Taoiseach Leo Varadkar and Minister for Employment Affairs and Social Protection Regina Doherty at the launch of the Government’s Self Employed Benefits Awareness Campaign in City Hall yesterday.

To much fanfare, the Taoiseach and the Social Welfare Minister launched a ‘Self Employment Benefits Awareness’ campaign this week.

This is their happy clappy attempt to distract from the fact that somewhere between 20% and %100 of you (depending on the industry, and yes some industries are 100% bogus self employment), didn’t choose to be self employed, don’t want to be self employed and have no idea at all why you are labeled as self employed.

Maybe you’re new into the workforce and you don’t know any better, maybe you’ve been around for a while and you know that this job you used to do as an employee is no different to the job you are now are forced to do as self employed, but damned if you know how your employer is getting away with it. .

Bogus self employed workers lose holiday pay, sick pay, maternity pay, workplace protections, including the right to join a union; face an increased tax burden; receive no overtime pay; and may have no recourse for workplace injury violations and disability-related disputes.

The loss of all these rights, your rights as an employee, results in a labour cost saving to your rogue employer of about 30%.

Bogus self employment has become a no brainer for employers. Ireland is the only country in Europe where an employer can register a worker as self employed without the consent, involvement or knowledge of the worker.

There have been no widespread investigations into bogus self employment since 2001. Once in a while, Revenue inspectors will arrive on a building site and pick off a few of the lowest hanging fruits to placate the odd journalist who asks questions, otherwise, it’s a bogus self employment free for all with the full consent and backing of the government through various ‘special tax arrangements’ like the eRCT and the Courier Agreement.

Bogus self employment doesn’t just steal from workers, it is stealing massive amounts from the state too. In 2017, 75,000 construction workers were registered as self-employed out of a total workforce of 130,000.

At least 30% of these self employed workers are bogus self employed workers with no employees of their own. The loss to the state is in the hundreds of millions and it is only the tip of the iceberg.

Rogue employers are now demanding that groups of workers set up companies to filter their wages through so that employers can evade PRSI. These come under the ‘self employed with employees’ category, nobody is even looking at the area for bogus self employment but it is happening and on an ever increasing scale.

When the construction industry collapsed in 2007, we were given the opportunity to have a unique insight into just how much bogus self employment in the construction industry was costing the state.

Between the years of 2008 and 2014 there was a combined total of 500,000 construction workers registered as self-employed. The total tax take in those years from those workers was minus 90 million!

YES – (minus) 90,000,000 euro from 500,000 self-employed contract situations over 6 years. 500,000 employment contracts situations would have netted the exchequer somewhere around 2 billion for the same period.

Now here’s the really astounding thing, these ‘Special Tax Arrangements’ like the eRCT and the Courier Agreement were not established to actually collect revenue, they were established to bring workers, who had traditionally been working in the Black Economy, into the tax net.

As the former Comptroller & Auditor General wrote:

All concerned recognise that it is far from being an ideal system and that there is room for improvement.

But the improvements never came, the Black Economy is still the Black Economy and it is bigger and slicker than it has ever been.

The government has agreed to turn a blind eye to bogus self employment because that’s the price they are willing to pay to reduce the numbers on the unemployment register.

For those outside the construction sector, there has never been any wide or even narrow scale investigations. Don’t bother trying to challenge you employment status, it can take up to 3 years, cost you  10s of thoudands in in legal fees and the fix is already in before you start. Instead, Leo and Regina will make you pay more PRSI for very very limited benefits.

You are truly lost in self employment.

Martin McMahon podcasts with Tony Groves at The Echo Chamber and blogs at RamshornRepublic

Previously: Deconstructing Bogus Self Employment

Rollingnews

31 thoughts on “Having Our Cake

  1. cian

    Any references for any of these claims?
    “some industries are 100% bogus self employment”
    “YES – (minus) 90,000,000 euro from 500,000 self-employed contract situations over 6 years. 500,000 employment contracts situations would have netted the exchequer somewhere around 2 billion for the same period.”
    and any links to what the “Courier Agreement” is?

    Thanks

    1. Biddy

      The courier agreement was an agreement reached between Courier Company owners and the Revenue Commissioners to classify all couriers as self employed. The agreement was made in the Burlington Hotel in 1998/99. Courier companies had failed to comply with their obligations and were actually under investigation by Revenue. Actual couriers, the guys who did the job, had no hand act or part in the agreement. Several times the SCOPE section has ruled that individual couriers are not self employed but in a secret meeting between stake holders (not including couriers) these decisions have been overruled.

  2. Aaaa

    Hmm I think I agree with the overall sentiment of the article but with regards to a few points…

    “Between the years of 2008 and 2014 there was a combined total of 500,000 construction workers registered as self-employed. The total tax take in those years from those workers was minus 90 million!
    YES – (minus) 90,000,000 euro from 500,000 self-employed contract situations over 6 years. 500,000 employment contracts situations would have netted the exchequer somewhere around 2 billion for the same period.”
    Is this combined total the number of employees per year multiplied by the number of years? I assume the loss made during that period was from self-employed going out of business?
    The construction industry was on its knees over those years, it’s pretty misleading to put out a figure of €2 billion as a reference to compare it to, as there’s no way there could have been ‘a combined total’ of 500,000 people in continuous employment in the construction industry over that period.

    A side note on the Construction Industry btw:
    Pre-tax Margin for top 10 contractors in the UK (many of whom also operate in Ireland):
    2014 = 2.9%
    2015 = 2%
    2016 = 1.5%
    2017 = -0.5%
    Source (https://www.constructionnews.co.uk/data/cn100-2017-the-biggest-uk-contractors/10022576.article)
    Don’t have figures for Ireland to hand, but I think the above is indicative. One of the potential beneficiaries of this is the state, as they could get motorways, hospitals, schools etc. built with very low margin for the companies involved. Until of course they go bust, a la Carillion. I think the push with regards to the self-employed problem has some of its origins rooted in this race to the bottom, which can have disastrous consequences. How to solve it is another issue entirely, would like to know people’s views on this!

  3. Zaccone

    A fairly badly written article but this is a huge, and growing, problem for the state. The more attention drawn to it the better.

    It manages to screw over both workers, and the state’s tax generation, so hopefully there will be a fairly broad spectrum of support to fix it.

    1. cian

      It manages to screw over both workers, and the state’s tax generation
      Is it not one or the other? If the worker is screwed over by not getting sick pay, maternity pay, jobseekers, etc; then the state is actually saving by not having to pay for these? it’s a zero-sum for the State. The employer is saving the (tax) money, and the worker is loosing the benefit from tax – but the State neither collects nor pays out.

      1. Biddy

        It is both Cian, nobody is considering the bigger picture. There are 1000s of people denied pensions or forced onto reduced pensions (a la the Ministers new PRSI contribution related plan). Many of these people were forced into bogus self employment through schemes the government implemented. There are decades of litigation against the state coming down the line when people realise where this is going.

  4. Joe Small

    “In every county in Ireland, a smaller share of the workforce was self-employed in 2016 compared with five years earlier”

    “it is clear that between 2011 and 2016 the number of employees grew far more strongly than the number of self-employed. Nationally the number of employees in 2016 was 12.9% higher than in 2011, whereas the number of self-employed was only 2.3% higher.”

    Source: http://www.wdc.ie/self-employment-what-does-the-census-tell-us/

    Bogus self-employment is a problem, especially in construction, but I think its been exaggerated by some for their own political/ideological needs. Unverified and unsourced “facts” are tricky.

    1. Biddy

      75 thousand out of 130 thousand in the construction sector for 2017 is a fact. A fact revealed in a PQ reply to Micheal McGrath. That 30% of that 75 thousand are bogus self employed is also a fact extrapolated from the only widespread investigations ever carried out (PAC C&AG). The facts are all there, denial is not an option.

      1. b

        ok Martin, sorry, Biddy

        while some of the data looks like it has been properly sourced, an extrapolation is not a fact.

        1. Biddy

          The rate of bogus self employment is known on two fixed points, the extrapolation is based on the ONLY valid figures available. Figures that the Dept had but did not use in it’s recent report on bogus self employment.

          1. b

            i’m not denying the situation doesn’t exist and needs to be addressed

            but, the argument isn’t helped by presenting estimates as facts. It only serves to draw doubt on your claims of how big an issue it is.

            Ditto the claim of 500k workers mentioned eslewhere, it doesn’t pass the smell test at first reading and i’m becoming less certain

          2. Owen C

            “That 30% of that 75 thousand are bogus self employed is also a fact extrapolated from the only widespread investigations ever carried out (PAC C&AG)”

            Its not a fact. Its an estimate. I think you are confused as to what “extrapolation” means. It means grossing up an actual small sample (fact) into a much larger group (estimate/forecast). It is not a fact.

      2. cian

        75 thousand out of 130 thousand in the construction sector for 2017 is a fact. (58%!)

        Depends on where you get your ‘facts’. According to CSO[1] for 2017Q1 there were 44,500 self-employed of 142,000 total in the construction sector (31%).

        [1] ESQ04: Persons aged 15 years and over in Employment (ILO) by Employment Status, NACE Rev 2 Economic Sector and Quarter

  5. cian

    I don’t understand how this works. Why would a worker settle for a lower wage? If they are self-employed they should be earning more per day (worked)

    Scenario 1 (ideal):
    Employer: will you do this work for €100/day as a full time employee?
    Employee: okay
    Employer pays €100 to employee, + PRSI to state, + (employer has to put €12/day aside to cover employee’s bank holiday + vacation).
    Employee and State are happy. Employer less so.

    Scenario 2 (bad):
    Employer: will you do this work for €100/day as a self-employed person?
    Employee: eh? okay?
    Employer pays €100 to employee (and no more). Employee takes €100; keeps €85 for day’s work, (and also pays own PRSI + saves €10/day to cover his holidays) [or takes 100 and doesn’t pay PRSI or save for holiday]

    Effectively this guy is taking a 15% pay-cut AND loses various other protections. Why would he do this?
    The employer saves money and hassle. State loses out some.

    Scenario 3 (good):
    Employer: will you do this work for €100/day as a self-employed employee?
    Employee: erm. no? But I’ll do it for €120/day
    Employer pays €120 to employee (and no more). Employee takes €120; keeps €100, and also pays own PRSI €8 + saves €12/day to cover his holidays)
    Employer doesn’t actually save money, but has less hassle. Employee get full wages. State is covered.

    Note: the numbers above are approximate – I’m not sure exactly what the self-employed uplift should be to cover tax + holidays.

    1. cian

      The employee has a choice – they can not take the job.

      The piece doesn’t talk about money.
      Are the contractors paid more ‘per working day’ than their full-time equivalents?

      1. Biddy

        between 09 & 2014, 1 in every 3.5 jobs created in all sectors was self employed. People are threatened with sanction for failing to take up an offer of work self employed or not. The dept SW also offers enticements, such as buying tools and the back to work scheme to move people from unemployed to self employed. The Dept SW is a conveyor belt of victims for rogue employers.

        1. cian

          Biddy, have you looked at the latest statistics[1]?
          Between 2014Q1 and 2017Q1 the construction total employee increased by ~40,000 (to 142,500).
          Of this 40,000 almost 35,000 were employees (86%)
          Self employed with paid employees rose by 3,900 (to 14,100)
          Self employed with no paid employees rose by 2,000 (to 30,400)

          [1]CSO’s ESQ04: Persons aged 15 years and over in Employment (ILO) by Employment Status, NACE Rev 2 Economic Sector and Quarter

          1. cian

            Biddy, no I didn’t miss that.
            I’m using CSO as my source. You’re using a BS article.

            So I’ll ask again. Have you looked at the latest statistics?

          2. Rob_G

            Wow Biddy/Martin, with that Broadsheet article (which, coincidentally, you also wrote) you really disproved Cian’s CSO stats…

  6. Biddy

    PQ -168.169, 19/72016

    R. Coppinger To ask minister numbers on RCT (self employed)

    2005 – 130,710
    2006 – 132,270
    2007 – 139,666
    2008 – 126,736
    2009 – 121,928
    2010 -116,302
    2011 – 107,358
    2012 – 54,333
    2013 – 62,451
    2014 – 68,674
    2015 – 74,795

    PQ 60, 9/11/2015 Micheal McGrath to Minister for numbers on eRCT

    2015 – 99,741

    1. cian

      Thanks for including this.
      But in those numbers you used (i.e. the 74,795 in 2015) are “RCT registrations/active contractors (principals & sub-contractors)” (my emphasis).
      I’m not 100% sure of the terminology – but isn’t a ‘principal’ in this case the employer? So this number includes both employers and sub-contractors.

  7. Percival

    Fine Gael serve the upper middle class professional segment as they enrich themselves at the expense of those who don’t have the wealth and contacts to devise cynical schemes of exploitation.

  8. A person

    As a self employed person, most of these claims are factually incorrect. At least when you are working for yourself you can make your own conditions To claim that an employee is in a better position is just plan wrong!

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