We Need to Safeguard Independent Contracting

On the 19.02.20, Brendan McGinty, Managing Partner of Stratis Consulting had the privilege of participating in a discussion on “The Emergence of the Independent Contractor” at the NRF Annual Conference 2020, 'Beyond All Limits'. The following are some of the key points that were addressed.

In September 2019, Minister for Employment Affairs and Social Protection, Regina Doherty T.D. announced as part of a new "Compliance and Anti-Fraud Strategy 2019-2023" the intention to place a renewed focus on social welfare fraud and on bogus self-employment.

This has also occurred against a backdrop of assertions by the ICTU that bogus self-employment was estimated to cost the exchequer up to up to €250m per year in lost PRSI contributions to the Social Insurance Fund, which pays for employment entitlements including jobseekers benefit and the state pension. Trade unions have advocated that bogus self-employment will only be resolved when the Revenue Commissioners compel employers/contractors to register all workers as direct employees unless they can prove otherwise. The issue has been cited as being prominent in construction amongst other sectors.

It is important to appreciate the critical role of Independent Contracting as a feature of the Irish labour market. Unemployment is now down to 4.8% (and the lowest recorded since January 2007) with just 119,000 workers classified as unemployed (December 2019). Ireland is essentially at full employment. A total of 2.36m people were in employment at the end of 2019 and a key challenge for many businesses is now finding workers for available vacancies.

We know that for 2019 (QNHS, Q4, 2019) the number of self-employed in Ireland amounts to 14% (331.2k) of the total working population (2.36m). Some 100k have paid employees and the balance, 231k have no paid employees. Within that 14% figure, many of those working people will be self-employed in professional activities and it is also worth noting that based on a January 2018 joint report from the Department of Finance and the Department of Employment Affairs and Social Protection this figure is well within the average rate of self-employment in the EU.

Not everyone wants to be an employee and we should all be concerned that a narrative in relation to self-employment is emerging to suggest that it is an inferior form of work by comparison with a contract of employment. This has the potential to become very damaging to the economy as we need a legislative framework that facilitates and encourages entrepreneurship. It is important that we do not prohibit genuine self-employment.

The practice of false self-employment is not a widespread problem and where it does exist or is exposed, there is a well-established existing legal framework to address it, informed by several common law tests which are applied by the courts to establish the correct classification of a particular working relationship. Our system of employment rights has provided a mechanism for an incorrectly designated self-employed person to challenge their status and have it corrected.

Stratis understands that the existing Code of Practice on Determining Employment Status which dates from 2007 is currently being reviewed. It is important that the Code should reference new forms of work that are now a feature of the labour market, but in so doing it must recognise that there is no one test of employment or self-employment status and that cases should continue to be determined on a case by case basis.

We must ensure that policy makers avoid measures which create a framework which removes genuine self-employment in Ireland. Ireland’s employment law must continue to facilitate individuals exercising choice and adapting to changing economic circumstances. The best response to the issue of false self-employment where it exists is through enforcement of existing laws and remedies. We must find solutions to genuine problems, not by overstating them but by ensuring that our laws more accurately reflect the diversity of work arrangements including through independent contracting which people wish to exercise about how they work and when.