This report echoes the findings of another study produced jointly by the Department of Finance and Department of Employment Affairs and Social Protection “The use of intermediary-type structures and self-employment arrangements: Implications for Social Insurance and Tax Revenues”, published in January of this year. This, too, found that there is no evidence that there has been any significant change in the level of self-employment and temporary employment in the economy, stating that levels of self-employment had largely been stable since 1999, “even during the recession of 2012”. Page 9 of the report
Persistent narrative despite the evidence
Notwithstanding the outcomes of these and other similar studies, the narrative that employment relationships are becoming more fragmented persists as does the idea that policy makers must take steps to address this trend. This has resulted in a range of policy initiatives, including the introduction of new definitions of “false self-employed worker” and “fully dependent self-employed worker” in the Competition (Amendment) Act 2017. These definitions are restricted to the application of the competition legislation, but there are other initiatives which are likely to have more far reaching impact. Further initiatives include a Private Members’ Bill - the Prohibition of Bogus Self-Employment Bill 2018 – and the insertion of section 20 of the Employment (Miscellaneous Provisions) Bill 2017 which criminalises the incorrect designation of an individual as self-employed.
Section 20 of the Employment (Miscellaneous Provisions) Bill 2017
A breach of this provision carries a possible custodial sentence of up to 12 months in prison on conviction. Apart from the very heavy-handed approach to an issue which, despite the narrative, is neither a widespread nor a growing problem, this will operate as a deterrent for businesses to enter commercial agreements with self-employed individuals at all, preferring to engage with other larger enterprises for short-term or specialist projects.
This cannot have been the intention behind the proposed section 20. The slight increase in self-employment during the recession identified in the joint study by the Departments of Finance and Employment Affairs and Social Protection suggests that as employees were made redundant or otherwise found themselves in a very tight job market, some availed of the opportunity to continue to work as self-employed, providing them with a chance to keep their skills current and perhaps earn additional income in circumstances where they could not gain employment. In the event of another recession, overly restrictive and punitive legislation may well rule out such an option for future unemployed workers.
Evidence based research welcome
Ibec welcomes the research conducted by the ESRI and its findings. It is now critical that stakeholders and policy makers pay heed to these findings and ensure that Ireland’s employment law policy develops in a manner which is balanced and appropriate for our labour market. The reality is that the common law tests, which are reflected in the Revenue Commissioners’ Code of Practice for Determining Employment or Self-Employment Status of Individuals is more than fit for purpose to address cases where it may not be immediately clear as to whether someone should be considered an employee or in business on their own account.
The Revenue Commissioners have proven themselves to be motivated in rooting out false self-employment where it arises, and the SCOPE section of the Department of Employment Affairs and Social Protection is accessible to individuals who have questions about their own status or designation as self-employed. Any further regulation in this area needs to be very carefully considered. Otherwise legislators risk up-ending a careful balance which has been achieved in the Irish labour market where independent contractor arrangements create opportunities for entrepreneurs alongside a system of contracts of employment with the protections but also restrictions that such an arrangement includes.
For the avoidance of doubt, Ibec is manifestly opposed to the practice of false self-employment, as it creates a competitive advantage over businesses which are compliant with employment rights and tax legislation. However, it must be recognised that commercial agreements with self-employed individuals can be complex, and it must remain possible within the Irish legal system for people to be in business “on their own account” without fear for one party to the agreement that they may be imprisoned for entering such an arrangement. Without such arrangements, we will introduce unprecedented labour market rigidity into our small, open economy.
Thursday, 23 August 2018