Employ Your Children

It is my experience, and that of my fellow accountant colleagues, that where a family run a business that everybody is involved. The parents and the children. Through innocence, many if not most business owners pay their kids for working out of their own taxed drawings. This is completely unnecessary and not good for the business either. If the child works, they can be paid.

“Is it OK to employ your children?”

This is a regular question I am asked. It’s a good one too.

A child can be paid up to €8,000 a year from the family business and not be liable for tax. 

If that payment reduces the parent’s taxable income by that amount, the family’s overall position has improved. A child can get the money free of tax while the parent would have had to pay the tax at either his or her highest rate.

Keep in Mind:

• A child must be genuinely doing the work for which he or she is paid
• It is necessary for the owner of the business to register as an employer for PAYE / PRSI if they have not already done so
• It may be necessary to pay PRSI on the wages for the child even though there is no tax.

The above items may seem onerous but they are not really. There is very little paper work after the initial set up. Even if there is PRSI payable on the wages, this can be handy down the road in case there is a claim for unemployment or similar benefits.

For example, in the case of a child helping his father or mother on a farm they would be classed as a class K contributor.

If their annual pay is less than €10,000 they are not liable for the USC

In practical terms where a child is employed in a family business the work is most likely to be part-time. The question of whether there is a contract of employment may not be relevant really.

Keep in mind the €8,000 and €10,000 limit above

But essentially where an employee is under 16 they pay no PRSI

The general minimum age is 16 but a 14 year old may be employed for light work outside of school term time subject to a maximum of 35 hours per week in holiday time or 8 hours a week during school term time.

If you require any further information contact me directly.