You are here: Home >> Case Studies >> Social Insurance >> Insurability

Insurability Status Case 2

Question At Issue:

Whether the appellant’s spouse was employed under a contract of service, i.e. as an employee, in his business (a limited company).

Background:

The appellant started a business, in which his wife had been involved. Following their separation, a question arose as to her social insurance status. A Deciding Officer determined that a contract of service existed (that is, an employer / employee relationship) and that the employment was insurable at the Pay-Related Social Insurance (PRSI) Class A rate. In his appeal against that decision, the appellant argued that as his wife had served as a director in the company, she was not engaged under a contract of service and was, consequently, insurable at the PRSI Class S rate.

Oral Hearing:

The appellant attended alone. His wife, the ‘engaged person’, also attended at the request of the Appeals Officer.

The appellant submitted that his wife had commenced working with the company as a general operative initially, in what he described as a very loose arrangement designed to bring more money into the household. He reported that the proposed hours of work had not been adhered to but that a set wage was paid, irrespective of the level of attendance. He stated that there was no written contract between them, as he did not consider it to be necessary at the time; both his own and his wife’s earnings went into the household fund. He acknowledged that his wife had worked as a general operative, but argued that she had taken charge when he was absent. He stated that she had the use of a company credit card and argued that this was a director’s ‘perk’. The appellant asserted that, in spite of the fact that his wife no longer works as an operative in the business, she retains her position as director. He argued that while she may not have hired or fired anyone personally, she had always been consulted about staff recruitment. The Appeals Officer asked the appellant about the right to dismiss. He insisted that he could not answer the question, as he could not envisage any circumstances in which the question of dismissal would have arisen. The Appeals Officer asked whether his wife carried a risk of losing money in the business and the appellant replied that she did, in that a dividend could not be paid if the business did not grow from its current size. The appellant contended that his wife controlled her own work. The Appeals Officer pointed out to him that this was at odds with the information he had given in Form INS1 (used by the Department of Social and Family Affairs where a question as to social insurance status arises). He replied that he had misinterpreted the question and asserted that the plan had been to develop the small business into a larger family business with his wife, and their children, being fully involved.

The appellant’s wife argued that she had worked for at least twenty hours each week and that she had taken time off only with permission. She stated that she had always worked under instruction from those more familiar with the tasks she was performing. She asserted that, at the outset, she had wanted only to be a part-time worker and to have some money for herself. She contended that while she was working as a general operative, the appellant and the other director would meet to discuss the day-to-day running of the company; documents would be drawn up and she would be called off the factory floor to sign them. She submitted that this was the extent of her attendance at director’s meetings. She reported that when her marriage broke down, she became distressed and felt unable to work, and that she was effectively on sick leave. She reported that the appellant had initially paid maintenance (amount specified); after some time, she received her P45 form in the post. The appellant stated that the form was sent out only after his wife told him that she did not want to have anything further to do with him or with the running of the company. He stated that he had taken this as a resignation from the part-time work she had been doing. The Appeals Officer asked the appellant about the P45 form, given that the document relates to an employee leaving a company. He replied that his accountants had issued the document.

In support of his appeal, the appellant submitted documentary evidence, including credit card statements, copies of reports of directors’ meetings and a letter from his accountants, in which it was argued that the PRSI Class S rate was the correct one in this case. The Appeals Officer noted from the documentation on file that one of those accountants was a shareholder in the company. It emerged during the hearing that the company had four employees; when the engaged person ceased working there as an operative, she was not replaced and she is now claiming half the shares in the company in the context of her separation from the appellant.

Consideration of the Appeals Officer:

The Appeals Officer identified as the key issue the question as to whether there was a distinction between the engaged person’s role as an operative in the company and her role as director. She noted the appellant’s assertions that she was engaged as a director. However, she noted also his statement that his wife had taken on the role of operative to bring more money into the household fund. She considered that those two contentions were not consistent and that there appeared to have been two distinct roles. She accepted that use of the company credit card was a ‘perk’ that his wife had been given as a director but considered that it did not define her other relationship with the company. In the context of the marriage breakdown, the Appeals Officer considered that the appellant’s wife had taken a pro-active role in the company to secure her interests. She noted her assertion as to signing documents but not participating in directors’ meetings and the fact that she had not been paid director’s fees, nor benefited from any share-out of profits; her payment was in respect of her labour on the company premises.

In relation to the questions of control, direction and dismissal, the Appeals Officer was not convinced, in spite of his assertions, that the appellant did not have the right to dismiss his wife as an operative. She considered that it might be argued that the atmosphere, which had prompted her to leave, constituted constructive dismissal. The Appeals Officer was satisfied that the engaged person was required to follow instructions; it was a small company and she worked as part of the operational team. She noted that the appellant contended that his wife’s work as a general operative was an integral part of her role in the family business but considered that, whatever her involvement before the business got off the ground, her commencement in the role of operative was independent of her family position. The Appeals Officer concluded that the company engaged her as an operative in an employer/employee relationship and that a contract of service existed. Accordingly, she determined that her employment was insurable at the Class A rate.

Outcome:

Appeal disallowed.

End of Document