The FSSU has received a number of requests from schools for assistance in dealing with correspondence from the Revenue. The Revenue is seeking confirmation from schools that all payments made by them are Revenue compliant. There are some grey areas where schools need to satisfy themselves that the school is fully compliant.
Engaging the services of external personnel
Many schools engage the services of external personnel for Transition Year modules, Drama, Music, Sports Coaching etc.
The Revenue are concerned that there may be an increasing numbers of individuals classified as ‘self employed’ when the ‘signs’ may be that ‘employee’ status would be more appropriate. The terms “employed” and “self-employed” are not defined in law. The decision as to which category an individual belongs must be arrived at by looking at what the individual actually does, the way he or she does it and the terms and conditions under which he or she is engaged, be they written, verbal or implied or a combination of all three.
Certain statements included in the contract and other notes of engagement such as
- “ deemed to be an independent contractor”,
- “ It shall be the duty of the demonstrator to pay and discharge such taxes and charges as may be payable out of such fees to the Revenue Commissioners or otherwise”,
- “ It is further agreed that the provisions of the Unfair Dismissals Act1997 shall not apply etc”,
- “You will not be an employee of Kerry Foods” ,
- “You will be responsible for your own tax affairs”,
are not considered contractual terms in Irish Case Law. In other words, the fact that such or similar terms are included in a contract is of little value in coming to a conclusion as to the work status of the person engaged.
1.Deciding on whether an individual is an employee or self employed
It is important that the job as a whole is looked at including working conditions and the reality of the relationship, when considering the guidelines. The overriding consideration or test will always be whether the person performing the work does so
“as a person in business on their own account.” Is the person a free agent with an economic independence of the person engaging the service?
There are a number of factors to be considered when determining the status of an individual and these are attached. See Appendix A and B
2. The impact of the decision for the individual
The status as an employee or self-employed person will affect:
1. The way in which Tax, PRSI and USC is payable to the Collector-General.
a. An employee will have Tax, PRSI and USC deducted from his or her income.
b. A self-employed person is obliged to pay preliminary tax and fileincome tax returns whether or not he or she is asked for them.
2. Entitlement to a number of social welfare benefits, such as unemployment and disability benefits. An employee will be entitled to unemployment, disability and invalidity benefits, whereas a self-employed person will not have these entitlements.
3. Other rights and entitlements, for example, under Employment Legislation
An employee will have rights in respect of working hours, holidays, maternity / parental leave, protection from unfair dismissal etc.
A self-employed person will not have these rights and protection.
4. Public liability in respect of the work done.
3. The cost implications for the school
Normally it will be obvious if the person is self employed or going to be an employee of the school. However it is imperative that the school ensures that a person appointed to perform a service is correctly classified as an employee or self-employed particularly where there is uncertainty.
Employers are obliged to operate the system correctly and there are various penalties imposed on employers found in breach of the system.
1. Under Tax and Social Welfare law if the status of ‘employee’ is found to be
appropriate the person engaging the ‘employee’ is the accountable person for any PAYE Tax, PRSI and USC deductible while that person was engaged (whether or not any deductions were made) together with appropriate interest and penalties that may arise.
2. There may also be penalties under various Employment Legislation if a person’s employment status is wrongly classified.
4. Further Assistance for determining status.
There may, in certain cases, be a difference of opinion between the school, the individual, that of the Revenue Commissioners, the Department of Social, Community and Family Affairs or Employment and Industrial Relations legislation on which classification the individual belongs.
Where there are difficulties in deciding the appropriate status of an individual or groups of individuals, the following bodies can provide assistance.
- The Local Tax Office or The Local Social Welfare Office, (a listing of Tax and Social Welfare Offices is in the telephone book).
- Scope Section in the Department of Social, Community and Family Affairs may also be contacted for assistance.
- If a formal decision is required, relevant facts will have to be established and a written decision as to status issued.
- A decision by one Department will generally be accepted by the other, provided all relevant facts were given at the time and the circumstances remain the same and it is accepted that the correct legal principles have been applied to the facts established. However, because of the varied nature of circumstances that arise and the different statutory provisions, such a consensus may not be possible in every case.
Criteria on whether an individual is an employee
While all of the following factors may not apply, an individual would normally be an employee if he or she:
1. Is under the control of another person who directs as to how, when and where the work is to be carried out
2. Supplies labour only
3. Receives a fixed hourly/weekly/monthly wage
4. Cannot sub-contract the work. If the work can be subcontracted and paid on by the person subcontracting the work, the employer/employee relationship may simply be transferred on.
5. Does not supply materials for the job
6. Does not provide equipment other than the small tools of the trade. The provision of tools or equipment might not have a significant bearing on coming to a conclusion that employment status may be appropriate having regard to all the circumstances of a particular case.
7. Is not exposed to personal financial risk in carrying out the work
8. Does not assume any responsibility for investment and management in the business
9. Does not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from the engagements
10. Works set hours or a given number of hours per week or month
11. Works for one person or for one business
12. Receives expense payments to cover subsistence and/or travel expenses
13. Is entitled to extra pay or time off for overtime.
Additional factors to be considered:
1. An individual could have considerable freedom and independence in carrying out work and still remain an employee
2. An employee with specialist knowledge may not be directed as to how thework is carried out
3. An individual who is paid by commission, by share, or by piecework, or insome other atypical fashion may still be regarded as an employee
4. Some employees work for more than one employer at the same time.
5. Some employees do not work on the employer’ s premises
6. There are special PRSI rules for the employment of family members
Criteria on whether an individual is self-employed
While all of the following factors may not apply to the job, an individual would normally be self-employed if he or she:
1. Owns his or her own business
2. Is exposed to financial risk, by having to bear the cost of making good faulty or substandard work carried out under the contract
3. Assumes responsibility for investment and management in the enterprise
4 .Has the opportunity to profit from sound management in the scheduling and performance of engagements and tasks
5. Has control over what is done, how it is done, when and where it is done and whether he or she does it personally
6. Is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken
7. Can provide the same services to more than one person or business at the same time
8. Provides the materials for the job
9. Provides equipment and machinery necessary for the job, other than the small tools of the trade or equipment which in an overall context would not be an indicator of a person in business on their own account
10. Has a fixed place of business where materials equipment etc. can be stored
11. Costs and agrees a price for the job
12. Provides his or her own insurance cover e.g. public liability etc.
13. Controls the hours of work in fulfilling the job obligations.
Additional factors to be considered:
1. Generally an individual should satisfy the self-employed guidelines above, otherwise he or she will normally be an employee
2. The fact that an individual has registered as self-employed or for VAT under the principles of self-assessment does not automatically mean that he or she is self-employed
3. An office holder, such as a company director, will be taxed under the PAYE system. However, the terms and conditions may have to be examined by the Scope Section of Department of Social, Community and Family Affairs to decide the appropriate PRSI Class.
5. It should be noted that a person who is a self-employed contractor in one job is not necessarily self-employed in the next job. It is also possible to beemployed and self-employed at the same time in different jobs.