Determining the correct employment status of a worker
When a principal contractor takes on someone in the construction, forestry or meat processing industries the principal contractor must establish whether the worker is an employee or self-employed as a subcontractor. Guidelines on how to determine whether someone should be classed as an employee or self-employed are provided in the Code of Practice for Determining Employment or Self-Employment Status of Individuals (PDF, 229KB).
Foreign language versions of the Code are also available.
The category that a worker falls into depends on what they actually do, the way they do it and the terms and conditions under which they are engaged, whether written, verbal or implied. It is not simply a matter of a principal contractor or a subcontractor calling the job 'employment' or 'self-employment'.
The following lists give the main features that should be taken into account in deciding whether a worker is an employee or a self-employed contractor (further details are available in the Code).
He/she is an employee if some or all of the following apply:
- Is under the control of another person who directs as to how, when and where the work is to be carried out
- Works set hours or a given number of hours per week or month
- Does not supply materials for the job
- Does not provide equipment other than the small tools of the trade
- Is not exposed to personal financial risk in carrying out the work
- Receives a fixed hourly/weekly/monthly wage
- Is entitled to extra pay or time off for overtime
- Is entitled to sick pay
- Receives expense payments to cover subsistence and/or travel expenses
- Supplies labour only
- Cannot subcontact the work
- Does not assume any responsibility for investment and management in the business
- Does not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from the engagements
- Will normally be covered under the employer’s public liability insurance
- Works for one person or for one business
He/she is self-employed if some or all of the following apply:
- Has control over what is done, how it is done, when and where it is done and whether he or she does it personally
(In the construction sector for health and safety reasons, all individuals are under the direction of the site foreman/overseer. The self-employed individual controls the method to be employed in carrying out the work.)
- Controls the hours of work in fulfilling the obligations of the contract
- Provides the materials for the job
- Provides equipment and machinery necessary for the job, other than the small tools of the trade
- Is exposed to financial risk, by having to bear the cost of making good faulty or substandard work carried out under the contract
- Costs and agrees a price for the job
- Receives an agreed contract payment(s) without entitlement to pay for overtime, holidays, country money, travel and subsistence or other expense payments
- Is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken
- Assumes responsibility for investment and management in the enterprise
- Has the opportunity to profit from sound management in the scheduling and performance of engagements and tasks
- Provides his or her own insurance cover as appropriate e.g. public liability insurance, etc
- Owns his or her own business
- Can provide the same services to more than one person or business at the same time
It should be noted that:
- A worker paid by results (piece worker, commission, by share) is not automatically a self-employed contractor;
- The fact that an individual has registered for self-assessment or VAT under the principles of self-assessment does not automatically mean that he or she is self-employed;
- A worker who is a self-employed contractor in one job is not necessarily self-employed in the next job. Each job must be looked at separately.
Cases of Doubt
If there is doubt as to whether a worker is an employee or a subcontractor in a particular job, contact your local Revenue office.
Employees pay tax under the PAYE system while self-employed subcontractors pay tax under the Self Assessment system.
If the worker engaged by the principal contractor is an employee, the principal contractor must operate PAYE/PRSI on any payments to him or her. The Employer’s Guide to PAYE provides information on the operation of the PAYE/PRSI system. This booklet is available free of charge from your local Revenue office or from the Revenue Forms and Leaflets Service LoCall 1890 306 706 (or 00353 1 70 23 050 for callers outside the Republic of Ireland).
Where it has been established that a contractor in the construction, forestry or meat processing industry is self-employed, Form RCT 1 must be jointly completed. Further information on Form RCT 1.