Self Employment Is Not Working

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From top: Minister for Finance Pascahl Donohoe; Tony Groves

It is difficult to define an elephant, but you know one when you see it – Bob Dowdall, Chief Inspector of Taxes

There are idioms and sometimes there are cliches. The elephant in the room is that both idioms and cliches are merely at different stages of the common lexicon cycle. One man’s philosophy is another man’s bunkum. Both things CAN be true.

It’s with this verbal trick in mind that my eye is once more drawn to the state of our exchequer returns. Month after month our indicators of economic performance have painted a picture of an economy that is once again the envy of all of Europe.

Forget Leprechaun Economics, we have more people at work than ever before in the history of the state. Don’t mind the begrudgers who point out Ireland’s preeminence in tax evasion scandals like the Panama Papers, we collected more tax in 2016 than ever before in the history of the state.

Put aside your concern for the various crises (housing, health, policing etc) and focus on a growing fiscal space that might start to tackle these issues.

But above all else, ignore the elephant in the room.

Since February a funny thing keeps happening with the income tax take; it keeps undershooting the government’s targets. Our former Minister for Finance, Michael Noonan is said to be at a loss to explain the results.

[Word of advice; in the event of a zombie apocalypse do not reach out to Michael Noonan, the Department of Finance and the new Finance Tzar, Paschal Donohoe, for help]

They can’t see the elephant in the room, let alone tackle it. It doesn’t take too much imagination to picture Taoiseach Leo Varadkar giddily welcoming the zombies and talking about his favourite Walking Dead episodes.

Whether our leaders are willfully blind to it, genuinely perplexed, or sincerely unaware doesn’t matter; the fact is that report after report has found that (at least) 1 in 5 self-employed workers are not really self-employed.

These are workers in the “sharing economy”, the “gig economy” and even your GP. The lad on the mountain bike, delivering your Thai Green Curry is a modern day entrepreneur, apparently. The fella sweeping the building site is the CEO of yard brush enterprises, who knew?

These are the workers whose job description includes the unwritten criteria of pretending they are self-employed.

This is the ‘elephant in the room’ work practice that the instruments of the state, Revenue Commissioners, Department of Social Welfare and the Department of Finance ignore because “the arrangement is administratively efficient in collecting tax from a sector which is traditionally recalcitrant when it comes to paying tax”.

What that actually means, in the eyes of the state, is that some money is better than no money.

It is bizarre to think that allowing people be misclassified as self-employed is the lesser of two evils, when, if these individuals were PAYE workers, the tax would be deducted at source.

From an employers point of view this is a ‘no brainer’. The estimated loss to the state (and saving to the employer) is an estimated 30% per employee.

Savings in pension contributions, sick pay, holiday pay, employers PRSI all hit the state coffers. All this while flexibility is forced upon workers in precarious employment. It’s manna from heaven for an unscrupulous employer.

There are quite literally tens of thousands of these wishy-washy contract for employment jobs, in lieu of contract of employment jobs; nearly 100,000 in Relevant Contracts Tax roles alone.

This herd of stampeding elephants have smashed holes in the ‘Fiscal Space’ that will determine our budgetary constraints. They have been allowed trample on hard earned employees rights, making the nature of work more precarious than in the past.The insurable jobs divide in the gig economy is estimated to be growing at 15% per annum.

People in such employment will be excluded from things like mortgages and employers pension schemes, they are not the recalcitrant children. They are the victims. The state, by looking the other way, are the issue.

You know an elephant when you see it, and this elephant is bad for the state, its citizens and the future. It needs to be addressed. Tackling it might seem like a mammoth task, but as the cliche (or is it an idiom?) goes; How do you eat an elephant? One bite at a time.

I just don’t see any big game hunters in our midst.

Note: I’d strongly urge you to check out Martin McMahon‘s video clips outlining his experiences of this sector. The links are embedded in the piece and are available to view in full here.

Tony Groves is a full-time financial consultant and part-time commentator. With over 18 years experience in the financial industry and a keen interest in politics, history and “being ornery”, he has published one book and writes regularly at Trickstersworld

 

56 thoughts on “Self Employment Is Not Working

  1. Twunt

    There are two sides to this. I work for a large multinational, 20% are self employed contractors, they earn €250 – €500 per day.

      1. JIMMYJAMES

        Those lads need not break a sweat, its mick & his local guttering service they can pin the ills of middle income earner on.

        did they not have sw inspectors with garda manning industrial estate entrances in the mornings while back

  2. Biddy

    The loss in PRSI alone runs to 60 million + per year, total losses could be 10 times more. That’s some kickback for rogue employers.

      1. Kenneth o connor

        Between 2008-2014 the total tax from RCT1 in construction came in at minus 90 millon euro!!!! somewhere in the region of 500k workers worked on RCT during those years….its a scam!!!!

  3. Cian

    According to CSO:
    “The total number of persons classified as self-employed increased by 5.5% from 308,500 in Q1 2010 to 325,500 in Q1 2016. The number of employees increased from 1,569,200 to 1,636,400 during this time. ” (http://www.cso.ie/en/releasesandpublications/er/qnhs-es/qnhsemploymentseriesq12016/)

    In other words: in Q1 2010 16.4% of those employed were self-employed. By Q1 2016 there are 16.6%.

    …and if you look at today (Q1 2017) the numbers are 312,300 and 1,721,200 respectively or 15.4% self-employed. (http://cso.ie/en/media/csoie/releasespublications/documents/er/quarterlynationalhouseholdsurvey/q12017/QNHS2017Q01TBL5.xls)

    There are relatively fewer self employed in Q1 2017 than Q1 2010 (15.4% Vs 16.4%)

      1. Fact Checker

        Good fact checking:-D

        Self employment is (like in any market) reflective of SUPPLY and DEMAND factors.

        Employers like contractors for all sorts of reasons. This is the demand part.

        But many workers like them too. This is the supply part. There are downsides, namely the tax treatment, lack of entitlements and greater risk of unemployment.

        The upsides in many cases are the chance to shape your hours around other commitments – like family – and to take on work which is more in line with your own interests.

        1. Biddy

          Employment status is never a matter of choice, it doesn’t matter a jot who ‘likes’ and who doesn’t ‘like’. One either fits the legal criteria or one does not. Deliberate misclassification of workers is punishable by 13k fine and or 3 years in prison. There is NO evidence that the majority of workers ‘opt’ for these tax avoidance smokescreens, it is forced upon them by rogue employers. Choice be damned, this is workers press ganged into self employment illegally.

      2. Tony Groves

        Yes, they’re a Cian special, waffle.
        Self employed numbers (one man bands) are up from 206k to 241k between 2010 & 2015.
        Self employed (with employees) are down from 92k to 84k.
        These facts show a growth in dodgy self employed workers and a drop in the real self employed.
        Have a nice evening.

        1. Cian

          I produce links to CSO and they are called “waffle”. You show unattributed numbers and they are, what?

          I have already linked to CSO figures with 2017 figures. Lets uses those more up to date ones:
          * Self employed numbers (one man bands) are 91.5K. (29.3% of self-employed)
          * Self employed (with employees) are 220.8K (70.7%)
          * Employees: 1,721K
          * Total Employed: 2,033K

          Your figures from 2010 shows a 206k to 92k (30.9% : 69.1%). So within the self-employed the change in one-man band self-employed increased slightly from 69.1% to 70.7%.

          However there were 1,867 people working in Q1 2010 [CSO].

          If you compare the number of one-man bands to total employed it DROPS from 11.0% in 2015 to 10.9% in 2017.

          1. Biddy

            You obviously didn’t read and watch the attached videos Cian, thousands and thousands of jobs wrongly removed from the tax net as illegal state aid for rogue employers. Luxembourg has a SE rate of 8%, the difference between them and us is proper regulation.

          2. Cian

            I watched the first one and wasn’t impressed.
            However, Tony said (without evidence) that “This herd of stampeding elephants have smashed holes in the ‘Fiscal Space’ […] .The insurable jobs divide in the gig economy is estimated to be growing at 15% per annum.”

            I have provided evidence that this is false. The percentage of self-employed (one-man bands) to total employed DROPED between 2010 and 2017.

            Either the CSO is wrong or Tony is wrong.

          3. Tony Groves

            Cian, as usual, is selective with the stats he picks,
            The most recent data I have (non 2017) shows:
            Unskilled self employed numbers rose 6.7%
            Skilled self employed numbers rose 9.2%
            And at the very top, where maximum tax avoidance can be availed of, self employed numbers rose by 15.2%

            Crisis averted, on to the next crisis…

          4. Frilly Keane

            here
            save from having to read it again

            I’m one of these one man bands
            I don’t clean gutters with Mick n’ the lads mind

            so am I the elephant in the story

          5. Cian

            Tony, you revert to form: “deflect; throw out some random numbers; pithy comment”

            You’re accusing *me* of selectively choosing stats? HA!
            1. I’m using the latest numbers when I can (Q1 2017)
            2. I’m linking to sources [CSO]
            3. I’m explaining the numbers

            You’re just throwing random numbers out there. Your latest example is totally meaningless without some context:
            “The most recent data I have (non 2017) shows:
            Unskilled self employed numbers rose 6.7%”
            1. what year is this? if it’s not 2017?
            2. where did you get the stats from?
            3. what are you compering it to? rose 6.7% from WHAT?

            Unless you include this sort of information I’m going to have to assume that you are just picking random numbers.

          6. Tony Groves

            Cian,
            No, I will not share links with you. I have a heavily regulated day job.
            But even if I produced the body filled with bullet holes and a smoking gun you’d still assume the murder weapon was a candlestick.
            But it’s all good, you’re alright in my book.

          7. Frilly Keane

            Pay me taxes!!!!

            I get stopped withholding tax on about a third of my Gross Income
            so
            like
            I’ve prepaid tax on Net Income I actually haven’t earned meself yet

          8. Cian

            “No, I will not share links with you.”.
            LOL. So you have ‘top-secret data’ that you can neither share nor even explain when it refer to or what it means.

            “But even if I produced the body filled with bullet holes and a smoking gun you’d still assume the murder weapon was a candlestick.”
            All you have done so far is *tell* me that you saw a dead body. I’m looking for some evidence here.

        2. Frilly Keane

          Cheezuz Grovel
          again
          who da’f
          do you thing you are

          like you’re no ESRI phd Economist or Seamus Coffey yerself

          1. Frilly Keane

            well I’m sure you have a quote from somewhere to ping back

            but in the meantime, you’re the one that used “waffle” to describe a contributor to your thread who tested your work with actual data and stats so
            if you’re going to call the CSO material waffle
            then I’m entitled to remind other readers that like,
            you actually aren’t an doctorated Economist

            or maybe your book to get you one

          2. fupptwit

            “You’re actually nobody”. Wow . just wow. Tony Groves , you really are deluded. Your articles are as thin on detail as the skin on your neck. You use twitter to sell your wares but hey self-promotion is no promotion. Back in your box, mate.

          3. Frilly Keane

            didn’t really say I was
            and I don’t use BS to market my profession and livelihood
            and I didn’t get inta this thread to look for a flasher

            and to be fair
            I’m not trying to let on I’m an’ting more than an a bloggard
            so if you feel you’re entitled to refer to CSO data as waffle
            go for it
            but expect to have your credentials to say such with any authority aired in public

            and that’s not Trolling
            that’s Professional Scepticism

            you don’t get a lot of that in your game, no?

  4. scottser

    a very ‘greek’ way of running things. soon we’ll be just a big refugee camp, owned by the chinese.

  5. phil

    can you imagine , if the wife was a public servant, and you got an agreement that you could switch from PAYE to self employed, Setup a company , get your salary paid into your ‘company’ account , then never touch it, let the wife carry ye both, Im pretty sure your salary would be tax free….

    Another trick, but I believe its closed now, was to give yourself a non-recourse loan from your company to buy stuff…

    Im probably misunderstand everything …..

    It did irk me lately when Self employed were allowed to access social welfare benifits , there is now no benifit to being PRSI

  6. bored@memes

    I haven’t read the post or the comments, but it doesn’t matter…

    I’m going to steal the heading and go into the T-shirt business.
    – See ya later, Suckers.

      1. bored@memes

        If there are any ladies reading, please listen to Tony.
        Don’t listen to me..

        I’m literally a lickar53.
        (Don’t knock it until you’ve tried it, baby.)

        And I like roundabouts too.
        I approach them like Tinder…

        Hang on… I’m losin; me grip, and me drift…

        1. bored@memes

          PS.
          If you MUST drink and drive, don’t text..

          Unless you are a Bogger/Cultchie / Idiot from Limerick Or Cork…
          Please…go ahead.
          I’ll pay for the drink…I’ll continue the conversation…

          Galway…
          I haven’t gotten to you yet…

          1. bored@memes

            Get up the yard…
            … I’ve already taken five of the other yokes.

            You’re no Guru.

  7. Connie

    Absolutely true. And not limited to the private sector. Based on personal experience, this practice is commonplace in the public sector, particularly state agencies (as opposed to actual government departments) where contractors were and are hired as ‘self employed’ – ostensibly as a work around for the public recruitment ban, though the practice continues despite lifting of said ban – but required to work from the office 9-5 or 9-6 or whatever it is, just like the PAYE staff… except with no access to sick pay, maternity pay, pension, the ability to get a mortgage…

  8. Pádraig Ó Raghaill

    There are definitely two sides to this story and it is not unique to Ireland by a long shot. One one hand you do have the _gig economy_ the zero hour contract style of lower pay scale jobs. It is, without a doubt, making the precariat class expand. However, it is also the go-to way of business for consultants, assessors, many in science, etc and so forth. State-based pensions, forced superannuation, ‘contributions’ to your retirement are often more a raught for tax collection than the nice soft pillow of retirement. While there needs to be an understanding that low paid jobs are under attack on all sides by assessable cheap labour there also needs to be an understanding that producing nice round pegs for jobless holes is also counterproductive.

    There is no easy solution, and the SME sector is already stretched so thin under the weight of taxes, VAT, race to the bottom competition that the threat of base wage increases is fueling the self-employed model. With the world ever more run by big business, it is squeezing everybody under them. I know one thing for sure, LeoLiberalism is not going to make lives easier for anyone.

    1. Biddy

      As the videos explain, the ‘go-to-way’ may suit the higher end for tax purposes but self employment is never a matter of choice, either one fits the legal criteria or one does not.

  9. Cian

    Tony’s whole article is at odds with what the Dept of Finance is saying in their Monthly Exchequer Returns report (http://www.finance.gov.ie/news-centre/press-releases/end-may-exchequer-returns-2) On page 4 it says:
    “Direct Taxes
    Income Tax receipts of €1,445 million were collected in May, broadly in-line with profile (down just €4 million or 0.3%). This represents an 8.4% or €112 million increase compared to May 2016.”

    Income tax in May was 8.4% greater than last year, albeit 0.3% lower than projected.

    1. Pádraig Ó Raghaill

      Well you know what they say, there are lies, damn lies, and then there are statistics. It is the same as countries that promote their employment rate; the flashy number hides the true story. Anyone that has a position that all is rosy, nothing to see here folks, could possibly, be tasting, the source a little too often.

      1. Cian

        Exchequer Returns aren’t statistics. They are accounts.

        Granted, the ‘profile amount’ (i.e. the 2017 estimate amounts) are arguably statistical. But we’re arguing if the amounts of Income Tax received is artificially low because of individuals being forced into self-employment.

        1. Biddy

          In 1988 the PAC ordered an investigation into bogus self employment in the construction sector. 63,000 employments were examined, 1 in 5 were easily identifiable bogus self employment. Fearing that this exercise hadn’t solved the problem, the C&AG repeated the exercise 2 years later with similar results. Since that time, less than 300 situations have been examined per year. It’s safe to say that the bogus self employment issue has not gone away, only policing of it has.

  10. Pádraig Ó Raghaill

    Down 4 million, as an example, could easily be 300 people. In a country so sparsely populated, that is a lot of people.

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