Self-employment in the context of unemployment security law can be either full-time or part-time. If you become unemployed or start a business while unemployed, the TE Office will make an assessment as to whether your business counts as full-time or part-time self-employment. The TE Office’s assessment is binding on your unemployment fund.
The effect of self-employment on eligibility for an earnings-related allowance
If you are full-time self-employed or work full-time in your own business, you can only claim an earnings-related allowance after you have stopped running or working for your business and can prove that your business has closed or that you no longer work in the business. More information about the assessment process is available from the TE Office.
Running or working in your own business on a part-time basis does not prevent the payment of an earnings-related allowance. Your earnings-related allowance will be adjusted to account for any income you earn from your business or self-employment. In most cases, the income information is taken from your most recently filed self-assessment tax return.
Independent work and light entrepreneurship
‘Independent work’ refers to forms of work that are classed as neither self-employment nor employment, whether in the private or public sector. Examples include working on a grant or acting as a carer for a family member. Independent work does not count towards satisfying the employment condition.
You must let your local TE Office know of any periods of work exceeding two weeks without an employment contract. The TE Office will decide how to classify your circumstances and issue a labour policy statement to the Unemployment Fund for Education and Science. You will not be eligible for an earnings-related allowance if you engage in independent work full-time. If the TE Office considers you to only be working independently on a part-time basis, you may be entitled to an earnings-related allowance. For more information, contact your local TE Office.
Under unemployment security law, working through an invoicing cooperative or service counts as running your own business. This form of making a living is known as ‘light entrepreneurship’, and any income you earn from it will be taken into account in the calculation of your earnings-related allowance on a cash basis. Please always include a bank statement / payslip showing your earnings with your earnings-related allowance application. Any period of light entrepreneurship exceeding two weeks also needs to be reported to the TE Office.
The TE Office will only make its assessment as to whether any business you start while unemployed is on a full-time or part-time basis after you have been running it for four months. You will therefore remain eligible for an adjusted earnings-related allowance for at least the first four months of self-employment. However, you must be registered as looking for full-time work with the TE Office.
Starting a business
Always contact the TE Office before starting a new business. The TE Office will assess the nature of your business and issue a statement to your unemployment fund. Your earnings-related allowance will be adjusted to reflect any income you receive from self-employment during your first four months in business. Once you have been running your business for four months, the TE Office will make a determination as to whether your self-employment is on a full-time or part-time basis and issue a new labour policy statement to your unemployment fund.
You do not need to notify the TE Office if you only run a business for a period of no more than two weeks. Any income you earn from such short-term self-employment will be taken into account in the calculation of your earnings-related allowance on a cash basis.
Remember to let the TE Office know if the scale of your business changes.
Effect of business income on adjusted allowances
Income from part-time self-employment is taken into account in the calculation of your adjusted earnings-related allowance on the basis of evidence of your earnings covering as long a period as possible. Your most recently filed tax return is usually used in the adjustment process if you have been running your business for long enough to have filed a self-assessment tax return. Only the part of your earnings that has been taxed as income will be taken into account. Any income that has been taxed as capital gains will not be factored in. You are also expected to back up the income you have declared in your tax return by supplying a tax statement and an itemisation. These should be enclosed with your first ever allowance application and once a year thereafter, whenever you file a new tax return.
If you have only just started your part-time business and have not yet been taxed on your earnings from it, or if your income has changed substantially since your most recently filed tax return, we will need to see your accounts covering as long a period as possible.
How to proceed if you are self-employed?
If you are self-employed or work without an employment contract and are looking to claim an earnings-related allowance, you will need to let your local TE Office know so that they can assess your circumstances and issue an opinion to your unemployment fund. We cannot process your application until we have received the TE Office’s assessment of the nature of your business.
Please also mention the fact that you are self-employed in your allowance application. Self-employment does not count towards satisfying the employment condition, and you therefore need not report your working hours.
Supporting documents to be enclosed with your earnings-related allowance application if you
- run your own business part-time or have a lmited company whose income has already been taxed: your most recently filled self-assessment tax statement and itemisation.
- run your own business part-time but have not yet been taxed on the income: evidence of your income and tax-deductible expenses based on your accounts since the launch of your business
- start a business while unemployed and have not yet been taxed on the income: monthly account statements showing your income and tax-deductible expenses for the first six months. After the initial six months, your earnings-related allowance for the following six months will be adjusted based on your average income during the previous six months. Once you have been running your business for a full year, the average of the previous 12 months will be used as the basis for calculating your allowance until you have filed a tax return for your business.
- set up a limited company while unemployed: monthly statements showing any wages you have received or paid yourself from the company as well as any benefits in kind, bonuses or other taxable income you have received, including taxable dividend payments and similar.
- embark on light entrepreneurship: statements showing your earnings during the adjustment period
The Unemployment Fund for Education and Science is a wage-earners’ unemployment fund, and our job is to provide unemployment security for people who earn a living by working for someone else. If your primary source of income is self-employment or if you are thinking about starting a business, we recommend that you explore the possibilities of joining an unemployment fund that specialises in providing unemployment security for self-employed people. You can read more about self-employment and what membership in the Unemployment Fund for Education and Science covers via the link below.