Carthy tackles Meat Industry’s use of Bogus Self-Employment at Public Accounts Committee
Local Sinn Féin TD, Matt Carthy, last week discussed the issue of ‘bogus self-employment’ in the meat processing industry at a hearing in the Public Accounts Committee.
Bogus self-employment is the process whereby workers who would normally be considered employees are regarded as self-employed, or employed by intermediary companies, thereby negating the need for employers to pay employer PRSI and depriving workers of social protection entitlements.
He was speaking with Mr Martin McMahon, a campaigner against the practice who has appeared as a witness before multiple Oireachtas meetings on the subject.
The exchange went as follows:
Deputy Matt Carthy: “I welcome Mr. McMahon and thank him for his diligent pursuit of this issue. Regardless of what the Department of Social Protection and Revenue might outline about the cases, which is not to disparage their specific responses, the issue of bogus self-employment is real. Anybody who has been out in the real world knows that there are people who are classified as self-employed who, under any basic rationale, clearly are not. They are working for one employer on a full-time basis for a prolonged period.
“I refer to one case that I am aware of. I have a report here from a person who won a case. This person was working for a meat processing plant in Cork. The report states that the person is a line worker for a specific employer so he regards himself as an employee of an agency. He works for eight to ten hours a day. He was subject to control and direction. He is not free to take up similar work at the same time.
“It goes further to highlight how this individual was clearly an employee. However, his employment situation was that he technically worked for a company registered in his name in Poland, despite that he had never been to Poland. It took six months for this person to get his Scope decision and a further six months to have his decision regularised. Even then, his PRSI payments were apparently not backdated.
“The Department of Social Protection referred to its method, which it is confident in, of catching bogus self-employment through inspections. In the case I have outlined, there were not any follow-up inspections of that person’s colleagues, who one would have to imagine are in the exact same position.
“Representatives of Meat Industry Ireland attended the Special Committee on Covid-19 Response. They spoke of the use of agency workers and they indicated that the use of agency workers in that sector was actually declining at the moment.
Does Mr. McMahon get a sense that the number of workers who are entrapped into this type of employment situation across all sectors is declining or increasing?
“How many people are involved? Is the emergence of new types of companies, such as Deliveroo, and workers associated with such companies contributing to an increase in such employment or is it a type of employment practice that is in decline, as stated by Meat Industry Ireland?”
Mr. Martin McMahon: “I thank the Deputy for his questions. I will take it from the start, and again the question here is cui bono? Who benefits from this situation?
“It is not the State and not the workers. It is the employers who are using this practice of bogus self-employment to save themselves circa 30% on labour costs. That is who benefits. If the Revenue is saying that bogus self-employment is not an issue, it should prove it. If it is saying it is an issue, it should quantify it. Otherwise, it is not at this game at all.
“On meat processing, what the Deputy is referring to with the agency are intermediary-type set-ups. Those are what we call the workplace with no employees. They are moving or being moved to intermediary-type set-ups, as would be used by the likes of Ryanair. A company with six directors, all of whom are pilots, supplies services to Ryanair exclusively. As the pilots association will confirm, as far as it is concerned, the pilots concerned are employees.
“The practice of setting up an intermediary company to disguise the reality that people are employees is on the rise. The chairman of the Revenue Commissioners has said there are many thousands of these companies out there. Some of these companies have even received awards from the State for what they are doing. It is ridiculous.
“On inspections, this is very interesting. Figures from the Revenue Commissioners on inspections show the number is in the low thousands. Back in 1998, the Comptroller and Auditor General sent officials from the Revenue out to inspect 60,000 employment situations within the construction industry and they found 12,000 of them to be misclassified.
“Two years later, the Committee of Public Accounts, under the chairmanship of the late Deputy Jim Mitchell, did the same thing. Some 60,000 employment roles were examined and 12,000 were found to be misclassified as self-employed. That is a huge number. It was 18% or 19% back in 1999 and 2000.
“Now, Revenue is doing at most a couple of thousand inspections per year and is saying it is capturing all the bogus self-employment. How could it?
“What changed was the employment status group. A decision was made that the status quo must remain and those wide-scale investigations stopped completely. They have never been repeated in any sector. The level of bogus self-employment within the construction sector according to ICTU is now 23% so it has not decreased over the 20 years since this last came up in this committee. It has increased.”
Matt Carthy: “There have been several reports of what is known as blacklisting, where workers are either threatened with losing or do lose their jobs for even attempting to raise the issue of their employment status.
“I referred to the meat processing sector because it is often the case that employees or self-employed people in that area happen to be independently working through an agency for a factory, for example, while also renting their accommodation from the same source. It is not just that these workers’ jobs are at risk but also their homes. Does Mr. McMahon have any evidence or reportage regarding the type of means by which blacklisting occurs?
“It occurs to me that the solution should be fairly simple in one sense because there is a legislative route we could explore. I say that because I understand how there could be an element of self-employment in the construction sector. In many cases, we are talking about small, independent contractors which might need carpenters or labourers for a defined time. It would not make sense for either party to be involved in an employment contract per se.
“However, if we were to set out in legislation conditions to clarify when an obligation falls on an employer to consider someone an employee, for example, a defined period of time, number of hours or number of contracts in an employment, that could provide a means to easily resolve a large proportion of these cases. Does Mr. McMahon have a sense of what those definitions should be regarding periods of time, lengths of contracts and numbers of hours worked?
Mr. Martin McMahon: “On blacklisting in meat processing and construction, fear is the big word. It is not just me saying this because the Department acknowledges it and ICTU have stated this in the committee. Fear of being blacklisted is the major concern. It has happened in construction and in the case of the 16 workers I represented in the Social Welfare Appeals Office in 2016.
“I take the Deputy’s point on whether some indicator could trigger employment status. Really and truly, as the Revenue Commissioners have stated, it does not matter whether people want to be self-employed. The only question is whether the legal criteria apply. Nothing else matters.
“People cannot choose not to pay tax just because they do not want to. The State is entitled to its cut. Everybody who gets paid has a contract. The payer has a contract and it is the State that is entitled, as part of the social contract, to deduct taxes and PRSI. Just because people do not want to pay tax and PRSI, they cannot use self-employment or bogus self-employment as the out. It is not as simple as a tick-box exercise, even if Revenue, the Department of Social Protection and the Social Welfare Appeals Office are using a tick-box exercise.”
Following the meeting, Deputy Carthy said:
“It is apparent that bogus self-employment is a systemic cross-sectoral issue, but particularly prevalent in some sectors such as the meat processing sector.
“It should be a national scandal that neither the Department of Social Protection nor the Revenue Commissioners seem interested in tackling this issue.
“What makes it even more egregious is that at the same time the government is telling us they wish for us to hold off on retirement until 67, due a supposed pensions crisis.
“Mr McMahon told the Public Accounts Committee that ICTU has calculated the amount of uncollected PRSI as a result of bogus self-employment to be as much as €1 billion per year.
“Minister Heather Humphries has set up a commission to consider options with regards to the pension age. Prior to any suggestion that workers should be forced to labour on for another two years, the Minister should outline what action she intends to take to tackle these uncollected PRSI contributions.”