Updated revenue guidance on employee classification post Karshan

10 July 2024 3 min read

By Matthew Graham and Orla O'Leary

At a glance

  • In October 2023, the Irish Supreme Court ruled that Domino’s Pizza delivery drivers are employees, not contractors, introducing a new five-criteria test (Karshan Test) to determine employment status.
  • The Karshan Test includes the Work / Wage Bargain, Substitution Test, Control Test, consideration of all circumstances of the contract, and the legislative context.
  • Employers are advised to re-evaluate their contracting arrangements.
  • Certain industries, including construction, domestic work, courier services, media, the public sector, and platform workers, are likely to be significantly impacted by these new guidelines.
  • The Karshan decision is part of a broader international response to the ‘gig economy’. 


In October 2023, the Irish Supreme Court held that Domino’s Pizza delivery drivers are employees rather than contractors, enumerating in their judgment a new test of five key criteria to determine employment status (Karshan Test). 

Employment status can have wide ranging tax and employment law implications. Where employers misclassify employees as contractors, they risk exposure to employment claims as well backdated taxes, interest and penalties. Employers should re-evaluate ongoing contracting arrangements according to the new criteria to minimise risk.

Revenue Guidelines

The Karshan Test has a five-pronged approach, which was interpreted by the Revenue Commissioners as follows:

  1. Work / Wage Bargain – Does the contract involve 'Payment by a business to a worker for a service, whether agreed in writing or not, whether the work is carried out on a once off basis or a continuous basis'?             
  2. Substitution Test – Does the contract impose restrictions which impede the ability of a worker to appoint a substitute?
  3. Control Test – Does the business have the ability, authority or right to exercise control over the worker concerning what, how, when or where work should be completed? 


    Each of the first three questions should be considered in a simple yes / no manner. If the answer to any of the initial three steps is 'No', the individual will not be regarded as an employee. 

    If the answer to any of the three questions is 'Yes' consideration then needs to be given to the more nuanced final steps. 

  4. All the Circumstances of the Contract – Consideration must be given to the entire factual matrix of the engagement, stepping beyond any written agreement to consider the arrangement in practice.
  5. The Legislative Context - Legislation which requires certain workers to be classed as either employees or contractors should also be considered.
Heavily Impacted industries

The Revenue Commissioners have highlighted that several industries are likely to be disproportionately impacted by the new guidelines. Employers in construction, domestic work, courier services, media, the public sector and, those who employ platform workers are especially likely to be affected. The high degree of control exercised over workers, the proliferation of contractors and various industry specific norms increase the risk profile of these sectors and make them likely to face future challenges. 

The Karshan decision can be viewed as part of a broader international response to the growing 'gig economy'. The UK have recently adjudicated on similar issues in the Uber BV & Ors v Aslam & Ors (2021) case. We can expect to see further developments globally on this issue, which may impact Ireland in the medium to long term. 

Revenue Commissioner guidance only relates to tax, and it is possible the Courts or the Irish employment tribunal (the Workplace Relations Commission) could interpret the criteria for employee status in a different way. In practice, in our view, it is likely the principles of Karshan will be broadly applicable.