Q I have an accounts person who does one day a week for my company. He invoices us on a monthly basis. This arrangement has been in place for many years and I am very happy with it. This year I am giving all staff a voucher at Christmas as a thank-you for their contribution during the year. Is my accounts person entitled to a voucher also?
A This is a topical issue at the moment, as a lot of questions have been asked about the validity of some contractor or self-employed roles. It’s an issue that may present for the WRC, Revenue and in some situations the Department of Employment Affairs and Social Protection, so it is absolutely essential that all employers ensure that they are fully compliant in this area.
Confusion surrounding the terms ’employed ‘and ‘self-employed’ may stem from the fact that are not defined in law. However, a code of practice was developed in 2012 to establish a uniform definition of ’employee’ based on clear criteria. The code says the decision “must be arrived at by looking at what the individual actually does, the way he or she does it and the terms and conditions under which he or she is engaged…”. It is not simply a matter of employment or self-employment.
When assessing whether or not a person is engaged under a contract of service (employee) or under a contract for services (self-employed), there are four main factors to be considered:
Does the person doing the work assume any responsibility for investment and management in the business; otherwise take any financial risk; provide their own equipment or helpers; have the opportunity to profit from sound management in the performance of their task?
Generally, it will be clear whether an individual is employed or self-employed.
However, it may not always be so obvious.
In cases that are not clear-cut, the following criteria can be used.
An individual would normally be an employee if he or she: is under the control of another person who directs as to how, when and where the work is to be carried out; supplies labour only; receives a fixed hourly/weekly/monthly wage; cannot sub-contract the work. If the work can be subcontracted and paid on by the person subcontracting the work, the employer/employee relationship may simply be transferred on.
Further criteria are that the person: 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; 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; works set hours or a given number of hours per week or month; works for one person or for one business; receives expense payments to cover subsistence and/or travel expenses; is entitled to extra pay or time off for overtime.
There additional factors that may be taken into consideration.
An individual could have considerable freedom and independence in carrying out work and still remain an employee. An employee with specialist knowledge may not be directed as to how the work is carried out. An individual who is paid by commission, by share, or by piecework, or in some other atypical fashion may still be regarded as an employee. Some employees work for more than one employer at the same time. Some do not work on the employer’s premises. There are special PRSI rules for the employment of family members.
The code of practice also confirmed that statements such as “You are deemed to be an independent contractor” or “You will be responsible for your own tax affairs” are not contractual terms and have little or no contractual validity. While they may express an opinion of the contacting parties, they are of minimal value in coming to a conclusion as to the work status of the person.
These guidelines should assist you in establishing whether or not your accounts person is an employee or a contractor. If he is an employee, he should receive the thank-you voucher in line with all other staff. If he is a contractor, there is no requirement for you to issue him with a voucher.
Caroline McEnery is managing director of The HR Suite and a member on the Low Pay Commission. She is author of ‘The Art of Asking the Right Questions’, a manager’s toolkit to all HR-related tips. Visit www.thehrsuiteonline.com for more information.
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