assess whether a worker is genuinely self-employed or an employee by examining factors such as substitution rights, integration into the business, financial risk, and operational control. For instance:

Employees typically lack personal financial risk, have set working hours, and are under employer control. Self-employed individuals assume financial risk, manage their own schedules, and often provide their own tools or materials. The Code acknowledges that these criteria are not absolute, noting exceptions such as atypical payment structures or shared employment across multiple employers.

Key clarifications include: - False self-employment is a criminal offence, with serious consequences, including retrospective PRSI payments and penalties. - Platform workers, or those using intermediary arrangements, are subject to the same assessment framework.

Lastly, the Code emphasises that health and safety regulations apply to all workers, irrespective of their employment status, ensuring workplace protections remain universal.

A previous update of the Code of practice was published in July 2021, by the Irish Department of Social Protection. This concerns the classification of workers as self-employed or as employed, which determines the rate of Pay Related Social Insurance (PRSI) and tax that must be paid by the workers, as well as the level of social welfare and employment rights protections that workers are entitled to. The Code of Practice aims to provide a set of guidelines for informed decision-making over the respective employment status. The updated version includes new phenomena and trends within the labour market such as platform work.

The criteria for determining the employment status are as follows:

• Mutuality of obligation: this concerns the question of whether and to what extent there is an obligation on one party to provide work and on the other party to accept it; this aspect is of primary importance in a sense that in case it does not apply, there is no employment relationship;

• Substitution: this relates to the workers’ right to appoint somebody else as a substitute to perform their work in case they are not able to do it by themselves;

• The enterprise test: this factor denotes the financial risk the workers are exposed to through performing the work and whether/to what extent the workers carry out the work as persons in business on their own account having the ability to profit from their own efficiency/entrepreneurial skill (or on the contrary suffering financial loss);

• Integration: this aspect concerns the workers’ integration into the business, whether and to what extent workers are an integral part of a business (as employees) or whether they are performing work that is peripheral or accessory to it (as independent contractors);

• Control: the last factor takes into account the degree of control held by the payer (employer) and the degree of independence held by the worker; this includes control over the worker and the power to decide what work should be done in what way and where; hereby, the right of the payer to exercise control is more relevant than whether they actually exercise this right.

Although the first factor is the most relevant, none of the aspects are decisive on their own but must be considered together and weighted against each other. This also means that in case a single factor is not found to comply with an employment status, the overall judgement can still be that an employment relationship exists.

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Additional metadata

Keywords

arbitration, employment status

Actors

Government

Sector

No specific sector focus

Sources

• Code of Practice on Determining Employment Status (1 July 2021)
• Updated Code of Practice on Determining Employment Status now published (29 November 2024)
• (updated) Code of Practice on Determining Employment Status (31 October 2024)