Ireland: New clampdown launched on social welfare fraud

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RTE (19.09.2019) A new clampdown on social welfare fraud will include increased inspections and penalties for employers who falsely claim that workers are self-employed. The practice estimated to cost the exchequer up to up to a quarter of a billion euro per year.

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A new clampdown on social welfare fraud will include increased inspections and penalties for employers who falsely claim that workers are self-employed.

The practice estimated to cost the exchequer up to up to a quarter of a billion euro per year.

By the end of this year, the Government is also planning to introduce a new criminal offence of wilfully and knowingly misclassifying an employee as being self-employed.

The Department of Employment Affairs and Social Protection spends €20 billion per year on social welfare payments for unemployment, disability, and other supports.

The new "Compliance and Anti-Fraud Strategy 2019-2023" targets "control" savings of €530 million euro in 2019 alone.

This is money that would have been paid out but for robust controls.

It will also pursue the recovery of €95m in social welfare overpayments, and will involve a review of over 750,000 individual social welfare claims.

The strategy will include measures aimed at preventing fraud through robust systems, deterring offenders by actively pursuing repayment and prosecutions, detecting breaches quickly through control techniques, and ensuring the Department accounts to the Oireachtas for monies entrusted by the taxpayer.

Announcing the new strategy, the Department stated: "An important focus for the Department under the new strategy will be the employer practices in relation to false self-employment and PRSI."

 

According to the Irish Congress of Trade Unions, the phenomenon also known as "bogus self-employment" costs the exchequer up to a quarter of a billion euro a year in lost PRSI contributions to the Social Insurance Fund, which pays for employment entitlements including jobseekers benefit and the state pension.

Bogus self-employment involves employers hiring workers as self-employed rather than as direct employees, which delivers huge savings for firms on PRSI contributions - as they do not have to pay the 10.95% rate for directly employed staff.

However, as a result, workers falsely designated as self-employed can lose out on many social welfare benefits and employment rights.

The practice is particularly widespread in construction, but has been found in other sectors including the media.

The new strategy announced by the Minister for Employment Affairs and Social Protection Regina Doherty will include a new unit of social welfare inspectors established to investigate and determine the employment status of workers in complex or larger cases.

A core team commencing in Dublin will be expanded over the coming months and years.

Meanwhile, its existing team of 380 inspectors has received additional training in the area of employer inspections.

The Department said targeted and strategic inspections are already underway to tackle false self-employment in a range of employment sectors.

By the end of this year, the Government also plans to pass new legislation to protect workers, including new anti-victimisation protections for workers seeking a determination on their employment status, and a revised guide on a statutory footing on making such determinations.

There will also be a media campaign to encourage social welfare recipients to notify the Department promptly of any changes in their circumstances to avoid the risk of penalties or debt due to overpayments being recovered.

Separately, a hotline already exists where the public can report suspected cases of welfare fraud.

Ms Doherty acknowledged that the vast majority of claims were genuine, but said that it was essential to combat social welfare fraud and error in order to target resources to those who needed them most.

She stated: "Irish taxpayers and society generally need to be reassured that the system of control that we operate is robust and effective and this plan will help make sure that taxpayer money gets to those who genuinely deserve our support."

The Department will continue to target serious fraud through its Special Investigations Unit which includes seconded gardaí, as well as collaborating with other Departments, agencies and cross-border and international organisations.

The Department noted that the previous 2014-2018 anti-fraud strategy had delivered over €2.5bn in control savings, which was money that would have been paid out but for the control measures implemented.

It confirmed that during that period, a total of 916 prosecutions were taken under social welfare legislation. Of those, 710 resulted in convictions, while 206 defendants got probation.

The highest number of cases was in 2014, with 209 convictions and 31 involving probation.

By last year, that had fallen to 151 cases, of which 101 secured a conviction, with 50 defendants receiving the Probation Act.

However, this does not include prosecutions taken under separate criminal justice legislation involving An Garda Síochána and the Director of Public Prosecutions.

As the Department is not the prosecuting authority, it says does not have statistics for convictions in such cases.

Irish Congress of Trade Unions General Secretary Patricia King said it had consistently advocated that the problem of bogus self-employment will only be resolved when the Revenue Commissioners compel employers/contractors to register all workers as direct employees unless they can prove otherwise.

She said Congress was still awaiting the Minister's response on the matter.