Sub contractors, specialist contractors and main contractors losing out to black economy

27 Jun 2014

Shadow Economy in the construction sector



Black Economy


Legitimate contractors of all kinds – sub contractors, specialist contractors and main contractors are continuing to lose out on work to shadow economy operators. This has been happening throughout the construction industry for years. However the latest news showcases why the Government needs to act if we are to protect law abiding contractors of all kinds. 


Minister for Education Ruairi Quinn has ordered an investigation into allegations of welfare fraud on certain construction projects which are being funding by his department. This followed on from claims raised by Deputy Robert Troy in the Dáil that a number of state building contracts were awarded to legitimate contractors but that the work was then passed on to sub-contractors who were operating from outside the jurisdiction of the State and outside the taxation and employment regulations for the construction industry in this country.


Deputy Troy also said that these sub contractors were facilitating social welfare fraud (by allowing their workers to pick up dole payments while in employment), ignoring basic terms and conditions and were not meeting their statutory obligations. In short, Deputy Troy was suggesting these sub contractors were not following the law. 


As an example he cited the worked being done at St. Patrick’s College in Drumcondra. 


Interestingly, Deputy Troy specified that the contract had been won by a main contractor and they were operating legitimately.  However he pointed to the work of the sub-contractor who is based outside of the State.


As everyone in the construction industry in this country knows, it does not matter where a company is based, if they are operating in Ireland they must obey the laws and regulations of this country.  So that means they must pay taxes, pay PRSI and they must meet their other obligations as employers.  They also can’t employ people who are on the dole and pay them with cash under the table. 


The black economy or shadow economy has been a scourge of the construction industry in this country for years.  The problems highlighted by Deputy Troy have been widespread throughout the sector – as was pointed out by Minister Quinn during his Dáil contribution on this discussion. 


However the problem seems to have been exacerbated over recent years because of the decline in the construction sector.


It is very disappointing to see these problems still taking place on public.  Effectively the State is being hit three times in these cases.  They are not receiving the proper taxes they are due from the construction workers.  They are subsidising the pay of these workers through social welfare payments.  The State is also the source of the finance for this activity in the first place as the funding is coming from the public purse via the main contractor. 


It is positive that the Minister wants to stop these kind of problems happening and Minister Quinn deserves credit for getting a private company – Contractors Administration Services – to undertake random audits on school and third level building projects to ensure the contractors are meeting the pay and condition requirements.  However these type of audits or inspections need to be backed up by the Revenue and other Departments.  We need to have these type of inspections across the board.


Only then will we be able to separate out the shadow economy operators from the legitimate sub contractors, specialist contractors and main contractors. By undertaking these inspections we will also be protecting the public purse. 


It’s should be noted that the CIF is a member of the Hidden Economy Monitoring Group Forum which aims to tackle the black economy.  We also encourages all our members to report any activities to the Revenue Commissioners – they can do this anonymously via the Good Citizen report details of which can be found at or by clicking on the image below

Good Citizens Report



Join the Construction Industry Federation