On 5 March 2026, representatives of the Revenue Commissioners, the Department of Social Protection and the Workplace Relations Commission attended a Public Accounts Committee meeting to discuss employment status and misclassification. The Karshan decision was a key discussion point and, while all three bodies confirmed that they follow the same five-stage test for employment status, it was acknowledged that, due to differing legislative frameworks, the same facts could result in three different status determinations. In practice, this means that misclassification risk has knock-on implications across:

• Tax (PAYE/USC) and payroll reporting.
• PRSI (and entitlements) and potential retrospective liability.
• Employment rights exposure and statutory claims.
• Reputational and operational risk.

This article examines how the three bodies have applied the Karshan test in practice and sets out key takeaways and recommended actions for employers.

The Karshan Test

The Supreme Court’s decision in Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza (2023) is now the central reference point for employment status analysis in Ireland.

Five-question decision framework.

1. Work/wage bargain: does the contract involve the exchange of wage or other remuneration for work?
2. Personal service: does the worker agree to provide their own services (and not those of a third party) to the alleged employer?
3. Control: does the alleged employer exercise sufficient control over the worker such that the agreement is capable of being an employment agreement?

If any of the above questions are answered negatively, no contract of employment can exist.

4. Overall consistency: if the first three requirements are met, do the contract and the facts and working arrangements point towards a contract of employment?
5. Is there anything in the particular legislative regime under consideration that requires a particular approach to be taken?

Updated Code of Practice

Following the Supreme Court decision in Karshan, the Revenue Commissioners updated their Code of Practice on Determining Self-Employment in 2025 (see our previous article on its guidance here).

A one-off disclosure opportunity to rectify misclassification following Karshan

In September 2025, Revenue offered a once-off self-correction opportunity for employers who had made bona fide classification mistakes, recognising that Karshan and the updated Code of Practice had changed the legal landscape for determining employment status. The disclosure window closed on 30 January 2026, generating €26.7 million in tax adjustments across 280 employers and over 6,600 workers highlighting the significant potential cost to the Exchequer from misclassification.

Workplace Relations Commission decisions on employment status post-Karshan

The Workplace Relations Commission has consistently applied the Karshan test in its decisions (see previous insights article here).

Employment status typically arises as a preliminary, jurisdictional issue—for example, where a respondent argues that the complainant is not an ‘employee’ within the applicable statutory definition.

Paul Lingard v Randridge International Ltd (In Examinership) (2025)

The claimant brought a claim for unpaid wages under the Payment of Wages Act 1991. He was originally engaged via his private limited company as an independent contractor, but claimed that the relationship had evolved into an employment one. Applying the Karshan test, the Adjudication Officer found that, on the balance of probabilities, an employment relationship did exist, as the claimant was effectively under the day-to-day control of the respondent.  

This case demonstrates the willingness of the Workplace Relations Commission to look beyond contractual arrangements and lift the corporate veil to examine the true nature of a working relationship. The claimant was awarded €8,500 in unpaid wages.

Beta Bajart v RTE (2025)

The claimant was engaged by RTÉ as a freelance photographer on successive contracts over 12 years. When the work was put to tender in 2023 and she did not re-apply, her engagement ceased, prompting her to bring various employment rights claims to the Workplace Relations Commission. Applying Karshan, the Adjudication Officer found that:

(1) the complainant was paid for work;

(2) she personally provided services 95% of the time;

(3) RTÉ exercised sufficient control (she attended set on a fixed schedule, received direction from a project manager, and had no discretion on attendance); and

(4) the day-to-day reality of her working relationship was not consistent with her contractual description as "a supplier" and "not an employee."

Accordingly, it was found that the freelancer was in fact an employee of RTÉ.

The Workplace Relations Commission will look beyond contractual labels to determine the true nature of a working relationship in recognition that engagements can evolve over time through course of dealing. Employers should bear this in mind when managing long-standing relationships

Department of Social Protection – use of intermediary companies

Similar to the Workplace Relations Commission, the Department of Social Protection will also look behind intermediary arrangements when investigating misclassification, though the outcomes have varied depending on the facts.

In Ryanair DAC v Reddy [2024], Ryanair challenged a Social Welfare Appeals Officer’s decision that a pilot was an employee of Ryanair rather than an intermediary company. The High Court applied Karshan and found the Appeals Officer erred in finding that there was an implied employment relationship between Ryanair and the pilot as there was no evidence of a contract between Ryanair and the pilot, no mutuality of obligation from Ryanair, and no basis to treat the intermediaries as Ryanair’s agents. The pilot was supplied through a chain of intermediary contracts and was not integrated into Ryanair’s workforce.

In summary, the contractual arrangements provided for a pool of pilots supplied by an intermediary; there was no direct work/wage exchange between Ryanair and the pilot.

Intermediary or managed service arrangements will not automatically be disregarded but equally will not be treated as conclusive. The analysis will be dependent on the actual facts. This aligns with the approach taken by the Workplace Relations Commission but contrasts with Revenue guidelines, which exclude intermediary arrangements from scrutiny.

Reddy reinforces the importance of careful documentation and ensuring day-to-day operations do not undermine contractual arrangements. Organisations using contingent labour arrangements should not assume end-user control can be ‘managed away’ by contractual layering and should ensure that the supply contracts contain adequate indemnities.

The Department of Social Protection sought to appeal the High Court judgment in Reddy however its application for leave to appeal directly to the Supreme Court was denied in February 2026.The Department of Social Protection has also lodged an appeal to the Court of Appeal and so this remains a developing area to watch.

European Platform Workers Directive (EU) 2024/2831

The EU Platform Workers Directive is due for transposition into Irish law by October 2026. A key provision is the legal presumption that platform workers are employees which will shift the burden of proof onto the platform to demonstrate otherwise. The Revenue Commissioners have also indicated that it will review its guidance in the gig economy context once the Directive is implemented.

Anticipated Impact on Irish Employment Status Determinations

While detailed mechanics depend on Irish implementing measures, employers should expect the below impacts:

First, a statutory presumption of employment will shift the focus to whether an employer can rebut that presumption. This will increase scrutiny of day-to-day operations regarding control, substitution, and economic dependence.

Second, there is likely to be increased examination of a platform’s operating systems and algorithmic management features (such as scheduling, rostering and consequences for refusing jobs) which may be viewed as indicators of management control rather than quality assurance.

Third, the Directive may have the effect of increasing litigation by making it easier for workers to challenge their classification. In such litigation, the Karshan test will apply.

Key Takeaways for Employers

• Misclassification risk is multi-dimensional. Employers face overlapping exposures across tax, PRSI, employment rights, and reputational risk, and an adverse finding by one body may trigger scrutiny from the others.
• Contracts are not conclusive. The Workplace Relations Commission has shown it will look beyond what a contract says and examine the day-to-day reality of the working relationship. If someone is labelled a ‘contractor’ on paper but works like an employee in practice, they may be found to be an employee.
• Relationships can evolve over time. An engagement that began legitimately as a contractor arrangement may transition into an employment relationship through changes in how the work is managed or controlled. Employers should periodically review long-standing contractor arrangements.
• PRSI liability has no limitation period. The Department of Social Protection can pursue arrears of employer and employee PRSI contributions going back to the commencement of the employment relationship. Employers are liable for both shares and cannot recover the employee’s portion meaning potential exposure can be significant especially where there are long-standing contractor arrangements.
• Intermediary structures are under scrutiny. Using an intermediary or managed service company does not automatically shield an end-user from employment status claims. The Workplace Relations Commission and Department of Social Protection will examine whether the contractual arrangements reflect the true nature of the relationship. While the High Court decision in Reddy is helpful, this will be dependent on the specific facts of each case.
• Inspection and enforcement powers are significant. Revenue, the Department of Social Protection and the Workplace Relations Commission each have statutory powers to inspect businesses and investigate employment status and misclassification. Unannounced inspections (sometimes referred to as “dawn raids”) are common across all three bodies, and the number of such inspections has increased significantly in recent years, with enforcement activity intensifying markedly following the Karshan These bodies regularly conduct joint inspections, share data, and cooperate through Joint Investigation Units. Employers should be aware that compliance failures may be identified through direct on-site enforcement action, not solely through complaints or self-disclosure.
• Platform businesses face additional scrutiny once the EU Platform Workers Directive is transposed into Irish law. The statutory presumption of employment will still require platforms to proactively demonstrate that their workers are genuinely self-employed.
• Recommended actions for employers include:
  • auditing existing contractor and freelance arrangements against the Karshan criteria;
  • ensuring contracts accurately reflect the working reality and are reviewed periodically;
  • documenting control, substitution rights, and integration factors clearly; and
  • monitoring developments in the transposition of the Platform Workers Directive.