Can I hire my wife/partner/husband/son/daughter/sister-in-law/nephew? This is one of the most frequently asked questions!
Employing family members works in similar manner as employing people with whom there are no family ties, i.e. if there is a need in business to hire someone and the business generates enough income to cover their wages, we do it. However, a few rules need to be followed.
The HMRC states that such a person cannot have more privileges than another person employed in the same position in the following categories:
– Pay
– Position in the business
– working conditions
In addition, a payroll should be prepared in the usual manner and then pension and insurance contributions should be deducted and transferred to HMRC as for any other employees. What’s more, companies business insurance should have sufficient cover for the employed family member.
Employing Children
You can employ a daughter/son from the age of 13. Between the age of 13 and 16 they can work part-time. The national minimum does not apply to them and they do not have to be paid through the PAYE payroll system.
Changes occur from the age of 16, once they have officially received a National Insurance number, they must then be paid through the PAYE system and then the hourly national minimum rates must be applied.
Hiring family members is a good practice to generate costs in a family business. In a typical company, there is always a need for administrative, marketing or social network managing work. As long as the company generates enough income and that there is a rational explanation for employing such person this option could be explored. For example we do not employ a 14-year-old child for the position of a sales representative or for paperwork, and there are only 10 bills per month generated. Works should be minimalistic, appropriate to age and skills.
Example
Steve owns a construction company, his wife Sue takes care of the house and children. Steve is a great builder, but he doesn’t like paperwork, so Sue helps him with the paperwork in her spare time. At the same time Steve can focus on what he does best at and Sue gets paid for her work and also helps the company to grow. Her typical activities are: invoicing clients, sorting bills, preparing all paperwork and consulting with the accountant and the tax office. She also helps in ordering materials for Steves work, paying contractors, paying subcontractors and employees, dealing with posts and ads on social media, replying to e-mails, sometimes she goes with
Steve and helps with cleaning after the house has been renovated.
If the company does not generate enough income and you are unable to think of what your wife/partner/daughter/son could help you with, unfortunately this option is not for you.
Greenlight Accountancy provides payroll services for monthly and weekly paid employees. We also advise on choosing the tax effective strategy to implement in your business before you start employing staff.
If you plan to hire employees or consider hiring family members, book a consultation with us by calling the office.
Anna @ Greenlight Accountancy
