Jul 2013
7
Classification of working directors
Up to now the classification for PRSI purposes, of directors of limited companies who work in that company (“proprietary directors”), has been determined on a case by case basis. This determination takes into consideration the Code of Practice for Determining the Employment or Self-employment Status of Individuals. (http://www.welfare.ie/en/Pages/Code-of-Practice-for-determining-Employment-or-Self-Employme.aspx )
Under the provisions of Section 16 of the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013 proprietary directors who own or control 50% or more of the shareholding of the company, either directly or indirectly, cannot be an employee of that company. This provision comes into effect from 1 July 2013.
In these circumstances the individual is classified as self-employed and is liable to pay PRSI at Class S.
The classification of proprietary directors who own or control less than 50% of the shareholding of the company will continue to be determined on a case by case basis, taking into consideration the Code of Practice for Determining the Employment or Self-employment Status of Individuals.
The new provision will apply to proprietary directors both prospectively and retrospectively.
Where these provisions are to be applied retrospectively, a person has the option of electing to have the decision, in relation to his or her employment prior to the enactment of the legislation, made under the Code of Practice for Determining the Employment or Self-employment Status of Individuals. Any decision will only apply to the period of employment prior to the enactment of the legislation.
Bright Contracts – Employment contracts and handbooks
BrightPay – Payroll Software
