38. Deputy Willie O’Dea asked the Minister for Employment Affairs and Social Protection her plans to deal with the issue of bogus self-employment; and if she will make a statement on the matter. (Question 8466/18 asked on 20 Feb 2018)
Deputy Willie O’Dea: The Minister understands the concept of bogus self-employment. I have been approached by groups of people on many occasions - one as late as last week - who are working as employees in the normal way who were suddenly told by their employers that from the following week they would be self-employed. That has certain devastating consequences, obviously, for the employees themselves and also for the Exchequer. I am trying to ascertain what is the Government’s policy on this. Is the Government aware of the extent of the problem and what proposals, if any, does it have to deal with it?
Deputy Regina Doherty: I propose to take Questions Nos. 38 and 40 together.
Bogus self-employment arises where an employer wrongly treats a worker as an independent contractor in order to avoid tax and social insurance contributions. There are already robust arrangements in place for dealing with complaints of bogus self-employment. Social welfare inspectors inspect a wide range of businesses, as part of their ongoing compliance operations. Inspections are also undertaken jointly with other agencies, including the Revenue Commissioners and Workplace Relations Commission. Where evidence of non-compliance is detected, this will be pursued.
Officials also investigate specific cases referred to my Department’s scope section. This section determines employment status and the correct class of pay-related social insurance, PRSI. Where misclassification of workers as self-employed is detected, the correct status and class is determined and social insurance arrears are collected as required under the law. Under the Social Welfare Consolidation Act 2005, there are specific offences in relation to employment contributions. On conviction, fines and-or imprisonment can ultimately be imposed.
Any worker who has concerns about his or her employment and-or PRSI status should contact my Department and the matter will be investigated. This can only happen with the co-operation of the worker.
Data from the recent CSO Quarterly National Household Survey record 312,000 individuals as self-employed in 2017, or 15% of total employment. This is consistent with the average levels of self-employment within the EU. There is no evidence of a significant change in the level of self-employment over the past 16 years, since we started collecting the data.
The classification of a worker for PRSI purposes can be complicated by the use of intermediary employment structures referred to by Deputy O’Dea. Revenue estimates that there are some 15,000 people employed using structures such as personal service companies and managed service companies. I consider these figures to be reliable and have no plans for additional studies of the numbers involved.
My Department has concerns that such mechanisms may be used to reduce the amount of PRSI and tax being paid, with a subsequent loss to the Exchequer and the Social Insurance Fund. A report on the issue, prepared by officials from my Department, the Department of Finance and the Revenue Commissioners and informed by a public consultation with a wide range of stakeholders, was published at the end of January following Cabinet approval.
The report finds that the available data does not indicate that self-employment is accounting for any significant increased share of the labour force and accordingly the perception of the level of disguised employment may be overstated. While the report indicates that intermediary arrangements can be abused to the detriment of workers and can distort the transparent and efficient operation of the labour market, it also notes that contract for service arrangements can provide flexibility - I take on board comments made previously that such flexibility exists usually is at the higher end of the scale - in many instances, for both businesses and workers where they are free to choose. It is not always the case that such flexibility exists.
The recommendations, of which there were three, are being examined in the context of the overall Social Insurance Fund. This report and the Actuarial Review of the Social Insurance Fund provide a timely and evidence-led opportunity to undertake a full review of our social insurance system and, as I hope to do later this year, to consult with stakeholders.
Deputy Willie O’Dea: The Minister states that robust measures are in place to deal with this. I am certainly not aware of those robust measures and they do not seem to apply in Limerick, whatever about the rest of the country. When I asked people what did they do, somebody who approached the Revenue Commissioners was told it was a matter for the employer. As for approaching the scope section, if the scope section is to deal with all of those thousands of people, it will be overwhelmed. In any case, the Minister will find that in most cases workers are compelled to sign a piece of paper to say that they are now self-employed. There is no point in going to the scope section if one has already signed a piece of paper. They do that on pain of losing their employment. In any case, if they do not do so, they will not get the jobs at all. I disagree with the conclusions reached by the report prepared by the Departments of Employment Affairs and Social Protection and Finance. A report with which we were circularised recently by the Irish Congress of Trade Unions, ICTU, pointed out that in the past ten years there has been a 23% increase in the number of the self-employed working without employees. The report to which the Minister referred involved an inspection which was carried out around the country and involved interviews of 11,699 people. One in ten, the report found, was bogus self-employed, and it very specifically stated that those who carried out the interviews were convinced they were not being told the full truth. This is a serious problem. The Minister says the figures are consistent with the EU’s, which may or may not be the case, but the fact that something wrong is happening in the EU is no justification for it happening at the same rate here. It is a real problem. I deal with real people who are affected by this and I am sure other Deputies have the same experience. Many of them work for subcontractors employed by the State. The money is all coming from the State. When I raise the matter with the relevant Ministers - not Deputy Doherty, but other Ministers - they just do not want to know. They say it is none of their business, “nothing to see here, move along”, but it is happening and is causing real hardship. Genuine employees are being-----
An Leas-Cheann Comhairle: Sorry, I took my eye off the clock.
Deputy Willie O’Dea: -----deprived of employment rights gained over many years and at the same time the Exchequer is losing money.
An Leas-Cheann Comhairle: I call the Minister. I apologise to the House.
Deputy Regina Doherty: The Department’s scope insurability section is responsible for making those statutory decisions on insurability employment under the Social Welfare Act. While the Deputy might be concerned about its capacity and workload, it certainly does not have a problem looking at the instances that are being brought to its attention. The insurability decisions are based on evidence that is provided, including the report from the social welfare inspector who goes out and sees the business where appropriate, and case law from previous court judgments. I will do a public awareness campaign this year because I am quite sure a very large number of self-employed people or people who think they are mismatched within the PRSI system do not even know about scope. We have a body of work to do to let them know what it is and what it can do for them. Any worker who has concerns about his or her employment or social insurance status should contact my Department and scope will kick in and take care of the matter. As I said, the Social Welfare Act is so robust it allows us to go back and recoup social insurance contributions that should have been made from the time the employment started, whether it was disguised or not disguised. The independent scope division will make that decision.
An Leas-Cheann Comhairle: Deputy Penrose has the first supplementary question.
Deputy Willie Penrose: I hope I get a little latitude. Bogus self-employment contracts effectively deny workers the same level of protection and entitlement their employed colleagues enjoy. I note the report commissioned by my colleague, Deputy Joan Burton, has finally been published. Bogus self-employment is a scourge of many industries, hitting the construction industry, the gig economy and the IT sector particularly hard. The figures that were postulated and arrived at in the study to which the Minister refers are difficult to believe. There is very little real information on the number of people who might be in so-called false self-employment. The report relies on CSO figures, but the CSO quarterly national household survey relies on self-reporting. This means that if people tell the CSO they are employees, that is how they are recorded. For all we know, it might be false self-employment, but they think they are employed. As Deputy O’Dea said, they sign bits of paper without knowing the details of what they are signing. The spread of these arrangements results in a loss of PRSI and tax income to the State, leaves people without entitlements and makes it very difficult for workers to bargain collectively for better terms and conditions. Of course, it suits the employers. Employers force workers into disguised self-employment arrangements and those workers are to all intents and purposes direct employees in all but name. As I said, they lose their rights as workers and their social welfare entitlements. This behaviour cheats the State out of tens of millions of euro in lost PRSI income and tax revenue, which means less money for social welfare which the Minister needs and for hospitals and schools. It is time to bring an end to this because it is rampant.
Deputy O’Dea is right: many of us in our everyday activity meet people who lose out badly. I know a code of practice was introduced in 2007 that set out criteria designed to help determine whether a worker is an employee or a genuinely self-employed contractor, but given the alarming growth in false self-employment since the code was first introduced, it is clear this initiative has not served the workers well. My colleague, Senator Gerald Nash, who is the Labour Party spokesman on social protection, is bringing forward the Protection of Employment (Measures to Counter False Self-Employment) Bill 2018. It will be introduced in the Seanad next week and I anticipate that it will receive widespread support. We must tackle this. It is a scourge for the Irish Congress of Trade Unions and SIPTU. All the unions are concerned about it.
I will ask the Minister only one question. Will she put on record the number of cases determined by the scope section for the most recent year for which the data are available? That would be interesting. How many people in the scope section are allocated to this task and how many inquiries has it had in this regard over the past year or so?
Deputy Regina Doherty: I do not have the data the Deputy is looking for so I commit that I will come back to him with the number of cases scope has managed in recent years and the staff complement involved. I do not disagree with either Deputy. There is an issue with disguised employment in the country, but I can only go on the basis of the data I have. The numbers involved are not as large as anecdotally I had heard they were before I became Minister. Before I saw the report, I probably would have thought the numbers were far larger than they actually are. This does not matter in essence because the people who are being forced into disguised employment, whether they number 500, 5,000 or 50,000, are being mistreated by employers, so for two reasons we will closely look at the three recommendations of the report. Two of the reasons fall under the remit of the Department of Finance and one under my Department. We will look very closely at the issue because I could certainly do with the €60 million, thank you very much, and I would not have trouble spending it.
Scope does work. If I do anything this year, it will be to ensure that people know about it and know there is no need to fear it from their employer’s perspective. While I know what Deputy O’Dea is saying - that if these employees rock the boat they may lose their jobs - the balance of someone being secure in his or her employment prospects and being treated well and with dignity by an employer can only be fixed if someone brings the matter to our attention.
Another matter I wish very quickly to put on the record is that we moved last year, and we continue to do so this year, to ensure that the benefits under the Social Insurance Fund that are available to employed people are extended to self-employed people. We have done likewise in respect of treatment benefits. We introduced the invalidity pension last year and we will keep going in the coming years, economy willing, to ensure everyone has equal status in the Social Insurance Fund.
An Leas-Cheann Comhairle: There are two further supplementary questions. I will take the first from Deputy Penrose.
Deputy Willie Penrose: With our Protection of Employment (Measures to Counter False Self-Employment) Bill 2018 we certainly do not want to interfere with the status of genuinely employed self-employed people or bring them into an employee framework. No one is interested in that because those thousands of people provide jobs and work extremely hard. A common misconception is that parties are free to choose whether they provide services, whether employee or self-employed, and can sign their contracts accordingly. That is codswallop. The people who are in the superior position impose their view upon the people in the lesser position. The Minister should remember that, in reality, the test of employment status is a matter of law and not determined by the label attached to the relationship by the parties. This is why in our Bill we have a number of measures which will be of help in this regard and will get down to ensuring a way to identify the relationship. It is a very important Bill and I hope it gets full support. The Minister talks about getting the income disregard for lone parents sorted out, the pension anomalies and all the other anomalies that were created after the 2012 changes. These must be tackled, and fair play to the Minister for going about tackling them. She could do with money and it is being lost as a result of bogus self-employment. I support these projects in every way and would like to be allocated them and gather the information from people. It is about time we deal with this, but there are rogue employers out there fooling decent employees into feeling that there is no choice. They are put on a certain contract and that is what they have to take: otherwise, it is “down the road with you” and there is someone else to take the person’s place.
Deputy Regina Doherty: Again, I do not disagree with what the Deputy has said. I have not seen Senator Nash’s Bill. I look forward to having a look at it, engaging with it-----
Deputy Willie Penrose: I know the Minister will support it next week.
Deputy Regina Doherty: -----and, I hope, if I can, supporting it. Ultimately, what we need to do, and I think what we all want to do, is to ensure that those who feel they are being marginalised or put in vulnerable positions by being made misread or misstate their employment status feel they have recourse to someone. Again, if I have to strengthen the scope division, we will do so, but I genuinely do not think I need to do so. What I need to do is tell people it is there and what it can do for them and allow people to come along with their inspectors to tackle these people who are taking advantage of others because of their strength and might. This will ensure that all employees are treated with dignity and respect.
An Leas-Cheann Comhairle: Deputy O’Dea has the final supplementary question.
Deputy Willie O’Dea: I take the Minister’s point but, as Deputy Penrose said, most people have no choice. If one signs a piece of paper under duress stating that one is self-employed because one does not get the job otherwise, there is not much good going to the scope section afterwards. That is the problem. Something must be done on a broader scale to prevent employers from engaging in this abuse - and it is an abuse. In the latter part of the Minister’s reply she mentioned the extension of certain benefits to the self-employed. She will be aware of a fairly detailed survey of the self-employed which stated they would be prepared to increase their PRSI contributions in return for further benefits, such as jobseeker’s benefit, being extended to them. If employers are willing to pay more, it disincentivises the idea of self-employment because it narrows the gap between what they save and what they get, with 14.75% as opposed to 4.75%. If it were increased, the gap would be smaller. If the self-employed are willing to pay for this themselves, would that not be a better idea than putting it on the taxpayers?
Deputy Regina Doherty: The Deputy has raised two separate issues. Let me be very clear, in case anybody thinks I am soft on this, bogus self-employment or disguised employment involves the wilful evasion of income tax, PRSI and social insurance liabilities and it will not be tolerated. There are mechanisms in place. I hear what the Deputy is saying about people not being given a choice but they have a choice to report it thereafter. If we do not know about it, we cannot inspect; if we cannot inspect we cannot catch people and if we cannot catch people we cannot fine them and put them in prison. We want to send out a clear message that for us to tackle the small amount of people who are taking the Mick, we need to be told about it. When we do the advertising campaign on scope we will tell people loudly and clearly. I will make sure we will monitor the increase in the number of reports coming into scope because if there is not an increase, we are definitely doing something wrong.
While I do want to extend to self-employed people all the benefits that employed people currently have, I absolutely do not want to increase the money self-employed people pay. I want to make sure there is an equilibrium and balance between what an employee pays and what a self-employed person pays and that it is the same. If anybody is going to pay the extra it is the people who only have one contract with one person, and this is the responsibility of the Revenue Commissioners and the Department of Finance. Let us look at that as being a contract tax or a contract self-employment tax, as opposed to taking more money from self-employed people who have had the gumption to provide employment for themselves.