The Code highlights that there is no single clear legal definition of either employment or self-employment under EU or Irish law.  The Code emphasises that “the reality behind the contract” is what determines the status and that, although the intention of the parties is taken into consideration, the intention alone does not determine employment status.  Notably, the Code also refers to both written and oral contracts.

The Code notes that the Safety, Health and Welfare at Work Act 2005 applies to all workers on a premises, regardless of their employment status.

Expansion of defining characteristics

Characteristics of employment

The Code expands the characteristics of an employee to also include:

  • An entitlement to sick pay;
  • An obligation to perform work on a regular basis that the employer is obliged to offer to them (this is known as ‘mutuality of obligation’); and
  • The worker has their tax deducted from their wages through the PAYE system.

Furthermore, a new section entitled “Important Caveats” now appears after the list of characteristics of an employee.  Although this section includes a number of points which were included in the previous Code there are a number of new inserts, most notably:

  • Some employees may also be self-employed in respect of other work being done by him or her;
  • If tax is not deducted from the individual’s earnings through the PAYE system, this does not mean a person with the other ‘employee’ characteristics is self-employed;
  • Employees may work in a range of ways, including, but not limited to, part-time work, temporary work, seasonal work or occasional work;
  • Some employees are paid by reference to contracted hours, while others may be paid by reference to the amount of work actually done;
  • The hours of work or remuneration of an employee may be uncertain.


Characteristics of self-employment

The Code expands the characteristics of self-employment to also include:

  • That an individual is not obliged to take on specific work offered to them; and
  • An individual is registered for self-assessment tax returns or VAT.


Introduction of key factors

The Code also specifically includes a number of legal tests that have evolved from case law: (1) mutuality of obligation; (2) substitution; (3) enterprise test; (4) integration; and (5) control.

The Code notes that determinations are made on a case by case basis.


Impact of determining status

The Code explains that employment status matters for: (1) PRSI contributions and associated social welfare benefits; (2) tax treatment; and (3) employment rights.   The Code notes that there are three different statutory bodies in place that make determinations on employment status:

Statutory Body Impact of Employment Status Where to Appeal
Scope Section of the Department of Social Protection Appropriate class of PRSI Social Welfare Appeals Office
Office of Revenue Commissioners Tax treatment Tax Appeals Commission
Workplace Relations Commission Employment Rights Labour Courts


The Code explicitly states that decisions of Scope Section, the WRC or Revenue are not binding on each other.  Therefore the Code contemplates a situation whereby a worker could be treated as an employee by one statutory body and as a self-employed worker by another.

In relation to PRSI, the Code sets out that where a worker has been incorrectly classified as being self-employed, the employer will be required to pay the relevant PRSI contributions for the employee(s) for the full period in question and may be subject to a range of penalties under the Social Welfare Consolidation Act 2005.  The fact that there is no statute of limitations on PRSI arrears is unusual and on a practical note may be difficult to apply given that there are limits on how long an employer needs to retain certain types of records.


Special Circumstances

The Code introduces a new section on special circumstances and developments in the labour market. A brief summary:

  • PRSI classification: Employed persons who own or control 50% or more of the shareholding of a company cannot normally be an employee of that company for PRSI purposes. Instead, such persons are classified as self-employed.
  • Agency workers: The employer of an agency worker depends on the rights that agency worker is looking to enforce.
    • For the purposes of some, but not all, employment and equality legislation, the third party / agency liable to pay the wages of the employee will, normally, be considered to be the employer of the agency worker. Under social welfare legislation, agency workers are deemed to be insurably employed, and the party who pays the wages is the employer for PRSI purposes.
    • Under the unfair dismissals legislation, the employer is the person or company for whom the employee actually works, rather than the agency.
  • Intermediary arrangements: These are structures used in lieu of a direct engagement between the worker providing services and the end-user of those services. Overall, the same factors and legal tests set out above will be used but the Code also sets out:
    • For a personal service company (“PSC”), the PSC pays the worker who, as the owner/director of the PSC, is normally regarded as self-employed for PRSI purposes.
    • For a managed service company (“MSC”), as the individual workers’ shareholdings are below 50%, they can either be found to be self-employed or an employee of the MSC.
  • Workers in the digital/gig economy: The Code notes that unlike other jurisdictions Ireland still has a binary approach and therefore, these workers are also subject to the same tests set out above.



Although the Code is currently soft law, the Minister has proposed placing the Code on statutory footing.   We therefore recommend that employers take steps now to consider their engagement with workers against the criteria provided to ensure compliance with the Code.