Locum pharmacists are an essential part of the Irish pharmacy workforce. They provide flexibility, continuity, and resilience to pharmacy operations by stepping in during staff absences, seasonal demand, or unexpected disruptions. Their ability to offer specialised skills, support busy periods, and ensure regulatory compliance makes them indispensable to many pharmacies’ businesses.

With the growing trend toward platform work and gig economy models, there has been increased scrutiny on how employment status is determined. The classification of such workers has become a complex legal area, highlighted by high-profile international cases involving companies like Deliveroo and Uber in the UK.

In Ireland, the Supreme Court made a landmark judgment in 2023 in the Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza case. This judgment clarified the legal test for employment status, prompting Revenue to issue updated guidance that directly affects how locums, gig economy workers, platform workers, and others should be classified for tax purposes.

While the operational benefits of locums in the pharmacy sector are clear, the tax treatment of locum engagements is less certain, and warrants closer consideration following recent guidance from the Revenue and the Supreme Court ruling.

Misclassifying a locum as self-employed when they should be treated as an employee can expose pharmacies to substantial liabilities. This may have significant implications for tax compliance. This article provides an overview of the legal framework, discusses Revenue’s position, presents practical examples, and outlines steps pharmacies should take to ensure compliance. It also highlights the opportunity to make a voluntary disclosure by January 30, 2026, to address past misclassifications.

Legal Framework

The core distinction for tax obligations is whether a worker is considered an employee (contract of service) or a self-employed contractor (a contract for services). Traditionally, this was assessed based on factors like mutual obligation and control, but the Supreme Court’s 2023 ruling introduced a more holistic approach.

The Court established a five-step test for determining employment:

  1. Work/Wage Bargain – Is there an exchange of work for remuneration?
  2. Personal Service – Is the individual required to perform the work personally?
  3. Control – Does the engager control how, when, and where the work is done?
  4. Terms & Working Arrangements – Do the facts and working arrangements point to employment?
  5. Legislative Context: Are any legal provisions influencing the employment relationship?

If the first three questions are answered affirmatively, the relationship is likely one of employment. The last two involve a comprehensive review of all circumstances.

Importantly, the Court rejected the idea that mutuality of obligation (the ongoing reciprocal duty to give and accept work) is a necessary condition for employment. Instead, the emphasis is on the substance of the relationship. This shift has led to a broader interpretation, with regulatory bodies, such as the Workplace Relations Commission (WRC), treating more relationships as employment if they meet the relevant criteria.

Revenue Guidance and Practical Examples

Revenue issued a guidance note (part 05-01-20) in July 2024 titled “Individuals described as ‘locums’ engaged in the fields of medicine, health care and pharmacy”.  In this guidance, Revenue expresses a view that most locum pharmacists are likely to be employees for tax purposes.

Revenue emphasises that the actual nature of the working relationship outweighs contractual labels. Written contracts that declare a locum to be self-employed carry little weight if the working reality suggests otherwise. Short-term, casual, or platform-based engagements do not automatically qualify as self-employment; each scenario should be evaluated carefully.

For example:

  • A locum who works only sporadically, uses their own equipment, and has flexible hours may still be considered an employee if the working relationship exhibits control, integration into the pharmacy, or lack of substitution rights.
  • Conversely, genuine self-employment typically involves a worker who provides services to multiple clients, bears financial risk, and can substitute for another worker.

Recent cases demonstrate these principles:

  • In one case, the Complainant (an assistant psychologist), worked only eight hours over a month, had flexibility in location, and used her own laptop. The Respondent maintained that all their workers were independent contractors with no employment relationship. The Adjudication Officer found the Complainant to be an employee, citing the wage/work bargain and lack of genuine substitution.
  • In Matthew McGranaghan v MEPC Music Limited, despite being labelled as a contractor, the court ruled that the individual was an employee, based on the work performed, remuneration, and limited substitution ability.

These cases illustrate how the framework is being applied in real-world scenarios. Factors like fixed hours, adherence to pharmacy procedures, and the inability to send a substitute tend to indicate employment. Even occasional work may be classified as employment if the relationship exhibits significant control and integration.

Locum Companies

Engaging a locum through a limited company can reduce the risk for the pharmacy.  In these cases, the locum company enters into a contract to supply the services of an individual locum to the pharmacy.  Often this can push the payroll tax liability to the locum company.  However, each situation would need to be reviewed on its specific fact pattern.  The risk would be higher for locum companies which only employ one locum.

In their guidance Revenue do note some additional risk areas, as follows:

  • Travel and subsistence claims: Travel expenses must be necessarily incurred in the performance of the duties of the employment to be reimbursed tax free. Expenses incurred by an employee to travel to the place of employment in a position to exercise his or her employment (e.g. from home to their normal place of work) are not incurred in the performance of the duties of the employment are not allowable and may not be reimbursed free of tax.   The fact that an intermediary may undertake a series of short-term contracts does not alter this position. The normal place of work for each new contract will most likely be the premises of the intermediary’s client.
  • Other expenses: Expenses which are not vouched and are not expended wholly and exclusively for the purposes of the trade will be treated as emoluments of the locum and taxed accordingly.
  • Family wages: Wages paid to family members are an expense of the business. Like all other business expenses, a deduction will only be allowable where the expense is incurred “wholly and exclusively” for the purposes of the trade. The amount to be deducted as an expense must actually be paid and must be commensurate with the duties undertaken.

Tax Risks and Enforcement

If a locum is found to be an employee, the pharmacy may incur unpaid PAYE, PRSI, and USC liabilities, as well as statutory interest and penalties. Interest is always due in full and accrues until the liability is paid. Penalties range from 3% to 100%, depending on whether the behaviour was careless or deliberate, and whether a qualifying disclosure was made. Fixed penalties, such as €4,000 for failure to register as an employer, may also apply. If the penalty exceeds 15% of the additional tax due or the total settlement exceeds €50,000, the employer may be listed in the tax defaulters’ list. Deliberate defaults may also be subject to prosecution.

Disclosure Opportunity

Recognising the impact of the Karshan decision, Revenue has introduced a settlement facility for employers who may have misclassified workers. Pharmacies can make a voluntary disclosure for 2024 and 2025, settling any payroll tax liabilities without penalties or interest, provided the disclosure is made by 30 January 2026.  This facility applies to genuine misclassification errors and requires employers to pay the full PAYE, PRSI, and USC due, with credit for tax already paid by the locum.  PRSI records must also be created for affected employees. (Disclosures can be made via Revenue Online Service or MyAccount.)

Recommendations for Pharmacies

Pharmacies should take proactive steps to evaluate all locum arrangements:

  • Apply the five-step framework to each engagement, documenting findings meticulously.
  • Review and update contracts regularly to ensure they accurately reflect the true nature of working relationships.
  • Seek professional advice if uncertainties about classification arise.
  • Consider voluntary disclosures for past arrangements before the January 2026 deadline to avoid penalties.

Future engagements should be structured with clear, comprehensive agreements that mirror working reality, minimising legal and tax risks.

In summary…

The evolving landscape emphasises the importance of correct employment classification for locum pharmacists. The Supreme Court’s decision and Revenue’s guidance have expanded the scope of what is considered employment, making rigorous assessment essential. The voluntary disclosure window offers a valuable opportunity to regularise past arrangements and mitigate penalties. The onus, as such, is on pharmacies to act quickly – and if necessary, disclose – to protect their business interests and ensure continued access to vital locum support.

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