The guidance issued on foot of the Supreme Court judgement issued in October 2023 in the case of Revenue Commissioners v Karshan (Midlands Ltd) trading as “Dominos” which found that delivery drivers should be treated as employees rather than self-employed.

1. 5 Step Decision-Making Framework

The Supreme Court Judgement set out a five-step decision-making framework to be followed in determining an individual’s employment status. These 5 steps are detailed in the Revenue guidelines together with various examples.

The 5 steps are :

1. Does the contract involve the exchange of a wage or other remuneration for the work provided?
2. If so, is the agreement one pursuant to which the worker is agreeing to provide their own services and not those of a third party to the employer.
3. If so, does the employer exercise sufficient control other the individual to render the agreement one that is capable of being an employment agreement.
4. If tests 1 – 3 are met, the decision maker must determine whether the terms of the contract and the actual working arrangements are consistent with an employment contract.
5. Finally, is there anything in any legislative regime under consideration that requires the Court to adjust or supplement any of the foregoing.

2. Key Take Aways

Other key points to note are as follows:

• The 5-step framework applies for taxation purposes only – in their guidance, Revenue have clearly stated that the responsibility for determination of employment status of a worker for PRSI purposes lies with the Department of Social Protection (DSP). Furthermore, matters relating to employment rights lies with the Workplace Relations Commission (WRC). Revenue state in the guidelines that it cannot be assumed that the decision of one State body will be replicated by either or both of the other two. The Code of Practice on Determining Employment Status is a joint publication by Revenue the DSP and the WRC. The code was last updated in 2021 and is now being further updated following the Dominos judgement.
• Importantly the guidelines clarifies that the Dominos judgement does not change the tax position for businesses who engage companies to carry out work on their behalf or the treatment of services provided through personal service companies. Revenue have stated that they will not look through corporate structures except in very limited circumstances.
• There is no need for an on going or continuous commitment to provide work for an employment to exist – Revenue have stated in their guidelines that individuals engaged to work at one job or gig can be regarded as employees.
• An agreement can be expressed in writing or orally – the terms of a written contract cannot be relied upon to determine employment status, you also have to look at the facts and circumstances of each case i.e. consider what the contract states is to be done versus what is actually happening day to day.
• If a Revenue query arises, they expect an employer to provide an analysis of the application of the 5-step framework to demonstrate why an individual has been treated as a self-employed.

3. Action Required

The new guidelines will apply to all industries including construction, hospitality, professions, retail etc. Should an individual be misclassified as self-employed rather than an employee, it is open to Revenue to seek payment of un-remitted payroll taxes, employers PRSI together with interest and penalties. We are finding that in current PAYE audits, Revenue are requesting details of consultants, contractors and in particular consultants/contractors who were previously employees or Directors of the company.

On foot of the new guidelines, Revenue have requested employers to comprehensively review arrangements to determine employment status. We would also advise that where it is concluded that an individual is self-employed that a regular review of the arrangements is carried out as the relationship can change over time.

Please contact us if you require support to review any working relationships in light of the new guidelines.