Taxation of individuals engaged through agencies

Background

There appears to be a perception that employment agency workers cannot be regarded as employees for taxation purposes. Revenue do not regard the taxation of workers engaged through agencies any differently to the taxation of workers engaged by any other means. In fact, over the years many agency workers have always been regarded as employees and PAYE/PRSI has been operated by the agencies, where the agency is obliged to pay the person placed with a client. In contrast, PAYE/PRSI has been operated by the client, where the client is obliged to make the payment to the person placed with them.

Employee/Self-Employed

Where there is a doubt or a disagreement as to the status of an agency worker it is necessary to examine the case by reference to the facts. The terms of the engagement need to be examined to determine whether the agency worker is an employed person or a self-employed person. Such examination should include the written terms, as well as any oral, implied or inferred terms, (the written terms may not necessarily describe the full relationship between the parties) and any other relevant information deemed necessary to form an opinion as to the status of the worker.

Operation of PAYE/PRSI

Where the agency worker is regarded as an employed person, again the perception appears to exist that there is difficulty in determining who the employer is for the purpose of operating PAYE/PRSI. The PAYE system has always recognised the uniqueness of a “paying employer”, who may not be an employer in the strict sense. In fact, a pensioner can be an “employee” and the body paying the pension can be an “employer” for the purpose of operating the PAYE system.

Chapter 4 Part 42 and the Income Tax (Employments) Regulations 1960 deal with the administration of the PAYE system. Section 983 Taxes Consolidation Act 1997 gives the following definitions:

• employer
means any person paying any emoluments’

• employee
means any person in receipt of emoluments’

• emoluments
means anything assessable to income tax under Schedule E, and references to payments of emoluments include references to payments on account of emoluments.’

Similar definitions are contained in Article 2 of the Income Tax (Employments) Regulations 1960. There are also complementary definitions in Social Insurance, Health and Employment & Training legislation for the purpose of collecting PRSI and Levies through the PAYE system.

Consequently, Revenue’s view is that, in general, the person who is contractually obliged to make the payment to an employed agency worker is the employer for the purpose of collecting income tax and PRSI/Levies through the PAYE system.

This position is also consistent with Employment legislation, insofar as it relates to a person employed through an employment agency.