Each year, bogus self-employment in the construction sector continues to cost the State millions of euro in lost revenue. The full potential of Irish construction will only be realised when this practice of misclassification is rigorously confronted. Liam Berney, Industrial Officer at Irish Congress of Trade Unions (ICTU) writes.
The reintroduction of Level 5 lockdown measures has seen 70 per cent of construction closed, with only essential works continuing to operate. Nonetheless, the overall outlook for the sector remains positive. Through the National Development Plan (which underpins Project Ireland 2040), government has committed to funding the development of a number of large-scale infrastructural projects.
In addition, the response to the housing crisis should mean further government investment in the development of public housing. While public investment remains important to the overall sector, significant levels of private sector investment are also expected in the short- and medium-term.
While the current pipeline of projects, both public and private, will ensure continued strong levels of employment, a number of significant issues remain to be resolved if the sector is to be attractive to young people seeking employment and is to maximise its potential.
For many years, the Irish Congress of Trade Unions has highlighted the practice of misclassifying workers as ‘self-employed’, otherwise known as bogus self-employment. In 2015, ICTU published a key report on bogus self-employment, including the loss of revenue to the State.
It is our strong view, supported by a considerable body of evidence, that ‘bogus self-employment’ remains widespread in the sector, with an estimated 30 per cent or more of construction workers falsely classified as self-employed. This compares with an average 12 per cent in other areas of the economy.
There are obvious benefits to employers who engage in this practice, including significantly reduced employment costs. However, workers who are misclassified are denied essential rights and benefits, such as paid holidays, and in many cases do not even receive the legal minimum rates of pay for the sector.
As ICTU has repeatedly emphasised, a key part of the problem is that the Revenue facilitates this misclassification of workers. Thus, an employer can, through the Revenue system, classify any number of workers as ‘self-employed’ and this classification is then accepted by Revenue.
Again, the only real winners in this scenario are employers, with both the workers and the State at a loss from bogus self-employment. The Comptroller and Auditor General has estimated this loss at tens of millions of euro annually.
In our view there is only one solution. The default position should be that each worker is classified as an employee unless and until the worker concerned can satisfy Revenue that they are indeed genuinely self-employed. This will require a much more rigorous approach on the part of Revenue.
Government recently commissioned two key reports on the future of the construction sector. The first was compiled by KPMG, Future Analytics and TU Dublin and examined the issue of productivity. The second was compiled by AECOM Consulting and explored the skills issue. Both reports noted that ‘bogus self-employment’ and precarious employment could make the sector less attractive to people seeking work and careers in construction.
More fundamentally, the practice may also contribute to lower levels of productivity and force workers with valuable skills to seek employment elsewhere. The reports also identified the need for a renewed focus on training and development. In particular, the AECOM report identified apprenticeship training as being key to meeting the future skills challenge.
Given the importance of the sector to the wider economy it is crucial that the challenges identified in both reports are tackled. ICTU has campaigned over many years for investment in apprenticeship training to ensure it is an attractive option for young people and adult learners.
The establishment of the new Department for Higher Education, Research, Innovation and Science creates a real opportunity to make this a reality and to give apprenticeships ‘equal status’ with third-level qualifications. The new department also has a key role in ensuring that the State’s training system is responsive to emerging skill needs, across construction and the wider economy.
For example, it is envisaged that modular or ‘off-site construction’ will become increasingly significant. The State’s training system must be capable of responding to evolving skill needs such as this.
Construction faces some significant challenges into the future. However, the stakeholders in the sector have demonstrated their capacity to resolve difficult and complex issues. The introduction of Safe Pass means construction sites are now much safer places to work. Equally, the measures put in place in response to Covid-19 have proven effective.
A Sectoral Employment Order is in place and this sets the legal minimum pay and conditions for tens of thousands of workers in the sector. All of this has been possible because of dialogue between unions representing construction workers and employers. Stronger and deeper dialogue will be required to ensure we can meet the challenges facing the sector, now and into the future.