Overview – Employees, Service Providers and Consultants

No business can run without people to manage and perform its operations. The question then becomes whether a particular task will be performed by a full-time or part-time employee of the company or business, or whether a service provider or consultant will be retained to do the work.

In assessing whether to hire an employee to provide a service that is necessary or desirable for your business, you should analyze whether the service is an integral part of operating your business that will be required for the foreseeable future, or whether it is a temporary need either to get your business up and running or improve its operations.

For example, if you own a restaurant and have little technological expertise, you may want to hire a website designer to get you online and teach you how to update the site, but you will probably not need the designer’s services going forward. In this situation, it will make sense to enter into a short term Service Agreement with the website designer, rather than hire him or her as an employee.

Both service provider and consulting agreements can range from short, discreet projects to outsourcing all of your sales and marketing efforts. However, in every situation where your business is attempting to establish an independent contracting relationship with the service provider, it always has to make sure that it does not inadvertently allow either the government or the service provider to claim that it is actually an employer-employee relationship.

Hiring an employee entails a broad spectrum of employer responsibilities and employee rights that do not exist in independent contracting situations. For example, the company will be obligated to provide the minimum benefits required by Irish employment law, as well as withholding income taxes and PRSI (Pay Related Social Insurance) and pension levy contributions from the employee’s salary or wages. Many factors are considered in determining whether, under the totality of the circumstances, the person performing services should be considered an employee or a self-employed service provider. It is important to tailor the agreement and working relationship to the one you desire.

We’ll now take a look in greater detail at how to hire and employee, service provider or consultant, focusing on the issues involved and the terms of the relevant agreement.

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