Understanding your employment status
- What is employment status?
- Why does my employment status matter?
- How is employment status determined?
- The decision-making framework for tax purposes
- Legal tests to decide employment status for other purposes
- How to query your employment status
- Where to apply
What is employment status?
Your ‘employment status’ is either that:
- You are an ‘employee’, or
- You are ‘self-employed’.
You are usually an employee if:
- Your employer controls how, when and where you work
- Your contract says you must do the work yourself and you cannot pass it on to someone else
- Your contract sets out specific work hours and amounts
- You are paid a fixed wage
- You pay tax through the PAYE (Pay As You Earn) system
You are typically self-employed if you:
- Own and control your business
- Bear the financial risk
- Can decide to do the work yourself, or hire someone else
- Can choose when and how you work and can refuse work offers
- Can work for multiple clients
- Pay tax through self-assessment
Why does my employment status matter?
Being an employee provides more security and protection than working for yourself. Below are some of the important implications of your employment status.
|
How employment status affects |
As an employee |
As self-employed |
|
PRSI contributions: Different contributions are made, which impacts social welfare entitlements |
You generally pay Class A PRSI, with your employer also making contributions. This entitles you to a number of social welfare benefits, for example, unemployment and disability benefits. |
You generally pay Class S PRSI. This entitles you to a smaller range of social welfare benefits. |
|
Tax treatment: Determines tax payment methods |
You pay tax under the PAYE system. |
You pay tax under self-assessment and file your returns using ROS.
|
|
Employment rights: Certain rights apply to employees only
|
You have extensive statutory rights like minimum wage, work breaks and rest periods, paid holidays and legal redundancy rights.
|
Not entitled to as many statutory rights. |
|
Public liability: Being responsible for any harm or damage caused to the public by your work. |
Your employer's public liability insurance usually covers any accidents or damages. |
You need to have your own public liability insurance to cover any accidents or damages. |
How is employment status determined?
In most cases it is clear whether a worker is employed or self-employed. It is set out in their contract with the business.
If you are an employee you have a ‘contract of service’ (an employment contract).
If you are self-employed you have a ‘contract for services’ – sometimes called a contractor.
But sometimes the actual working relationship between a worker and business is different in practice to what the contract says.
For example, a business might label a worker as a self-employed contractor when the relationship is actually employee and employer. This is called bogus or false self-employment.
Establishing employment status
There is no definition of employed or self-employed in Irish or EU law.
In cases where it is not clear, several factors determine your employment status. Different guidelines apply depending on the context.
- For tax purposes a decision-making framework is used
- For employment law and PRSI purposes a set of legal tests are used.
This means that you could be, for example, an employee for tax purposes and self-employed in respect of your employment rights and social welfare entitlements.
The decision-making framework for tax purposes
| Questions | Answer/ decision | Explanation |
|
1. Work and wage bargain Is there an agreement covering the exchange of work for pay? |
No – there is no contract Yes – Go to question 2 |
First, we need to confirm if there is an agreement where work is exchanged for pay. |
|
2. Personal service Is there an agreement to provide personal services with limited substitution? |
No – the worker is self-employed Yes – Go to question 3 |
Asks if the worker is restricted from hiring someone else (a "substitute”) to do the work or provide the service. |
|
3. Control Does the business “Control” the worker? |
No – the worker is self-employed Yes – Go to question 4 |
Control refers to the businesses ability, authority, or right to control what work should be done, and how, when and where it is done. |
|
4. Factual Matrix All the circumstances points to an employment contract |
No – the worker is self-employed Yes – Go to question 5 |
This step looks as all aspects of the work arrangement to decide if it resembles an employment contract. |
|
5. Legislative context Any law indicating this is not a contract of service |
No – the worker is an employee Yes – the worker is self-employed |
Consider any laws that might affect the classification as part of the framework above, especially those protecting particular employee rights. |
You can find more details and some practical examples in the Revenue Guidelines for Determining Employment Status for Taxation Purposes (pdf).
Legal tests to decide employment status for other purposes
The Workplace Relations Commission decides your employment status when it adjudicates on employment rights complaints.
The Department of Social Protection (DSP) decides whether you are an employee or self-employed and what PRSI class you pay. Legal tests can help distinguish between an employee and being self-employed.
Legal tests can help distinguish between an employee and being self-employed.
| Legal tests for employment status | Description |
| Mutuality of obligations | Whether the employer must offer you work and if you have to accept it |
| Substitution | If you can send someone else to do the job |
| The enterprise test | Assessing ownership of the business |
| Integration | How you fit within the organisation |
| Control | Your control over the work, including how, where and when you work |
Detailed information on the legal tests is in Appendix 2 and 3 of the Code of Practice for Determining Employment Status 2021 (pdf).
How to query your employment status
If you think you are falsely classified as self-employed, contact the Scope section of DSP for a decision.
DSP will investigate your work relationship.
You can get more information from DSP on the criteria the Department uses to decide on your employment status.
Revenue also has Guidelines for Determining Employment Status for Taxation Purposes (pdf).