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Minister for Social Protection, Heather Humphries has recently updated the Code of Practice on determining employment status. The purpose is to make the criteria that classifies someone as an employee or self-employed clearer. Derek McKay, Managing Director at Adare Human Resource Management provides detail on the new code for employers to be aware of.
What is meant by “employment status”? Simply put, employment status means whether someone is an employee or self-employed and, in most situations, it will be clear which category someone falls into. In some instances, people have been misclassified as being self-employed or a contractor, which can have tax and PRSI implications and impact on employment rights, such as sick leave.
Since the increase of ‘gig economy’ roles in Ireland, there has been a renewed focus on what constitutes an employee. However, in employment law, there is currently no definition and in the event of an issue arising, the decision on employment status is reached by looking at the type of work involved, how the work is carried out and what agreements or contracts are in place.
The Code of Practice outlines the typical characteristics of an employee and those of someone who is self-employed – the Code of Practice can be accessed here. The statutory bodies that are involved in determining employment status are also included: Department of Social Protection, Office of the Revenue Commissioners and the Workplace Relations Commission.
Factors determining employment status
There are certain factors to consider when determining if someone is an employee or self-employed contractor. The factors establish the difference between “contract of service” and contract for services” and include:
- Mutuality of obligation
- The enterprise test
None of these are determinative on their own and it may be the case to take all into consideration when determining employment status. The Code of Practice provides additional descriptions of each to help provide further direction.
Developments in the labour market
The updated Code also takes into consideration developments in the labour market as well as legislation and case law, which is an area that will be particularly helpful for businesses in their determination of status.
These developments include Agency Workers and who is considered to be the employer of an Agency Worker. Under the Unfair Dismissals legislation, the employer is the person or company who the employee actually works for, rather than the Agency.
Included in the Code is information on the use of Intermediary Arrangements and clarity on the differences between Personal Service Companies (PSC) and Managed Service Companies (MSC).
The Code also provides guidance around new forms of work such as platform work, where someone is engaged through the use of an App and/ or gig economy. Well-known companies operating in this space are Uber, JustEat and Deliveroo.
The code is non statutory but the Minister has highlighted that it is intended to put the Code on a statutory footing later this year.
Consequences of incorrect classification
Incorrectly classifying a worker’s employment status can have significant consequences for both employers and employees. These could include arrears for PAYE/ PRSI as well as interest and penalty payments as well as any additional award made for alleged loss of pay or benefits.
Given the changes in work practices and the types of work, the updated Code should help employers and statutory bodies determine employment status. However, it is the responsibility of the business engaging the services of a worker to ensure they are correctly classified.
If your Organisation requires support in determining the classification of employment status, please contact one of the team at Shannon Chamber HR.
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