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Government accused of tolerating bogus self-employment fraud

12 April 2018

Statement by Senator Ged Nash
Spokesperson on Employment and Social Protection

Labour Senator Ged Nash has accused the government of tolerating high levels of bogus self-employment which he says represents nothing but the perpetration of a mass fraud on the State. The Labour Party spokesperson on Employment Affairs & Social Protection was speaking to delegates at the Forsa trade union Services & Enterprise division conference taking place in Galway.

Senator Nash said:

“Thousands of workers in aviation, construction, IT, the media and many other sectors know what the daily reality of life is like for them as falsely self-employed workers.

“Unlike directly employed colleagues who do exactly the same job as them, they have no protection from the sack and are deprived of welfare benefits, holiday pay and sick pay entitlements as a result of the deliberate misclassification of their employment status.

“The reality is that bad employers are abusing the system to dodge paying employers’ PRSI in a bid to dramatically slash their labour costs.

“This is a scam and it defrauds the State of around €60 million each year in foregone tax and PRSI payments. Instead of changing the law and clamping down on this borderline criminal activity, the State seems to want to simply manage the phenomenon instead.

“Incredibly it seems to me that there is a level of tolerance for bogus self-employment at government level that is not applied to any other form of fraud

“Fraud is fraud, wherever we see it and it should not be acceptable in any form.”

Senator Nash told the conference that planned awareness raising campaigns run by the Department of Employment Affairs & Social Protection to direct more workers to the Scope section of the Department in order to have the insurability of their employment status investigated fundamentally misunderstands the nature and extent of the problem.

“Falsely self-employed workers fear retribution if they stick their head above the parapet. Nothing but a fundamental change to the law will do in this case. Employers should not be allowed to opt in and out of employment law as and when they see fit.

“That’s why Labour introduced the Protection of Employment (Measures to Counter False Self Employment) Bill 2017 which, if enacted, will put all workers on an equal footing in situations where they are carrying out the same duties, but are not legally designated as ‘employees’.

The Bill passed second stage in the Seanad in late February and is expected to go to Committee for further scrutiny shortly.

“In 2007, a Code of Practice was introduced with a new set of criteria designed to help determine whether a worker is an employee or a genuinely self-employed sub-contractor.

“Given the deep embedding of false self-employment in the labour market since the Code was first introduced, it is clear that this initiative has not served workers well.

“Labour’s Protection of Employment (Measures to Counter False Self Employment) Bill 2017 provides for a holistic approach to the determination and classification of employment status and a set of clear rules in statute law that would apply to all State bodies and enforced across the board by the courts and in all administrative tribunals.

“The Competition (Amendment) Act 2017, a Labour Party initiative, includes for the first time in Irish legislation a definition of the characteristics of bogus self-employment. This new legislation builds on that and extends these tests to the general population of worker.”

Senator Nash continued:

“The primary motivation of rogue employers who misrepresent the status of their workers is to avoid tax and PRSI liabilities and obligations.

“This Bill amends the Tax Acts to apply tax avoidance laws to the practice of bogus self-employment.

“There is no good reason to why an employer who decides to deliberately misclassify the status of an employee should not be considered to be a tax and PRSI cheat and to have the same penalties applied to them as is the case for other tax avoiders. Critically this Bill extends to PRSI also.

“This measure should act as major deterrent for employers who might consider forcing an employee to go down the false self-employment route.”