The issue of bogus self-employment is back in the news. ICTU’s Macdara Doyle unpacks the detrimental impact such practice has on workers.
Over recent weeks, RTÉ’s Drivetime carried a series of stories and reports from workers who have fallen foul of such practices. Most were anonymised in order to ensure they suffered no retribution for speaking out. But change the accents and some small details and the horror stories we heard on radio sounded like dispatches from a repressive, developing world economy, or from inside the grim mills of the Industrial Revolution.
Bogus self-employment is a myriad of old abuses and practices dressed up in new terminology. In short, it transfers the entire risk and cost of employment from the employee to the worker and to wider society.
By forcing a worker – using whatever means – to assume the status of a ‘self-employed contractor’, employers enjoy all the benefits and are not burdened with a single responsibility of employment. Workers ‘employed’ in this fashion enjoy no right to sick pay, holiday pay, social insurance or pension payments and can be dismissed at a moment’s notice.
Far more insidious is the fact that they are forced to bid for jobs as if they are providing a ‘contract service’ and often make that pitch in direct competition with similarly disadvantaged workers. All of which drives the price right down to bargain basement levels. Thus, as outlined in the Drivetime series of reports, highly-skilled workers plied their trade in the construction sector for an hourly rate just above the minimum wage.
And if you are foolish or brave enough to demand your rights and be treated as the PAYE worker that you are, the job will go elsewhere. Meanwhile, not only are individual workers losing out, but so too is the State.
In 2015, Congress published a report on the prevalence of this practice in the construction sector. The report estimated – at that point in time – that up to 30,000 workers in the sector could be working as bogus self-employed.*
It also found that each one of those falsely employed workers cost the State €2886 per annum, in lost PRSI payments. In other words, the State was probably losing some €80 million a year and close to €700 million since the practice began to first take root in the sector.
Yet it appeared, from the Congress report, that the State was happily facilitating this practice: “In 2012, Revenue’s system for the registration of building contractors – the Relevant Contracts Tax (RCT1) – moved from a paper-based system to an online system. The paper-based system had the advantage of requiring a worker to consider the nature of the (self-employed) contract they were being offered and to sign a form stating they were genuinely self-employed. It also clearly spelt out the right and entitlements the worker would sign away by opting for self-employment: in terms of pay, pension, sick pay, holidays, social insurance etc.
“Under the new system anyone can go online and designate any number of employees as self- employed, without challenge. In short, a ‘principal contractor’ can propel a job candidate out of the PAYE system at the click of a mouse.
“For some unscrupulous employers, this amounts to an invitation to replace decent employment with bogus self-employment, thereby putting pressure on good employers. Contractors can now use the system to avoid paying decent wages, evade PRSI and divest themselves of employment rights and obligations.”
Following publication of the Congress report, the then Ministers for Finance and Social Protection jointly established a public consultation on the use of such employment structures, with a closing date for submissions of 31 March, 2016. We know that numerous submissions were received and that a report was duly prepared. We are still awaiting its publication.
Meanwhile, the problem has leached out across the wider economy with the practice taking root in education, health care and the aviation sector. Indeed, a recent news story detailed how Ryanair pilots based in the UK were considering “legal action to challenge the airline’s widespread use of employment through agencies or special companies.” (RTÉ, 26 October)
In construction, some form of redress will be found in the recently-enacted Sectoral Employment Order that sets legally-enforceable pay rates and conditions for workers in that area. But the bigger problem to be addressed by government is the fact that, as of now, Bogus Self Employment remains entirely legal.