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Self Employed Vs Employee


Self Employed Vs Employee

The question of whether a person should be classified as an employee or self employed is an important one, David from explains the difference..

In a lot of cases, the business owner will want the employee to be treated as a self employed individual because:

1) There will be no liability to Employers PRSI. In some cases employer’s PRSI can be as much as 10.75% of the gross salary of the employee.

2) There is no exposure to unfair dismissal which means that the individual can be hired and fired without any issues arising. There is no obligation to pay a wage every month as it will be linked to performance.

3) There is no requirement to pay holiday pay, sick pay, etc

For the employees who are classified as self employed, not only is there no job security but also there is a lessor degree of social welfare benefits available to them should they become unemployed.

Employees pay tax under the PAYE system while self-employed subcontractors pay tax under the Self Assessment system.
Whether or not a person is classified as an employee or self employed is a question of fact.

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.

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. This can prove extremely costly is the revenue insist on emergency tax and grossing up the employee’s salary.

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.

If you are unsure of whether you should be classified as self employed or an employee then do get in touch with us at

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