Employee or self-employed in Ireland: the Karshan test

"Self employed vs employee ireland" is the question underneath almost every other question on this site. Every right in the employment Acts, from the minimum wage to unfair dismissal, belongs to employees. If you have been told you are a contractor, paid gross without PRSI, or asked to invoice for your hours, the first question is whether that label is right. Since 2023 the test for answering it has been clear.

Why the label matters

An employee is entitled to the written statement of terms, the minimum wage, rest breaks and the 48-hour week, 4 weeks' annual leave, public holidays, statutory sick pay, maternity and other family leave, minimum notice, statutory redundancy, and protection against unfair dismissal after 12 months. An employee's employer pays employer PRSI, which funds the employee's Jobseeker's Benefit, Illness Benefit and State pension entitlements.

A self-employed contractor has none of the rights in the employment Acts. They pay their own PRSI at a lower class, carry their own insurance, invoice for their work, and can be let go when the contract says so. For the business, labelling someone a contractor saves employer PRSI, holiday pay, sick pay and the risk of a WRC claim. That is the incentive behind bogus self-employment, and it is why the law looks at the reality rather than the paperwork.

Some protections reach beyond employees. The Employment Equality Acts cover people employed under a contract personally to execute work, which includes many contractors. The Protected Disclosures Acts protect "workers" in a wide sense. But for pay, leave, notice, redundancy and dismissal, the answer depends on employee status.

The Karshan test

In Revenue Commissioners v Karshan (Midlands) Ltd (2023), a case about delivery drivers who had been engaged as contractors, the Supreme Court replaced the older collection of tests with a single five-step framework. The questions are asked in order:

1. Is there an exchange of work for pay? Does the person do work in return for remuneration? If not, there is no contract of employment at all.
2. Is the person providing their own personal service? Is it you who must do the work, or can you freely send someone else? A genuine, unfettered right to substitute points away from employment. A right that exists on paper but is never used, or needs the business's approval, carries little weight.
3. Does the business have sufficient control? Not day-to-day supervision, but the right to direct what is done, when, where and how, to the degree the work allows. A skilled person may need little instruction and still be controlled in this sense.
4. Are the terms, looked at as a whole, consistent with employment? This is where everything else goes: who provides the equipment, who bears the financial risk, whether you can profit from your own efficiency, whether you work for others, how integrated you are in the business, how you are paid, and what the written terms say. The question is whether the whole picture looks like a person in business on their own account or a person working for someone else's business.
5. Does any legislation require a different answer? Some Acts define their own scope, and the answer under one Act can differ from the answer under another.

The Court made two further points that matter in practice. First, the label the parties chose, "contractor", "self-employed", "freelance", is one factor among many and is not decisive. Second, there is no need for an ongoing obligation on the business to offer work and on the worker to accept it ("mutuality of obligation") for each individual engagement to be a contract of employment. A person engaged shift by shift can be an employee during each shift.

Revenue's Code of Practice on determining employment status, revised after Karshan, sets out the same framework with examples, and is the document Revenue, the Department of Social Protection and the WRC all work from.

Signs that point each way

Reading the five steps against a working life, these are the features that tend to point towards employment:

• you must do the work yourself and cannot send a substitute
• the business sets your hours, your location and the way you work
• you use the business's equipment, uniform, vehicle or systems
• you are paid by the hour, week or month, not by the job
• you take no financial risk and cannot make a loss
• you work for one business, or the business expects you to be available to it
• you appear in its rosters, its email directory and its organisation chart

And these tend to point towards genuine self-employment:

• you can and do send others to do the work
• you set your own hours and decide how the work is done
• you supply your own equipment and carry your own insurance
• you quote for jobs, can profit from doing them faster, and can make a loss
• you have several clients and advertise for more
• you are registered for VAT or trade through a company that you actually run

No single feature decides it. A courier who provides a van is not thereby self-employed if the platform sets the route, the rate and the hours, which was in substance the finding about the drivers in Karshan.

Platform and gig work

Delivery, driving and care-platform work is where status disputes now concentrate. The Karshan judgment itself concerned delivery drivers, and its reasoning on substitution clauses and on shift-by-shift engagements applies directly to app-based work. A person who logs on, accepts jobs the app allocates at a rate the app sets, and cannot send a stranger in their place, meets several of the employment indicators even though they can choose when to log on. The answer still depends on the facts of each arrangement, and decisions are made case by case, but "the app says contractor" is no longer an answer.

Who decides status

Three bodies decide employment status, each for its own purposes, and they do not bind each other, though they apply the same test.

• Scope section, Department of Social Protection. Decides which PRSI class applies. Either you or the business can ask for a determination. A finding that you are an employee means employer PRSI is owed back, with the arrears falling on the business, and gives you the contribution record for benefits. There is an appeal to the Social Welfare Appeals Office.
• Revenue. Decides for tax. Revenue audits businesses that engage large numbers of contractors and can reclassify, with the tax and PRSI consequences falling on the business.
• The WRC. Decides status as a preliminary question in any employment rights complaint. If you bring a claim for unpaid holiday pay and the business says you were a contractor, the adjudicator hears evidence on the Karshan factors and rules on it before going to the holiday pay. A WRC finding is appealable to the Labour Court within 42 days.

A Scope decision in your favour is strong evidence at the WRC, and many people obtain one first, but it is not required. The WRC applies the test itself.

How to challenge your status

Most people who suspect bogus self-employment take these steps.

1. Gather the evidence of the real relationship. Rosters, messages setting your hours, the uniform or equipment rules, who you report to, invoices showing the same hours each week to the same client, any refusal when you proposed a substitute.
2. Read the written terms. Note the substitution clause, the control clauses and the label, and compare them with what actually happens. The contract checker is built for the employee statement, but running the document through it shows how far the terms are from an employment contract and which statutory items are missing.
3. Decide which consequence you need. If it is the PRSI record and benefits, ask Scope. If it is unpaid leave, the minimum wage, notice or a dismissal, that is a WRC complaint under the relevant Act, and status is decided inside it.
4. Watch the clock. A WRC complaint must be made within 6 months of the contravention, extendable to 12 for reasonable cause, and the WRC deadline checker works out the date. Status does not pause the clock: the 6 months run from the unpaid leave, the dismissal or the underpayment, not from the day you find out you were an employee.
5. Expect the business to contest it. Status cases are usually defended, because a finding of employment has consequences for every other person on the same terms. Representation by a union or a solicitor is common in these cases, and a union will take on a member's status question as a matter of course; see do you need a solicitor at the WRC.

Penalising someone for asserting employee status, or for asking Scope, can itself be a contravention under the Act the person was asserting rights under, and dismissal for exercising a statutory right has no minimum service requirement under the Unfair Dismissals Acts; see unfair dismissal in Ireland.

If you are found to be an employee

The consequences run backwards and forwards. You become entitled to the written statement of terms within 5 days and 1 month, annual leave at 4 weeks or 8% of hours, public holidays, statutory sick pay after 13 weeks' service, and the notice bands in resigning, notice and references. Arrears of leave and underpayments can be claimed at the WRC within its time limits. The business owes employer PRSI, and your contribution record is corrected. If the engagement has already ended, the ending may have been a dismissal, with the 12-month service test and the exceptions applying.

Where this leaves you

If the business controls your work, you cannot send a substitute, you carry no business risk and you have one client, the Karshan factors point towards employment whatever your contract calls you. Start by comparing the paperwork with the reality: the contract checker shows which statutory terms an employee's statement must contain, and how many of them are absent from yours is itself part of the picture. Then choose the route that gets you what you need, Scope for PRSI, the WRC for the employment rights you were denied, and keep the 6-month clock in view throughout. The WRC overview explains how a status question is handled at a hearing, and the glossary covers the terms used here.