New guidance has been issued in Ireland to help businesses determine whether people who work for them are employees or independent contractors.
The code of practice on determining employment status was updated by Irish authorities to account for a seminal ruling by the Supreme Court in Ireland last year in which the court found that Domino’s Pizza’s delivery drivers were in fact employees and not independent contractors.
In its decision, the Supreme Court set out a five-step framework for determining a worker’s employment status. That framework is reiterated in the updated code, which explains that organisations should start by asking themselves three ‘filter’ questions in respect of their contracts with workers: “Does the contract involve the exchange of wage or other remuneration for work? If so, is the agreement one where the worker is agreeing to provide their own services, and not those of a third party, to the business? If so, does the business exercise sufficient control over the worker to render the agreement one that is capable of being an employment agreement?”
Workers will not be employees if any of those questions are answered negatively, the updated code confirms.
If those questions are all answered positively, organisations should then go on to consider all the circumstances of the arrangement, agreement, or contract they have in place with the worker. The authorities said this essentially requires organisations to determine whether the terms, when interpreted in light of the “practical/real conditions of engagement”, 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 worker working for themselves or for the business/employer”.
The final step involves determining whether there is anything in a specific piece of legislation that requires a particular approach to be taken, with the new code confirming that it is possible for individuals to be “an employee for social insurance purposes but self-employed for employment law or tax purposes”.
“All the relevant circumstances established by applying the framework as a whole are to be taken into account in determining the employment status of a worker in any given case,” the authorities added.
The updated code also refers to a number of “caveats” to apparent factors that would indicate that a worker is an employee or a contractor.
Tax expert Robert Dever of Pinsent Masons in Dublin said the code was originally published in 2001 and had been under consideration by a working group made up of representative from Irish Revenue, the Department of Social Protection and the Workplace Relations Commission during 2024, following the Supreme Court ruling.
“The publication of the updated code will be viewed as positive by many in terms of the clear guidance that it seeks to provide to employers, employees, independent contractors as well as legal, financial and HR professionals as to the approach that should be taken to determining whether a worker is properly an employee or independent contractor and minimise the risk of workers being misclassified from a tax, social welfare and employment rights perspective,” Dever said.
“From a tax perspective, businesses and their professional advisers will need to consider the update code in conjunction with the separate guidelines issued by Irish Revenue in May following the Domino’s Pizza case,” he said.
“Many businesses in different sectors which have been heavily reliant on independent contractors are continuing to grapple with the implications of the Supreme Court’s decision, and not just from a tax point of view. This is particularly so where the business engages individuals on an occasional basis for a short term, often only for a day or two. The updated code is unlikely to be the panacea that those businesses might have hoped for; most will no doubt continue to push for legislative change or practical concessions in this area,” Dever added.
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