Politics

Plans in train to crack down on ‘sham’ self-employed

Department of Social Protection finds issue common in construction sector

Instances of bogus self-employment were being detected by officials in the Department of Social Protection more regularly, said Minister of State Kevin Humphreys. Photograph: Getty Images
Sarah Bardon
Thu Dec 24 2015 - 10:59

An increasing number of employers are depriving workers of sick pay and other social protections by forcing them to register as self-employed, Minister of State Kevin Humphreys has said.

Instances of bogus self-employment were being detected by officials in the Department of Social Protection more regularly, he said. The department was working with officials in other areas of Government to examine the prevalence of “sham” self-employment and efforts to crackdown on the issue would be intensified in the coming weeks, he added.

The practice is most notably an issue in the construction sector, the Minister of State said.

Avoiding PRSI

“They are not necessarily self-employed at all. It is a way of larger firms avoiding paying company PRSI and pension contributions,” he said.

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Employers who label workers as self-employed contractors are able to avoid employment rights and national insurance contributions. A report by the Irish Congress of Trade Unions said the State had lost out on up to €600 million in tax revenue since 2007 as a result of a surge in the practice.

The study showed that for every bogus self-employed worker the exchequer lost some €2,886 in PRSI payments each year.

Fergus Whelan, who wrote the report, said current figures showed there were 27,600 sole traders operating in the construction sector. However, he said there were no adequate controls to ensure all were legitimate.

Under pressure

Mr Humphreys said many people were coming under pressure and being forced to register as self-employed by their bosses.“They are not really self-employed. They are actually employees of the company and the employers is avoiding paying their PRSI contributions and the pension of those individuals. This needs to be stamped out of the economy,” he said.

Trade unions, employers and the Revenue Commissioners in 2007 agreed a code of practice to tackle the issue of bogus self-employment. However, this system was not policed by the Revenue and the number of bogus self-employed workers has increased.

An investigation by Revenue uncovered almost 200 cases in the construction industry this year. But authorities have also found evidence of a blurring of the lines between employees and the self-employed in a range of other sectors such as information technology, media and consultancy.