Employer obligations when using a contractor?

stiofanD

I've a question about whether or not someone employing the services of a sole trader has any employer obligations to them (such as paying employer PRSI). I hope someone can shed some light on the situation for me.

To give some background, my wife is currently working at home minding our kid, but she has the opportunity to mind another couples child and earn a bit of money from this.

I suggested that she should register as self-employed with revenue and the dept of social welfare. My thinking is that even though she won't have to pay tax to revenue (she won't earn enough to be liable to tax), she'll still get PRSI credits, allowing her to retain PRSI benefits, such as maternity benefit (could be very useful in the future) and dental benefit.

Unfortunately, the couple she would be working for are not in favour of this as they fear that they would be considered her 'employer' and would have to pay employer's PRSI etc..

Can someone clear this up for me? Surely once a person is 'self-employed', then the person they do work for is not their employer from a PAYE/PRSI point of view?

ck1

""Surely once a person is 'self-employed', then the person they do work for is not their employer from a PAYE/PRSI point of view?""



Not necessarily so. And I can see exactly where they are coming from. What needs to be established is whether there is a Master/Servant relationship or in other words a Contract of Service or Contract for Service.

Even if you establish a written contract, it still may not hold up. If however your wife was minding other children then there is more of a case but where she is only minding one, potentially it could be deemed as a master/servant relationship.

Give you an example, case I worked on few year back where a farmer used a person from the village for casual labour over many year. In brief, whilst the labourer was free to take on other work, he did not as the work for this particular farmer was sufficient for his needs. Many years later, spurred on by an investigation into the tax affairs of the labourer and actually after the farmers death, a ruling was given that there was a master/servant relationship mainly as the farmer determined "how" the work was to be carried out but the other main factor was that all the work carried out by the labourer was for one individual. The family of the deceased farmer had to pay all the backdated tax and PRSI that should have been applied plus interest and penalties and court costs.

Speak to Scope department as there may be precedent set for this type of service or alternatively you could seek an opinion from someone who specialises in employment law.

TempestSabre

Obligation of PAYE was one of the reasons (obviously theres other reasons aswell) I've been given for agencies insisting that a contractor operates as a limited company. If you contract to the same company for a long period of time, unbroken, doing more than one job. I've been been told that the company can be obliged to pay PAYE. However if you are using a limited company, the distinction is clearer.

To be honest I don't know how true it is. Could be bull.

ck1

TempestSabre, you are right in what you are saying as if you are just being contracted to one company over many years, then this could be viewed as a Master/Servant relationship, which could be deemed as a contract of service. By the way, the terms that I am using - Master/Servant and Contract of/for Service are actual terminologies in Case Law. There are many "tests" carried out by the courts and each case is decided on its own merits.