“It is Revenue’s position that locums are engaged under a contract of service (i.e. that they are employees) and that their remuneration comes within the scope of PAYE”.

This statement was contained in letters sent to GPs in the South-West Region in the last month. However, Revenue approach to this isue has varied from district to district. This situation is unhelpful, as in addition to the PRSI cost of 10.75% and the administrative costs of operating PAYE, there are potential employment law issues and employer liability issues. It may be the case that being treated as an employee for tax purposes does not automatically make a locum an employee for the purposes of general law. However, it is certain to have a bearing on decisions taken by another Government department or tribunal. 

The letters do not refer to the Report of the Employment Status Group or the Revenue’s own Code of Practice for Determining Employment or Self-Employment Status of Individuals. The Employment Status Report states that the terms “employed” and “self-employed” are not defined in law. The Report states that “…the decision as to which category an individual belongs to must be arrived at by looking at what the individual actually does, the way he or she does it and the terms and onditions under which he or she is engaged”.

Some of the key factors which would be influential in indicating that a person is self-employed would include:

  • the person works for more than one business;
  • the person benefits financially from increased productivity;
  • the company provides no direction or control over how the person carries out his or her duties;
  • the person can send a replacement without consulting the company;
  • the person carries their own insurance so that in the event of a claim the person is accountable and not the company;
  • the person is not integrated in the company.

 It is increasingly common for companies to insist that prospective contractors form a company which enters into the contract with the company. A recent high profile case is Ryanair which “employs” its pilots through companies controlled by groups of pilots, thus avoiding the ramifications of employment law and PRSI.

While the Revenue letter referred to above is addressed to the situation of medical locums, similar issues may arise in other cases where Revenue take the view that a person is employed by another (“contract of service”), rather than being self-employed with a “contract for service”.

If you are in this position, take advice as to how to avoid the potential pitfalls.