Tax and Duty Manual Part 05-01-30
The information in this document is provided as a guide
only and is not professional advice, including legal advice. It
should not be assumed that the guidance is comprehensive
or that it provides a definitive answer in every case.
1
Revenue Guidelines for Determining Employment
Status for Taxation Purposes
Part 05-01-30
Document created May 2024
Tax and Duty Manual Part 05-01-30
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Table of Contents
1. Introduction ......................................................................................................3
2. Decision-making Framework.............................................................................7
3. Understanding the Decision-making Framework..............................................8
3.1 Work/wage bargain........................................................................................8
3.2 Personal Service ...........................................................................................12
3.3 Control..........................................................................................................15
3.4 All the circumstances of the employment....................................................19
3.5 The legislative context..................................................................................23
4. What does the decision mean for businesses? ...............................................25
4.1 Determination of employment status for taxation purposes.......................25
4.2 Who is an employee? ...................................................................................25
4.2.1 Construction ..............................................................................................26
4.2.2 Part-time, casual and seasonal workers ....................................................27
4.2.3 Workers engaged in a domestic setting ....................................................28
4.2.4 Couriers and other transport providers.....................................................29
4.2.5 Media.........................................................................................................29
4.2.6 Public sector ..............................................................................................30
4.2.7 Platform operators ....................................................................................30
4.3 Provision of workers through a Company ....................................................32
4.4 Provision of workers through an employment agency ................................32
5. Decision Tree...................................................................................................33
6. Examples .........................................................................................................34
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1. Introduction
For tax purposes, the treatment of individuals who are engaged as employees
(‘contract of service’) differs to those who are engaged as a contractor/self-
employed (‘contract for service’), although there is generally no difference in the tax
rate which applies
1
.
Where an individual is engaged under a contract of service, i.e., as an employee
taxable under Schedule E, income tax, USC and PRSI should be deducted from his or
her employment income through their employer’s payroll system on or before when
a payment is made. He or she can claim a deduction through MyAccount for
expenses incurred wholly, exclusively and necessarily in carrying out the duties of
the employment. For the avoidance of doubt, “office holders” (e.g., Company
Directors) are always subject to PAYE.
Where an individual is engaged under a contract for service, i.e., as a self-employed
individual taxable under Schedule D, he or she will generally be obliged to register
for self-assessment, to pay preliminary tax and file their own income tax returns
using the Revenue Online Service (ROS). He or she can claim a deduction for
expenses incurred wholly and exclusively for the purpose of his or her trade or
profession.
Each business making payments to individuals needs to correctly determine whether
individuals are employed or self-employed based on the facts and circumstances of
each relationship and payment. While it is usually clear whether an individual is
employed through a ‘contract of service’ or self-employed through a ‘contract for
service’, it has not always been immediately obvious and it has led to confusion in
relation to their employment status. There is no single, clear legal definition of the
terms “employed” or “self-employed” in Irish or EU law.
These Guidelines are being issued to outline the tax implications of the Supreme
Court judgment of 20 October 2023 in ‘The Revenue Commissioners v Karshan
(Midlands) Ltd. t/a Domino’s Pizza’ (“the case”) in making such a determination. The
judgment was delivered by Mr. Justice Murray and when referencing his analysis
throughout this document, it is referred to as “the judgment”. The full text of the
judgment is available at the Court Service website.
These Guidelines set out the key elements of the judgment and its implications for
businesses engaging employees, workers, contractors or sub-contractors. It is
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There is a 3% USC surcharge on non-PAYE income over € 100,000
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important to stress that the case was concerned solely with the proper tax
treatment of the workers concerned. The broader question of employment rights
was not before the Court and was not considered by it.
While Revenue has responsibility for determination of employment status of a
worker for taxation purposes, responsibility for determination of employment status
of a worker for PRSI purposes falls to the Department of Social Protection. In
general, self-employed individuals and certain company directors are liable to pay
Class S PRSI, whereas employees generally pay Class A PRSI, with their employers
also making a PRSI contribution. Each class has different PRSI rates and entitlements.
If an employer or employee is unsure as to the correct PRSI class to apply to
payments made to an employee, the case can be referred to Scope Section in the
Department of Social Protection, Áras Mhic Dhiarmada, Store Street, Dublin 1 D01
WY03 for a determination. Further details can be obtained at Operational
Guidelines: Scope Section - Insurability for PRSI purposes.
Responsibility for a range of employment rights, such as employment equality,
minimum wage rates, holiday pay, sick pay, maternal and paternal leave, sectoral
pay agreements, etc., falls to the Workplace Relations Commission (WRC) under the
aegis of the Department of Enterprise, Trade and Employment. The question of
whether a person is an employee or is self-employed for the purposes of Irish
employment rights legislation depends on the definition contained in each
instrument, for example, the Equality Acts, health and safety legislation, the National
Minimum Wage Act, the Unfair Dismissals Act, etc. The WRC’s Adjudication Service
and the Labour Court (on appeal) determine employment status as a preliminary
issue when adjudicating on employment rights complaints. Information on
employment rights can be obtained from the WRC, O’Brien Road, Carlow. Further
details can be obtained at the Workplace Relations Commission website.
Each State body operates within its own legislative framework and a decision by one
body is non-binding on the other two bodies. While Revenue endeavours to ensure
consistency, occasionally, due to the separate legislative frameworks, differences
arise. As a result, it cannot be assumed that the decision of one State body will be
replicated by either or both of the other two.
The Code of Practice on Determining Employment Status (“the Code”) was originally
developed in 2001 by the Employment Status Group under the Programme for
Prosperity and Fairness to address concerns around the number of individuals
categorised as ‘self-employed’ where ‘employee’ status would have been more
appropriate. It was updated in 2007 by the Hidden Economy Monitoring Group
under the Towards 2016 Social Partnership Agreement.
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In 2021, the Code was further updated by an interdepartmental working group
comprising of the Department of Social Protection (DSP), Revenue and the WRC. The
purpose of the Code is to provide a clear understanding of employment status,
taking into account labour market practices and developments in legislation and
caselaw. It aims to be of benefit to employers, employees, independent contractors
and legal, financial and HR professionals, together with staff in the DSP, Revenue and
the WRC.
Following the judgment, Revenue is working with colleagues in DSP and the WRC to
update the Code.
The judgment provides an extensive review of caselaw to date in the area of
determination of employment status, and succinctly summarises it through the
provision of a decision-making framework. The decision-making framework consists
of five questions that should be used to resolve the question of whether a contract is
one of service (employee) or for service (self-employed). This will greatly assist
businesses in determining the employment status of workers, i.e., whether they are
employed or self-employed.
It has restated the position that the terms and conditions of an engagement as set
out in a written contract should be considered when determining the status of the
relationship. However, they may not be the sole determining factor as the facts and
circumstances of that relationship may also have to be considered in the application
of the decision-making framework.
It has also clarified that there does not need to be a continuity of service, in effect, a
worker engaged to carry out one job, gig or shift, will generally be an employee for
tax purposes for that one job, gig or shift.
The judgment was concerned with the tax treatment of delivery drivers who were
treated as self-employed contractors. It is important to note that the judgment also
applies across all sectors and not just delivery drivers. This is considered further in
these guidelines. Revenue’s treatment of services supplied through a Personal
Services Company, or a Managed Services Company, which are common structures
through which contracting services are supplied, has not changed. Revenue do not
look through corporate structures, except in very limited circumstances specifically
provided for in the Taxes Consolidation Act. In that regard, for tax purposes, the
judgment only relates to individuals and there is no change in the tax position for
businesses who engage companies to carry out work on their behalf.
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Having considered the full facts and circumstances of the case, and applying the five-
step framework, the Supreme Court unanimously confirmed Revenue’s
determination of the employment status for taxation purposes of the workers in the
case as employees.
Some businesses have relied on previous decisions of Deciding Officers of the
Department of Social Protection, to treat workers as self-employed for the purpose
of tax. With the clarification from the judgment, such previous decisions cannot be
relied upon for determining the correct taxation treatment. The five-step framework
should be applied to each relationship to determine the taxation status of each
worker.
As outlined throughout these guidelines, there are a number of workers across a
number of sectors who will need to be treated as employees for tax purposes, where
previously they have been treated as self-employed. It is essential that businesses
urgently and comprehensively review arrangements with all workers and determine
their employment status for taxation purposes. Where a business previously treated
a worker as self-employed, rather than as an employee, and the review of these
arrangements by reference to the five-step framework indicates that they are
employees for tax purposes, the business must now rectify that position by treating
the relevant workers as employees and operating PAYE.
Throughout these guidelines, the term ‘business’ is used to describe any recipient of
a service and includes not-for-profit entities (such as sporting organisations and
charities), and ‘worker’ is used to describe the service provider (i.e., the self-
employed individual, or employee, as the case may be).
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2. Decision-making Framework
The decision-making framework consists of five questions as follows:
“1. Does the contract involve the exchange of wage or other remuneration for
work?”. This is more commonly known as the ‘Work/Wage bargain’ and is
explained in more detail in Section 3.1.
“2. If so, is the agreement one pursuant to which the worker is agreeing to
provide their own services, and not those of a third party, to the employer?”.
This is more commonly known as ‘Personal Service’ and is explained in more
detail in Section 3.2.
“3. If so, does the employer exercise sufficient control over the putative
employee to render the agreement one that is capable of being an
employment agreement?”. ‘Control’ is explained in more detail in Section 3.3.
“4. If these three requirements are met, the decision maker must then determine
whether the terms of the contract between the employer and worker
interpreted in the light of the admissible factual matrix, and having regard to
the working arrangements between the parties as disclosed by the evidence,
are consistent with a contract of employment, or with some other form of
contract having regard, in particular, to whether the arrangements point to
the putative employee working for themselves or for the putative employer.”.
‘All the circumstances of the employment’ is explained in more detail in
Section 3.4.
“5. Finally, it should be determined whether there is anything in the particular
legislative regime under consideration that require the court to adjust or
supplement any of the foregoing.”. ‘The Legislative Context’ is explained in
more detail in Section 3.5.
The first three questions are to be viewed as a filter. If any of these are answered
negatively, there cannot be a contract of employment. If the first three questions
are answered affirmatively, questions four and five must then be considered to
determine if a contract of employment exists. The Decision Tree at Section 5
provides a visual representation of how the framework should be applied.
Section 3 analyses each of the five questions in more detail.
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3. Understanding the Decision-making Framework
The five-question decision making framework is expanded on in this section. As
detailed above, questions one to three must be answered ‘yes’ for there to be a
contract of employment, with questions four and five then considered.
3.1 Work/wage bargain
The Supreme Court reframed the ‘mutuality of obligation’ test as simply being a
reasonable description of the work/wage bargain. It is necessary to establish if there
is an exchange of work for remuneration before a working arrangement could be
categorised as an employment contract.
The judgment considers that there has been unnecessary confusion caused in
determining employment status by using the term “mutuality of obligation”. The
confusion caused is reflected in the judgment as follows:
“The fact is that the term ‘mutuality of obligation’ has, through a
combination of over-use and under-analysis been transformed in
employment law from what should have been a straightforward description
of the consideration underlying a contract of employment, to a wholly
ambiguous label. That ambiguity has enabled it to morph from merely
describing the consideration that must exist before a contract is capable of
being a contract of employment, to its being presented as a defining feature
that in itself differentiates a contract of service from a contract for services.
The consequence has been to assume that the ‘mutual obligations’ that
subtend a contract of employment are in all cases necessarily and
categorically different from those that underlie a relationship of employer
and independent contractor. This is the fundamental error in Karshan’s legal
analysis.”.
The judgment ultimately concludes that the confusion:
“…will be most effectively avoided in future if the use of the phrase in this
arena is discontinued.”.
It remains the position that there must be a wage or other consideration as
otherwise there is no employment contract:
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“The phrase [Mutuality of Obligation] should be viewed as doing no more
than describing the consideration that has to be present before a working
arrangement is capable of being categorised as an employment contract.”.
Thus, the first question to consider is whether there is actually a contract (whether
express or implied) in place at all:
“It goes without saying that the first question a decision maker must broach
when determining if the parties have entered into an employment contract,
is whether they have entered into a contract at all. Arrangements lacking an
intention to create legal relations (as may be the case in what are truly casual
or domestic agreements) and/or which are unsupported by consideration (as
may be the case with volunteers) will be immediately out-ruled.”.
Payment of expenses to volunteers solely to reimburse them for expenses incurred,
up to civil service rates, to allow them to undertake their work for an organisation
whose functions and aims are both altruistic and non-commercial, is not
‘consideration’ in the context of this work/wage bargain. Further detail on payments
to volunteers is included on revenue.ie.
Similarly, arrangements that are truly casual or domestic in nature, e.g., where a
family engages a person to attend their home to “mind” their child for a few hours
on an ad-hoc basis would not create a legal relationship. However, where a family
engages a child minder to attend their home for a fixed number of days per week at
set times, etc., this would be indicative of a contract of employment, subject to the
application of the framework.
The judgment outlines different types of arrangements where an employment
contract may arise:
“For as long as a worker is actually undertaking work for which the employer
is liable to pay them, there is consideration that may be characteristic of an
employment contract: a single engagement can give rise to a contract of
employment if work which has in fact been offered is in fact done for
payment, and a contract which provides merely that a worker will be paid for
such work as they perform is capable of being a contract of service.”.
Thus, a contract may consist of a regular wage for work bargain, a series of
agreements governing the discharge of particular tasks, an agreement to complete
one identified task, an ongoing agreement defined by an umbrella contract, or some
combination of the foregoing. It is possible therefore that a worker can be
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considered an employee in respect of one “job”, even where there is no continuity of
obligation. This is explained further below.
The judgment clarifies:
“To qualify as an employment contract for the purposes of this initial hurdle,
however, the consideration must involve a promise of some kind by the
worker to work for the putative employer. That promise may be one to work
at defined points into the future, it may be to work if called upon to do so, or
it may be to work starting more or less contemporaneously with the
agreement itself. It may be to work continuously, or over an undefined
period as called upon, or for a defined period(s), or for the purposes of
completing a specific task(s).”.
Turning then to the employer:
“The obligations on the employer may be to provide work, to pay for work, to
retain the worker on the books and/or to confer some benefit on the worker
which is non-pecuniary. These may, but need not necessarily, involve an
ongoing or continuous obligation into the future to provide work.”
It is necessary to determine the terms of the contract to understand the work/wage
bargain:
“In the course of that process, it will be necessary to determine what,
precisely, the terms of the alleged contract are, and whether they derive
from written agreement, oral agreement, are express, implied, or fall to be
inferred from a course of conduct. There will, in some circumstances, be an
issue of characterisation that this case shows can be important: is the
contract a regular wage for work bargain with ongoing obligations to pay and
work, is it a series of employment agreements governing the discharge of
particular tasks, is it an agreement to complete one identified task, is it an
ongoing agreement defined by an ‘umbrella’ contract, is it some combination
of the foregoing and, indeed, is the agreement one for the exchange of
labour for pay at all? In some cases involving a so-called triangular
relationship, it may be necessary to very specifically identify which
obligations are owed by which party to another.”.
However, there is no requirement for there to be an ongoing commitment:
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“…the most important issue that arose before this court was the question of
whether it is a sine qua non of such a relationship (i.e. employer and
employee) that there be an ongoing reciprocal commitment extending into
the future to provide and perform work on the part of the employer and
worker respectively.”.
The judgment confirms that it may be important when deciding if there is continuous
employment for the purposes of certain statutory regimes, but it is not a “sine qua
non” (essential condition) of an employment relationship.
In summary, provided there is payment by a business to a worker for a service,
whether agreed in writing or not, and whether the work is carried out on a once off
basis, or on a continuous basis, or anything in between, there is a contract which is
capable of being an employment contract. Indeed, the consideration of the
judgment regarding the work/wage bargain would strongly suggest that the default
position is that, for the purposes of this test, there is likely to be a contract of
employment unless it can be clearly demonstrated otherwise. Examples indicative of
being capable of being a contract of employment (subject to the other elements of
the framework) include:
An individual undertaking a security role at one sporting event for a set fee;
An individual serving at a bar at one concert for a set fee;
A labourer working for a week on a building site on an hourly rate.
Examples of where there is no work/wage bargain where the individual is not
treated as an employee for tax purposes include:
An individual providing stewarding services at one or a series of matches in
an unpaid capacity;
An individual on a rota working part-time every week in a charity shop as a
volunteer in an unpaid capacity;
A family member minding children full-time in an unpaid capacity.
Whether the agreement between the business and worker in the examples above is
in writing or verbal, whether its terms are express or implied, and whether it’s a
single or ‘umbrella’ contract, will not alter the position. If the business has
determined that the answer to this question is “yes”, it must proceed to examine the
second question of the framework – personal service.
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3.2 Personal Service
This question considers whether the worker has agreed to provide their services to
the business personally. This is what is known as the ‘substitution test’. Substitution
concerns a worker’s right to appoint someone else as a substitute if he or she is
unable or unwilling to do all or part of the work, or never intended to do the work
themselves. In other words, it concerns whether the worker can “subcontract” the
work or hire assistants, and whether the agreement provides for personal service or
can the worker independently arrange for someone else (a "substitute”) to provide
the service. An important question to ask when considering this test can be who
does the work when the worker is absent?
The judgment reiterates the importance of this test by saying:
“This is more than just a matter to be ‘taken into account’, as the decision
maker has to make a judgment having regard to the terms of the agreement
and the facts as to whether the agreement is, or is not, one for personal
service. This is the essence of an employment agreement.”.
It was indicated that it would be:
“…helpful to separate out the requirement of personal service so as to make
clear that it is a requirement and not merely a factor to be put into the mix.”.
While some degree of limited substitution is consistent with a contract of service,
the judgment notes that:
“Substitution clauses which impose substantive restrictions on the
circumstances in which a worker can delegate the obligations they have
assumed will thus not be inconsistent with employment status.”.
The judgment further refines the term by saying:
“A right of substitution available only where the worker is unable to carry out
the work is consistent with personal performance. A right of substitution
limited only by the need to show that the substitute is qualified to do the
work is not consistent with personal service, while a right only with the
consent of another person who has absolute and unqualified discretion to
withhold consent will be consistent with personal performance.”.
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The judgment summarises the foregoing by saying:
“But, in every case it is necessary to decide if the agreement is just one for
personal services, whether it is an agreement for personal services with a
conditional capacity for delegation, or whether it is an agreement that
enables such unconditional delegation that it is not a contract for personal
services at all.”.
Thus, an important factor in assessing the level of substitution possible includes a
consideration as to whether and to what extent the business has a say in who the
worker hires. Other important factors to consider are whether and to what extent
the substitute is controlled and/or paid by the business or the worker. The judgment,
in referring to Pimlico Plumbers Ltd v Smith [2017] EWCA Civ.51 states:
“An unfettered right to substitute is inconsistent with an undertaking to
provide the workers service personally. A conditional right to substitute may
or may not be inconsistent with personal performance depending on the
conditionality, and in particular on the nature and degree of any fetter: a
limited and occasional right will point to personal service.”.
A typical characteristic of an independent contractor or self-employed person is that
they are free to hire other people, on his or her own terms, to do the work which has
been agreed to be undertaken.
In situations where there are umbrella contracts such as existed in the Karshan case
itself, the judgment states:
“…where the contract of employment is an individual assignment governed in
part by an umbrella agreement, this means that the worker cannot both
accept an offer of work in accordance with the umbrella contract, and then
be permitted to unconditionally delegate it.”.
In summary, the more restrictions imposed on the freedom for a worker to appoint a
substitute, the more indicative the arrangement is that of a contract of employment.
The types of restrictions that may occur which indicate an employment relationship
will be arrangements where prior approval of substitutes is required such that the
business has an unfettered right of refusal, payment of substitutes is made directly
by the business rather than the person they are providing cover for, or where
substitutes are from a pool of preapproved workers.
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Examples where the substitution test is indicative of a contract of employment
(subject to the other elements of the framework) include:
No ability to nominate a substitute, i.e., the business arranges someone to
provide cover if necessary;
A worker engaged as a child minder in the home of a family, where the
worker cannot nominate a substitute;
A delivery driver who can only nominate a substitute from a list of candidates
provided by the business.
Examples where the substitution test is indicative of a self-employment contract
include:
A contract to run a bar at a racecourse with no provision included as to who
will serve the drinks;
A contract to install a gas boiler at a residential property without any
specification that the work be undertaken by one named individual;
A contract to provide landscaping services, whether at a private or
commercial setting, without any specification that the work be undertaken
by one named individual.
If the business has determined that the answer to this question is “yes”, it must
proceed to consider the third question of the framework – control.
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3.3 Control
Control refers to the ability, authority, or right of a business to exercise control over
a worker concerning what work should be done, and how, when and where it should
be done. The continuing importance of control was noted in the judgment as
follows:
“While the meaning of ‘control’ has, as I have explained earlier, evolved, this
long established feature of the Irish cases has never been questioned, and
indeed Walsh J. in Roche v. Patrick Kelly and Co. Ltd. [1969] IR 100 at p. 108
(with whose judgment Ó Dálaigh CJ and Haugh, Budd and FitzGerald JJ.
agreed) authoritatively restated it: “[w]hile many ingredients may be present
in the relationship of master and servant, it is undoubtedly true that the
principal one, and almost invariably the determining one, is the fact of the
master’s right to direct the servant not merely as to what is to be done but as
to how it is to be done. The fact that the master does not exercise that right,
as distinct from possessing it, is of no weight if he has the right.”.
As the third filter of the decision-making framework, control is described as a
“gateway”. It is not determining the issue of employment status but rather
describing the legally minimum level of control before a relationship is capable of
being an employment contract. The judgment notes that this level of control differs
depending on the engagement:
“What this ‘legally minimum’ element of control is, will depend on the nature
of the employment, and in some cases it may indeed prove to be a wide
gateway. It is well and clearly expressed by MacKenna J. in RMC: the control
involves a lawful authority to command ‘so far as there is scope for it’ (at p.
515). The question is thus directed to whether there is a sufficient framework
of control in the sense of ultimate authority, rather than the concept of day-
to-day control envisaged by the older cases (see Montgomery v. Johnson
Underwood Ltd. [2001] EWCA Civ. 318, [2001] IRLR 269 at para. 19).”.
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There must obviously be a minimum level of control before a relationship can be
capable of being an employment contract. The judgment confirms this:
“…if the putative employer does not enjoy the power to direct the type of
work the worker is required to do, the relationship will not be capable of
constituting an employment relationship (Minister for Education v. The
Labour Court and ors. at para. 9.13, and para. 102 of the reported judgment).
Similarly if the service is provided to a person who has no entitlement to
prescribe times by which the work is to be done, no power to determine
where or in what conditions the work is to be done or, within an enterprise,
the persons who were to do particular work, it is difficult to see how this
requirement could be met.”.
When assessing the degree of control held by the business and the degree of
independence held by the worker, it should be borne in mind that the right of the
business to exercise control is more relevant than whether they actually exercise
this right. The judgment states:
“…the decision-maker is concerned to establish a right of control, over what
is to be done, at least generally the way in which it is to be done, the means
to be employed in doing it, the time when and the place where it shall be
done. That must take account of the nature of the employment and the
control an employer would be reasonably expected to exert.”.
The actual degree of control will vary with the type of work and the skills of the
worker. Deciding the degree of control that exists when examining the engagement
of experts can be difficult. Due to their expertise and specialised training, they may
need little or no specific direction in their daily activities. When considering the right
of control over what is to be done and modern working with skilled and unskilled
labour being examined, the judgment notes:
“If unskilled, close direction as to the means and manner by which the work
is to be done is expected. While if skilled, the employer would not be
expected to be in a position to direct the worker as to how to achieve the
prescribed objective.”.
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This is expanded on further:
“While in cases involving skilled work, it is to be expected that the employer
will not have the right to direct how the work is to be done, the test requires
that the employer retain some residual authority over it.”.
An example of such residual control would be the expectation to meet clearly
defined deliverables, or meet clearly set targets, within defined deadlines. Control
for skilled workers would generally not extend to how work is undertaken, rather
what is required to be done by when.
An additional test to consider, as a subset of control, is the ‘enterprise test’, which
considers which of the parties to a working relationship bore the economic risk:
“…. it is not possible to separate the question of control from the question of
whether the evidence points to the worker carrying on business on their own
account.”.
The following parts of the judgment provide detailed analysis of how this is to be
examined:
“The need for this element has not been diminished, nor has the RMC test
been supplanted, by a ‘business on his or her own account’ test as a result of
the decision in Henry Denny”,
” … the issue of whether a person is in business on their own account is
relevant to the question of control, because the degree of control exercised
by the employer over a person in business on their own account will, by
definition, be less than that exercised over an employee.”,
“… if the service is provided to a person who has no entitlement to prescribe
times by which the work is to be done, no power to determine where or in
what conditions the work is to be done or, within an enterprise, the persons
who were to do particular work, it is difficult to see how this (control)
requirement could be met.”.
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Integration (the extent to which a worker, and their work, form a coherent part of
the business) was also not considered by the Supreme Court to be a stand-alone test
and rather it can be, but does not always have to be, viewed within the context of
control. The judgment states:
“It should be viewed as doing no more than articulating a possible feature of
some employment arrangements that may negate or support control, and/or
might otherwise suggest that the worker is so divorced from the employer’s
undertaking that they cannot be properly viewed as being employed within
it.”.
The judgment cites Lord Denning in Stevenson, Jordan and Harrison v. MacDonald
and Evans [1952] 1 TLR 101 as first formulating the test:
“…One feature which seems to me to run through the instances is that, under
a contract of service, a man is employed as part of the business and his work
is done as an integral part of the business; whereas under a contract for
services his work, although done for the business, is not integrated into it but
is only accessory to it.”.
Determining this (i.e., the integration test) has its difficulties, which is why it is not
treated as a stand-alone test:
“…the notion of which work is ‘integral’ to a business is not easily applied has
been frequently observed (see for example Deakin and Morris at para. 2.14).
So, a decision maker may be quite right in a particular case to examine the
extent to which the worker and their work form a coherent part of the
employer’s organisation but treating this as a stand-alone ‘test’ (with the
implication that it must be interrogated in all cases) is neither necessary nor
helpful.”.
Additional matters to consider when examining control include elements such as
notice periods, whether and to what extent the business controls the method, and
amount, of payment, and the working hours of the worker.
Tax and Duty Manual Part 05-01-30
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3.4 All the circumstances of the employment
If the first three “filter” questions on work/wage bargain, personal service and
control are answered affirmatively, consideration then needs to be given to the
entire factual matrix of the engagement. The basis for this ‘filtering’ approach was
set out in the judgment as follows:
“While in many cases decision makers will always end up at the same point –
looking at all relevant factors – I think the prescription of a method should at
least assist in obtaining uniformity of approach, in both clearly identifying
and removing from the inquiry at an early stage those situations which, in
law, are incapable of amounting to a contract of employment and in
describing the ‘pointers’ that suggest one way or another whether an
arrangement between worker and employer should be viewed as consistent,
or inconsistent, with the status of employment.”,
“…. I think the right approach is to view the first three questions I have just
identified as a filter in the form of preliminary questions which, if any one is
answered negatively means that there can be no contract of employment,
but if all are answered affirmatively, allow the interrogation of all of the facts
and circumstances to ascertain the true nature of the relationship. This is
what Keane J. in Henry Denny described as the consideration of ‘all the
circumstances of [the] employment.”.
When reviewing all the facts and circumstances that should be interrogated to
ascertain the true nature of the relationship, the judgment notes that:
“While many ‘tests’ have been formulated around the elements of an
employment relationship, they all lead directly or indirectly to two closely
related (and somewhat unremarkable) conclusions – first, that every case
depends on the particular facts, and second that in distinguishing an
arrangement that is a contract of employment from one that is not, it is
necessary to assess all relevant features of that relationship, identifying those
that are, and those that are not, consistent with an employment contract,
and determining based upon the sum of those parts the correct
characterisation. The role of the various tests is thus, ultimately, not as much
to condition the content of that ‘multi-factorial’ analysis (although of course
as the law has developed various important and helpful indicia that are, and
are not, consistent with an employment contract have been identified in the
cases) as it is to formulate a workable structure within which that analysis
Tax and Duty Manual Part 05-01-30
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can be conducted while, at the same time, enabling the early elimination of
those arrangements that do not present the legally required minimum
contents of such a contract.”.
The complete wording for this step of the framework is as follows:
“If these three requirements are met the decision maker must then
determine whether the terms of the contract between the employer and
worker interpreted in the light of the admissible factual matrix and having
regard to the working arrangements between the parties as disclosed by the
evidence, are consistent with a contract of employment, or with some other
form of contract having regard, in particular, to whether the arrangements
point to the putative employee working for themselves or for the putative
employer.”.
The judgment expands on four specific matters to be considered at this stage. The
first two are as follows:
1. “First, while RMC looked to ‘the provisions of the contract’, the decision in
Castleisland establishes that the contract itself must be interpreted (as, today,
with all contracts) in the light of the factual matrix in which it was concluded.
There is nothing new in that regard in Irish law, but insofar as the RMC test does
not make this clear, it should be expressly stated.”.
2. “Second, both Henry Denny and Castleisland demand that in conducting that
inquiry, the court must take into account the actual dealings between the
parties. Keane J. thus referred in the first of these cases to the relevance of ‘the
manner in which the work was done’, Murphy J. to ‘the facts or realities of the
situation on the ground’ and (in Castleisland) Geoghegan J. stressed that the
Appeals Officer whose decision was in issue in that case, was bound to examine
‘what the real arrangement on a day to day basis between the parties was’.”.
The judgment concludes that these statements:
“…mean that where an agreement purports to characterise the relationship
between or the status of the parties, that description does not fetter the
function of the court in determining what, as a matter of law, the agreement
actually is. ..[..].. These statements also require that, as a matter of the
general law, an agreement which says one thing when both parties in fact
intend another will not be given effect to under the doctrine of sham, or
perhaps mistake.”.
Tax and Duty Manual Part 05-01-30
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On that basis, while a detailed written agreement may carry significant weight,
efforts to describe a relationship in a particular way which differs from the day-to-
day reality, in order to circumvent or frustrate the operation of statutory provisions,
will be challenged. Additionally, terms of a written contract, which seek to describe
the legal consequences of rights and obligations or conclusions of law, rather than
defining the rights and obligations of the parties to the contract, may be
disregarded. Phrases such as “as a self-employed contractor you will be responsible
for your own tax” will carry little weight.
However, it is worth noting that the judgment caveated this somewhat as follows:
“As I have alluded to, there may well be cases in which it is found that the
parties elected to describe their relationship in a particular way in order to
circumvent or even frustrate the operation of some statutory provision,
which would engage both questions of statutory intent and the doctrine of
sham. But outside that situation whether, and if so when, it is possible in Irish
law to otherwise allow evidence of the conduct of the parties to override the
consequences of detailed and written contract, have to await a case in which
that question is properly in issue, and is argued in full.”.
The third and fourth elements to be considered are as follows:
3. “Third, the last clause in the RMC test is reframed in this formulation to make
clear that this part of the inquiry does not depend on any presumption arising
from the other parts. It is free standing, the onus of proof being in the ordinary
way on the party who asserts any proposition of fact, law or mixed fact and law
having regard to the statutory process in which the decision is made.”.
4. “Fourth, it is useful to remember that if the contract is not one of employment it
is something else, and the question of whether it is within the former category
cannot in reality be resolved without identifying what it actually is. … the issue
may, for example, be a choice between an employment relationship and one of
copartners (as in DPP v. McLoughlin [1986] IR 355) or joint venturers, or (as in
RMC) a contract of carriage or (as in Cheng Yuen v. Royal Hong Kong Golf Club
[1998] ICR 131) a licence agreement permitting the worker to provide a service
to third parties. Nonetheless, the effect of the Market Investigations case was to
elevate the issue of whether the facts were consistent or not with the worker
carrying on business on their own account, or whether they pointed to the
worker conducting the business of the employer”.
Tax and Duty Manual Part 05-01-30
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After reviewing the complete factual matrix, consideration should be given as to
whether the evidence is consistent with a contract of employment with the
individual working for the business as an employee or whether the individual is self-
employed. The question to be considered is whether the facts are consistent or not
with the worker providing services on his or her own account, or whether the facts
indicate that the worker is providing the services on behalf of the business. The
judgment notes that:
“… the law makes it clear that the capacity to profit in a material way from
their own skill, the need for the employee to invest significantly in their
ability to undertake the work, and the requirement to bring tools or
equipment to the task all lean against the existence of a contract of
employment.”.
However, there are no “static characteristics” indicative of an employment contract,
rather:
“What depends on the particular facts, however, is the place of those
positives and negatives and the weight to be given to them, in the balancing
exercise undertaken in a given case. That is a matter, when the relevant
factors pointing one way or the other are identified, for the assessment of
the decision maker.”.
The judgment states that it is appropriate that control be considered again at this
stage:
“…as there will be cases in which it is so extensive as to point overwhelmingly
in the direction of employment just as there will be cases in which it is so
attenuated as to push the agreement towards another type of relationship.”.
Section 3.3 above contains a detailed narrative on the control test.
Tax and Duty Manual Part 05-01-30
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3.5 The legislative context
In relation to the legislative context, the judgment states that consideration needs to
be given to any legislation that requires an adjustment or supplement to any of the
foregoing questions in the particular circumstances of the relationship being
considered. This would occur where there are:
“…legislative provisions in which it is intended to carry a different meaning.
This may be evident from the language used in the statute as a whole, or
indeed its overall purpose and context.”.
This question opens the prospect that:
“…particular legislative schemes – in particular those involving the protection
of particular employee rights – might require a modification of either the
test, or (as was decided by the United Kingdom Supreme Court in Uber) to
the approach adopted to the relationship between a written contract of
employment and the practices of the parties in implementing it in a particular
case, must be factored into the analysis.”.
While there was no such legislation requiring application of this part of the
framework in the case, the judgment outlines this as one of the five questions for
cases where it may be relevant.
As an example of how this question of the framework might apply, one could look to
the EU Directive on Platform Workers. On 24 April 2024, the European Parliament
adopted the Directive. The provisions currently provide how employment status will
be determined for individuals working through digital platforms. The Directive aims
to correct the employment status of those who have been misclassified as self-
employed, improve transparency and regulate the use of algorithms and data in
taking decisions about platform workers. Once the Directive is approved by the
European Council and published in the Official Journal of the EU, all EU Member
States have two years to bring their national legislation in line with the Directive.
The Directive obliges EU Member States to establish a rebuttable legal presumption
of employment at national level, aiming to correct the imbalance of power between
the digital labour platform and the person performing platform work. The burden of
proof lies with the platform, meaning that it is up to the platform to prove that there
is no employment relationship.
Tax and Duty Manual Part 05-01-30
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Another example is the application of PAYE on office holder payments, where no
application of the framework will be required, as application of PAYE on office holder
income is provided for in section 112 of the Taxes Consolidation Act.
Tax and Duty Manual Part 05-01-30
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4. What does the decision mean for businesses?
4.1 Determination of employment status for taxation purposes.
A worker’s employment status for taxation purposes is not a matter of choice - it
depends on the terms and conditions of the role and whether the practical working
arrangements between the business and the worker are consistent with the express
categorisation of the contract. While it is usually clear whether an individual is
employed or self-employed, it may not always be obvious. The judgment provides
clarity on the determination of employment status of workers for taxation purposes.
Businesses who engage workers now have a clear decision-making model by
reference to the five-question framework set out in the Supreme Court judgment to
determine the employment status of each worker for taxation purposes. It is
essential that businesses urgently and comprehensively review arrangements with
all workers and determine their employment status for taxation purposes. It is clear
that there are a number of workers across a number of sectors who will need to be
treated as employees for tax purposes, where previously they have been treated as
self-employed. For those re-classified as employees for tax purposes, the business
will have an obligation to operate PAYE.
4.2 Who is an employee?
On foot of this judgment, it’s expected that there will be an increase in the number
of workers that will be determined to be employees for tax purposes once the five-
step framework is applied to their facts and circumstances. For example, it is difficult
to envisage how unskilled workers in the retail or hospitality sectors, or any worker
providing labour only services in the construction or transport sectors, would be
anything other than an employee when the framework is applied. Conversely, the
provision of goods or tools together with labour will not always result in the
relationship being classified as self-employment, particularly when the worker is
engaged in the main by one business or a number of connected businesses.
Businesses have been encouraged to review arrangements and apply the framework
to determine if a worker should be treated as an employee. While not being
prescriptive, Revenue would expect evidence of the analysis done to apply the five-
step framework when a worker is engaged, including, where appropriate, looking
beyond the simple wording of the contract between the business and the worker. As
relationships tend to change over time, it’s important that businesses undertake a
Tax and Duty Manual Part 05-01-30
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regular review of the arrangements to ensure application of the framework at that
later point in time would not result in a different determination.
It is the nature of the engagement that determines the relationship, so it is possible
for a worker to have two or more employers. For example, a student may work as a
food delivery driver two evenings per week and work as a labourer on a construction
site on a Saturday. Having applied the five-step framework, the student can be an
employee in both scenarios.
Also, the fact that there is only one shift/engagement undertaken by a worker does
not in itself mean that a worker is self-employed, he or she can be an employee in
respect of one piece of work, subject to the application of the five-step framework.
Some general commentary on some sectors is included below.
4.2.1 Construction
The construction industry is one industry with a significant number of workers being
treated as self-employed. Since 1970, payments made to these self-employed
workers are subject to Relevant Contracts Tax (RCT) which is operated by the
business paying the worker. Tax is deducted at a rate specified by Revenue, that
being 0%, 20% or 35%. Since 2012, this deduction rate is updated and notified
though ROS in real-time and is determined by the circumstances of the worker with
compliant workers generally seeing 0% deducted, and non-compliant generally being
subject to 20% or 35% deduction. This system reduces potential tax leakage if the
workers fail to file their tax returns and make tax payments. It also operates in the
meat processing and forestry sectors.
Some construction workers are engaged on a full-time, or near full-time, basis by a
single entity or a group of connected entities and have no autonomy as to what work
they do and when they work. On foot of this judgment, subject to the facts and
circumstances and the framework being correctly applied, it is highly likely that such
workers will be determined as employees for taxation purposes.
Other scenarios where a worker is likely to be determined to be an employee for tax
purposes, following the application of the framework, include:
An unskilled worker operating as, for example, a casual labourer paid an
hourly rate, taking direction from the site foreman;
Tax and Duty Manual Part 05-01-30
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A skilled worker (e.g., electrician, plasterer, roofer) who works alone (i.e.,
does not employ a team to work for him or her), uses material supplied by
the business and is told what, where and when to do work;
An individual fitting windows for one company or a group of connected
entities, on a continuous basis, using equipment supplied by the business,
and travelling in or driving a company vehicle.
There will always be workers in the construction sector who are properly treated as
self-employed and paid through the RCT system. Examples include:
An electrician who has his or her own firm with a team of workers, is engaged
to wire a number of houses for a fixed fee, is free to send anyone he or she
wishes to undertake the work and can profit if it’s done more efficiently, i.e.,
in less time;
Any worker who provides their service through a corporate, i.e., they are not
engaged directly as an individual by the business (construction company),
rather the business engages another company to provide a service, which is
undertaken by the worker. In this case, the worker is an employee of the
service company, rather than the construction company.
It is not unusual for skilled workers in the construction industry to be both an
employee and self-employed, but not for the same or connected businesses. For
example, an electrician who is an employee for the majority of the week but
undertakes ad-hoc work for individual householders at the weekend would likely be
self-employed in respect of the weekend work, subject to application of the
framework.
All construction businesses should ensure they have reviewed all workers by
reference to the framework and treat relevant workers as employees, except where
they are clearly self-employed.
4.2.2 Part-time, casual and seasonal workers
There was a perception that when workers were engaged on a part-time or casual
basis, including specifically for one off shifts, they were not employees as there was
no continuous employment obligation. These engagements are particularly
prevalent in sectors such as agriculture (e.g., fruit pickers, drivers for silage
contractors, relief milkers), retail (e.g., shelf stockers, till operators, fuel pump
attendants), entertainment (e.g., extras on tv shows, ticket scanners in venues,
parking attendants) and catering (e.g., waiters and waitresses, bar tenders,
cleaners). Such workers are generally employed for their own service (i.e., they
Tax and Duty Manual Part 05-01-30
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cannot provide a substitute) and would be subject to significant control by the
business. On that basis, it is expected that such workers would be determined as
employees for tax purposes when the framework is applied.
All businesses employing such workers should ensure they have reviewed all workers
by reference to the framework and treat relevant workers as employees, except
where they are clearly self-employed.
4.2.3 Workers engaged in a domestic setting
As mentioned earlier, casual arrangements where a family engages a person to
attend their home to “mind” their child for a few hours on an ad-hoc basis would not
create an employment relationship and obligation to apply PAYE. This equally
applies to engaging trades people to do once-off tasks in the home, e.g., fix
appliances, install a boiler, carry out landscaping work, etc.
Aside from those arrangements, other than one domestic employee in the
employer’s private house paid less than € 40 per week
2
, there is no minimum
threshold for the application of PAYE where a worker is engaged to carry out such
services and, following the application of the framework, they are correctly classified
as an employee.
Generally, subject to the application of the framework, if a person is engaged on a
regular or an ongoing basis to care for a person or people in the home of the cared
for, the payer will have obligations to register as an employer and deduct PAYE.
In relation to the exemption from income tax
3
for gross earnings up to € 15,000 per
annum by individuals who provide a child-minding service for up to 3 children in the
childminders own home, this exemption is only available to self-employed
individuals, i.e., if applying the framework the childminder is determined to be an
employee rather than self-employed, PAYE is to be applied to all income.
Carers engaged through corporates would generally not be employees of the family
but of the corporate providing them. In such instances, the corporate agrees to
provide a carer and should apply PAYE to the payments made to the employees.
2
Section 986(6) TCA 1997
3
Section 216C TCA 1997.
Tax and Duty Manual Part 05-01-30
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Families and individuals engaging such workers should ensure they have reviewed all
workers by reference to the framework and treat relevant workers as employees,
except where they are clearly self-employed.
4.2.4 Couriers and other transport providers
This sector has seen a lot of change with workers generally now generating a
significant portion, if not all, of their income from a single courier firm. In such
instances, workers generally have the logo of the courier firm on their vehicle, wear
a uniform or clothing incorporating the courier firms’ brand, are provided with a
company mobile phone with the number provided to customers, undergo
performance reviews, and undertake deliveries when, where and how (i.e., what
order) as directed by the firm. They are also generally an integral part of the business
of the courier firm. Applying the complete framework, such individuals would
generally be employees rather than self-employed, which they were historically
treated as. Indeed, removal of some elements identified above, e.g., provision of a
company phone or wearing specific clothing, would not generally see a different
determination being made.
It is noted that there are a minority of genuine self-employed couriers still in
existence, providing ad-hoc services to a number of businesses who do not impose
the same level of control over them as set out above. However, every business who
engages couriers should apply the framework to ensure they have correctly
determined the status of their couriers.
All courier firms should ensure they have, following application of the framework,
reclassified appropriate workers as employees, except where they are clearly self-
employed.
4.2.5 Media
Personal service is the essence of the majority of engagements between a media
outlet and its workers such as actors, presenters or journalists. As the business also
generally controls when work is undertaken and where, they would also generally
meet the control test. Due to the skilled nature of the roles, it’s unlikely the workers
will be told ‘how’ to undertake the work, but the level of residual control retained by
the business will result in the control test being met. This is equally applicable to
other workers in the sector such as camera persons, sound engineers and producers.
Free-lance journalists and photographers have been a long-standing feature of the
media industry. Where a worker produces content of his or her own volition and
Tax and Duty Manual Part 05-01-30
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offers that content for sale to various media outlets, his or her status will, subject to
the framework, generally be that of an independent provider subject to self-
assessment as a self-employed worker. Commissioned work, i.e., where a media
outlet engages a person to produce content, will, subject to the framework,
generally result in the person being an employee of the media outlet in respect of
the work.
It is noted that some workers in this sector provide their services through the use of
personal service companies. Such workers will not be employees of the media outlet
but will be subject to PAYE on payments from their personal service companies.
All media firms should ensure they have applied the framework to workers and
reclassified the relevant directly employed workers as employees, except where they
are clearly self-employed.
4.2.6 Public sector
There are no special rules around determining whether a worker is an employee or
self-employed in the Public Sector. The framework equally applies to public sector
workers as all other workers.
It is expected that there may be some workers engaged by public sector bodies who
were treated as self-employed that will, when applying the framework, need to be
treated as employees.
All Public Sector bodies should ensure they have reclassified their directly employed
workers as employees, except where they are clearly self-employed.
4.2.7 Platform operators
Although the method of engagement of a ‘platform’ worker might be different from
traditional methods because of the use of modern technology, such workers will still
be categorised as being either an employee or self-employed using the same
approach as is taken with workers in other sectors. Each engagement must be
looked at based on the facts and circumstances of the case.
Platforms such as online food delivery platforms, with levels of control over workers
in terms of appearance, delivery, substitution and equipment would suggest control
consistent with employment. Similarly, where a business operating through a
platform can supervise performance, including by electronic means, and exercise
control over the distribution or allocation of tasks, it would be consistent with
Tax and Duty Manual Part 05-01-30
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employment. Control over working conditions and restrictions on choosing working
hours will also display control consistent with employment.
While the EU Commission is progressing proposals on employment status in relation
to the gig economy
4
, it is clear from the judgment that the Supreme Court has clearly
established that gig workers can be employees for tax purposes. All businesses
employing such workers should ensure they apply the framework and reclassify
appropriate workers as employees, except where they are clearly self-employed.
4
Once domestic legislation is passed to implement the Directive in Ireland, these guidelines will be reviewed and
updated if necessary.
Tax and Duty Manual Part 05-01-30
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4.3 Provision of workers through a Company
It is open to any worker to incorporate their business, at which point the business is
a separate legal entity. Any engagement of companies by businesses cannot be
contracts of service, or employments, for taxation purposes.
5
This judgment does
not disturb this position.
However, the employment status of workers contracting with those companies will
have to be considered having regard to the decision-making framework, bearing in
mind that those who are office holders will always be subject to PAYE.
4.4 Provision of workers through an employment agency
Revenue does not regard the taxation of workers employed through agencies any
differently to the taxation of workers employed by any other means. PAYE/PRSI/USC
is operated by agencies where the agencies are obliged to pay the person placed
with a business. In contrast, PAYE/PRSI/USC is operated by the business where the
business is obliged to make the payment to the person placed with them.
The PAYE system provides for the concept of a “paying employer”, who may not be
an employer in the strict sense. For example, a person in receipt of a pension can be
an “employee” and the body paying the pension can be an “employer” for the
purpose of operating the PAYE system.
The person who is contractually obliged to make the payment to an employed
agency worker is the employer for the purpose of collecting income tax, USC and
PRSI through the PAYE system. Tax and Duty Manual 05-01-15 explains the tax
treatment in more detail.
5
There are a number of provisions in Chapter 4 of Part 42, for example sections 985C to 985F, which provide for
PAYE liabilities to arise to a person other than the payer.
Tax and Duty Manual Part 05-01-30
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5. Decision Tree
Figure 1 Decision Tree
Tax and Duty Manual Part 05-01-30
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6. Examples
The examples included below are included for illustrative purposes only, and do not
have universal application. Each case has to be examined in the light of its own facts
and circumstances to determine the employment status of the worker for taxation
purposes.
Example 1
A construction company, C Co, engages a general labourer, James, to work on a site.
James is to be paid an hourly rate. James cannot send someone else in his place. C
Co’s foreman determines the hours that will be worked. James does not supply
equipment and supplies labour only.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
James will be an employee based on the relationship and PAYE should be applied by
C Co.
Tax and Duty Manual Part 05-01-30
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Example 2
Richard works as a plasterer for B Co, a building company, on a labour only basis. He
is paid on a daily basis. He takes his instructions from the site foreman. Richard is not
free to provide someone else to perform his duties.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Richard will be an employee based on the relationship and PAYE should be applied
by B Co.
Tax and Duty Manual Part 05-01-30
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Example 3
H Co, a company tax resident in Poland (note – similar position arises if H Co were
based in Ireland), provides a team of six scaffolders under contract to B Co on a
labour only basis. The scaffolders will be paid by H Co at a daily rate. The scaffolders
take their instructions from the site foreman of B Co. The individual scaffolders are
not free to provide someone else to perform their duties.
Similar to example 2, although B Co exercises a significant level of control over the
scaffolders, and the contract between H Co and B Co is for the scaffolders’ personal
service, engagements between two corporates can never be under a contract of
service, so B Co pays H Co for the six scaffolders under a contract for service.
We will now consider the contract between H Co and the scaffolders.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
Tax and Duty Manual Part 05-01-30
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5
Legislative context
N/A
In the first instance, the individual scaffolders will be employees of H Co based on
the relationship and PAYE should be applied by H Co.
However, if B Co is paying the scaffolders, the obligation to deduct PAYE would fall to
B Co in the first instance.
Tax and Duty Manual Part 05-01-30
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Example 4
Peter works as an electrician for B Co. He supplies labour, materials and his own
tools. He is paid a set fee to wire each house. He takes his instructions on what
house to wire next from the site foreman. There are no restrictions on who
undertakes the work Peter has been contracted to do.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
No
3
Control
4
All the circumstances of
the employment
5
Legislative context
As the answer was ‘No’ to one of the first three
questions, the contract is not indicative of an
employment contract, so the remainder of the questions
do not need to be considered.
Peter will be self-employed based on the relationship and PAYE should not be
applied by B Co. Payments made to Peter are reported through the RCT portal by B
Co with RCT deducted as necessary.
Tax and Duty Manual Part 05-01-30
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Example 5
Michael is engaged by a telecommunications company, T Co, to undertake work,
building and installing new telecoms infrastructure, or repairing existing equipment.
He is paid a fee per project. He provides his own tools and safety clothing and if it is
provided by T Co, it is recharged back to him. He is assigned a body of work and is
free to bring someone else in to do the work on his behalf or assist him in
completing it on time. There are no restrictions on taking on other projects at the
same time or with competitors of T Co.
Five Step Framework
No.
Question
Answer
Explanation
1
Work/wage bargain
Yes
Michael is paid a fee to undertake work.
2
Personal Service
No
There is no personal service as there are no
restrictions on sending someone else to
undertake or assist with the work.
3
Control
N/A
While this test does not need to be examined,
commentary is included for completeness.
Michael is told what to do and a deadline is
agreed within which to do it. For H&S purposes,
hours when the work can be undertaken are set
by T Co together with how (from a safety
perspective) it can be done. He is not an
integral part of T Co’s business.
On balance, the ‘control’ test appears not to be
met.
4
All the circumstances of
the employment
N/A
While this test does not need to be examined,
commentary is included for completeness.
In addition to steps 1 to 3, Michael wears
clothes with his own logo. He has his own
business insurance which is a condition of the
contract with T Co. He can benefit from work
efficiencies. He is free to refuse offers of work,
i.e., he only takes on projects he wishes to
undertake. He provides labour and tools. He is
free to provide substitutes. Training costs (e.g.
Safe Pass) are incurred by Michael for himself
and his substitutes.
On balance, if this test was required to be
applied, the indications are that the contract is
not an employment contract.
Tax and Duty Manual Part 05-01-30
40
5
Legislative context
N/A
Michael operates an independent business (self-employed) based on the
relationship and PAYE should not be applied by T Co. Payments made to Michael are
reported through the RCT portal by T Co with RCT deducted as necessary.
Tax and Duty Manual Part 05-01-30
41
Example 6
Anne, an IT professional, provides her services to an IT Multi-National Corporation
(MNC) through a limited company which is owned 100% by Anne, A Services Ltd.
Although the IT MNC exercises a significant level of control over where and when
Anne provides her services, and the contract between IT MNC and A Services Ltd is
for Anne’s personal service, any engagement between two corporates can never be
under a contract of service (employment contract), so IT MNC pays A Services Ltd
under a contract for service.
We will now consider the contract between A Services Ltd and Anne.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Anne will be an employee based on the relationship and PAYE should be applied by
A Services Ltd.
Tax and Duty Manual Part 05-01-30
42
Example 7
Anthony is engaged on a fixed term contract by an IT consultancy company to
provide IT consultancy services for a specific client. Anthony is paid a daily rate. The
contract states that Anthony shall devote all of his time, attention and abilities to the
business of the company. The services must be provided by Anthony or by such
other person of equivalent qualifications and experience as may be approved by the
company in advance, in writing, with the IT company paying the substitute. Standard
weekly commitment as noted on the contract is Monday to Friday 09:00 to 5:30 pm
or as directed by the client. If Anthony is unable to attend on-site for any reason,
such as illness, he is required to contact the company before 08.30am and failure to
do so may be considered a breach of contract. Anthony has his own professional
indemnity insurance.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
Tax and Duty Manual Part 05-01-30
43
5
Legislative context
N/A
Despite the contract being drafted as a consultancy contract and Anthony having his
own professional indemnity insurance, the facts and circumstances determine that
Anthony is an employee and PAYE should be operated by the IT Consultancy
Company.
Tax and Duty Manual Part 05-01-30
44
Example 8
A dental practice engages Avril, as a dental associate, for four mornings per week.
Avril is paid on a per session basis. The contract states that Avril is free to provide a
substitute, but she must get written prior approval. The substitute will be paid
directly by the practice. Avril is not an equity partner and does not participate in the
management of the practice, in determining opening hours, or charge rates for
procedures. The reception and appointment infrastructure is provided by the
practice.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Avril will be an employee based on the relationship and PAYE should be applied by
the dental practice. Additional information on the taxation of locums and dental
associates is available in Tax and Duty Manual 05-01-20.
Tax and Duty Manual Part 05-01-30
45
Example 9
Lisa is engaged by a courier company, Deliveryco, to undertake deliveries for them
using her own van. She is paid a fee per delivery calculated by Deliveryco based on
the distance to be covered to undertake deliveries assigned to her. She is provided
with a uniform. She is told what deliveries to make in what order each day and her
contact details are provided to customers who receive a text letting them know the
time their delivery will arrive. She can send a substitute on an exceptional basis (e.g.,
when sick, if her van is broken), but it has to be someone from a list of approved
drivers provided by Deliveryco. Lisa cannot undertake delivery work for any other
courier company.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Lisa will be an employee based on the relationship and PAYE should be applied by
Deliveryco. Additional information on the taxation of couriers is available in Tax and
Duty Manual 04-01-07.
Tax and Duty Manual Part 05-01-30
46
Example 10
For a pre-determined fee, Ben is engaged on a fixed term contract by a broadcaster
to present a radio and TV show. He is not free to provide someone else to perform
these duties. With advance agreement from the broadcaster, Ben can provide similar
services to another broadcaster. When presenting on shows he is obliged to adhere
to the broadcaster’s editorial guidelines, accept the broadcaster’s decision on
programme content and accept instructions from production staff.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Ben is an employee based on the relationship and PAYE should be operated by the
broadcaster.
Tax and Duty Manual Part 05-01-30
47
Example 11
A public sector body engages a temporary worker, Breda, to provide cover for an
absent employee. Breda has fixed hours and a set hourly/weekly rate. Breda cannot
send someone else to perform the duties and is directed in their duties by a line
manager.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Breda will be an employee based on the relationship and PAYE should be applied by
the public sector body.
Situations may arise where a public sector body fills roles using an employment
agency. Where the employment agency is paying the temporary worker then the
obligation to deduct PAYE would fall to the employment agency.
Additional information on the taxation of agency workers is available in Tax and Duty
Manual 05-01-15.
Tax and Duty Manual Part 05-01-30
48
Example 12
Stephen provides Sea Captain services to a Public Sector entity. He is responsible for
the daily operation and the safety of the boat and crew. The crew on the boat are a
mix of employees and contractors of the Public Sector entity. Stephen is provided
with the vessel, tools, and equipment to carry out the service. His fee is a set daily
amount.
The contract states that Stephen is free to provide a substitute, but the substitute
must meet certain standards, including relevant qualifications, and must be from an
approved list. The Public Sector entity pays the substitute. Stephen holds his own
public liability insurance.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
Tax and Duty Manual Part 05-01-30
49
5
Legislative context
N/A
Stephen is an employee based on the relationship and PAYE should be applied by
the Public Sector entity.
Tax and Duty Manual Part 05-01-30
50
Example 13
Julie provides archaeology services to a Public Sector entity. Julie carries out
archaeological assessment reports and also carries out excavations in advance of
building developments.
Julie works in conjunction with Public Sector employees, contractors, project
managers, architects and engineers to provide suitable solutions with minimal
impact on archaeological heritage. Ordinary working hours are full-time Monday to
Friday and may involve some evening and weekend work. Julie is provided with a
vehicle, tools, and equipment to carry out the service. Her fee is a set daily rate. The
contract states that Julie is free to provide a substitute, but the substitute must meet
certain standards, including relevant qualifications, and must be approved by the
Public Sector entity.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
Tax and Duty Manual Part 05-01-30
51
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Julie will be an employee based on the relationship and PAYE should be operated by
the Public Sector entity.
Tax and Duty Manual Part 05-01-30
52
Example 14
Andrew, an actor, was engaged to provide a workshop to transition year students in
a secondary school. He provides his own material, his own insurance, can send a
substitute to carry out these duties and informs the school of the rates and his
availability. He is free to take up similar work at the same time with other
businesses.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
No
3
Control
No
4
All the circumstances of
the employment
N/A
5
Legislative context
N/A
Andrew is engaged on a self-employed basis based on the specific detail of the
engagement therefore the school can pay Andrew on receipt of an Invoice and a tax
clearance certificate without the operation of PAYE. Andrew is required to register as
a self-employed individual and account for income tax in the normal manner.
Additional information on the taxation of part-time lecturers/teachers/trainers is
available in Tax and Duty Manual 05-01-11.
Tax and Duty Manual Part 05-01-30
53
Example 15
Mary, a legal professional, was engaged to give a guest lecture on a specific legal
topic for a fixed fee to students at a University at an agreed date and time. She
cannot provide a substitute.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Mary will be an employee based on the relationship and PAYE should be applied by
the University.
Additional information on the taxation of part-time lecturers/teachers/trainers is
available in Tax and Duty Manual 05-01-11.
Tax and Duty Manual Part 05-01-30
54
Example 16
Luke and Emily both ‘hire a chair’ in a busy hairdressing salon. The salon also has full-
time employees paid €800 per week.
Luke pays €250 per week to rent the chair. This covers his share of the overheads –
Light, Heat, Cleaning, Advertising, Hot & Cold Water, Reservations & Receptionist,
Rent & Rates, etc. He receives the balance of his takings which are recorded in the
salon system. He has his own clients and sets his own charge for these and takes
overflow from the salon when it’s busy, charging the salon rates. He sets his own
working hours within the salon opening hours. He can send a substitute and pays the
substitute from his own resources.
Emily attends while the salon is open other than one agreed day off per week. Her
prices are set by the salon and she receives the first €700 per week with the balance
retained by the salon to cover the rent of the chair and her overheads. She is
guaranteed a minimum of €550 per week. She cannot send a substitute.
Both Luke and Emily attend to private clients outside the salon, which they return as
self-employed income under self-assessment through ROS.
Five Step Framework
Answer
No.
Question
Luke
Emily
Explanation
1
Work/wage
bargain
No
Yes
Luke is not paid by the salon – he is paid by
his clients.
Emily is paid a set amount by the salon to
undertake work.
2
Personal Service
N/A
Yes
While this question does not have to be
addressed for Luke, it is for completeness.
Luke is free to send a substitute of his
choosing and he pays them so there is no
personal service.
Emily cannot send a substitute and is
providing a personal service
3
Control
N/A
Yes
While the question does not have to be
addressed for Luke, it is for completeness.
He has full control over when and how he
works, what service he provides and how
much to charge. Thus, the salon does not
have control over him.
Tax and Duty Manual Part 05-01-30
55
Emily is told who to style, what to do, when
to do it and where. Thus, she is under the
full control of the salon.
4
All the
circumstances of
the employment
N/A
Yes
The contract with both is drafted as a chair
rental contract with payments made
recorded and reported annually on the Third
Party Return Form 46G by the salon. The
facts of the case do not support a self-
employed position for Emily. In addition to
the facts detailed under questions 1 to 3,
Emily’s role is integral to the business. Emily
has no possibility to earn in excess of her
weekly rate of €700, outside of tips.
5
Legislative context
N/A
N/A
There is no legislation that requires an
adjustment or supplement to any of the
questions above.
Emily will be an employee based on the relationship and PAYE should be applied by
the salon.
Luke will not be an employee based on the relationship and PAYE should not be
applied by the salon. Luke should return all income as self-employed under self-
assessment.
Tax and Duty Manual Part 05-01-30
56
Example 17
Sarah is a psychologist who works with a charity and provides counselling services to
clients/service users of that charity. She works exclusively for that charity and is paid
by them on an hourly basis. She attends the premises of the charity to provide the
sessions. She is not free to provide someone else to perform her duties.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Sarah will be an employee based on the relationship and PAYE should be applied by
the charity.
Tax and Duty Manual Part 05-01-30
57
Example 18
Ronan is a psychologist with his own practice. A local charity engages him to provide
workshops to their managers. He remains free to manage his other clients and the
timing and numbers of charity workshops are agreed with him in advance. He
invoices the charity for the workshops and is paid by the charity on an hourly basis.
He attends the premises of the charity to provide the workshops. He is not free to
provide someone else to perform his duties.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
Yes
3
Control
Yes
4
All the circumstances of
the employment
Yes
5
Legislative context
N/A
Ronan will be an employee based on the relationship and PAYE should not be
applied by the charity.
Tax and Duty Manual Part 05-01-30
58
Example 19
Rachel is self-employed as a partner in a solicitor practice and returns her
partnership income under self-assessment. She takes a position on a State board,
appointed by a Government Minister. She is paid on a session rate basis per half day.
The duties of the board members are laid down in statute. Rachel is not free to
provide someone else to attend the board meetings, but some duties in preparation
for the meeting are carried out by the firm’s staff.
Five Step Framework
No.
Question
Answer
1
Work/wage bargain
Yes
2
Personal Service
No
3
Control
Yes
4
All the circumstances of
the employment
N/A
5
Legislative context
Yes
Rachel is an office holder based on the relationship and PAYE should be applied by
the Department. Additional information on taxation of members of State boards
and office holders is available in Tax and Duty Manuals Part 42-04-56 and Part 05-01-
28.