Employment of a partner's family member in the company

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Employing family members in the company is quite a common practice. However, it is worth remembering that such cooperation may take various forms. It depends on the degree of kinship and the nature of the cooperation - whether it will be formalized by signing a contract or not. How to account for the employment of a partner's family member in a company, and how to account for a family member of a sole proprietor? About it below.

The concept of the employer

Pursuant to Art. 3 of the Labor Code: "An employer is an organizational unit, even if it has no legal personality, as well as a natural person, if they employ employees".

Pursuant to this provision, employers can be both sole proprietorships and limited liability joint stock companies, as well as general partnership, partnership, limited partnership and limited joint-stock partnership. It is assumed that a civil law partnership, despite the lack of legal personality, may also be an employer. This is confirmed, inter alia, by the judgment of the Supreme Court of November 7, 1995, I PRN 84/95: “So if a civil partnership operates in the form of a separate organizational unit employing employees, then such a unit is a workplace within the meaning of Art. 3 of the Code of Civil Procedure, and thus has legal capacity and the capacity to perform acts in law in the employment relationship of employees, and thus also has court and procedural capacity (Article 460 § 1 of the Code of Civil Procedure) ".

Employment of a family member

Employing the immediate family is a common phenomenon. In such a situation, the owner of the company is sure about the person, does not have to undergo the - often tedious - recruitment process, which allows him to significantly save time. The settlement of family members depends on the type of business and the form of cooperation adopted by the parties.

Employment of a family member of the owner of a sole proprietorship

Family members of sole proprietorships are usually treated as cooperating persons. The cooperating person may be:

  • spouse;
  • own child, child of the other spouse and adopted child;
  • Mother father;
  • stepmother, stepfather;
  • adoptive parents

- provided that they stay with the entrepreneur in a common household and cooperate in running the business. Start a free 30-day trial period with no strings attached!

Example 1.

Mr. Patryk hired his daughter in the company. However, she does not live in a shared household with her father and therefore does not meet the definition of a cooperator.

In the event of cooperation with the above person:

  • non-contractually or on the basis of an employment contract - contributions should be paid for a family member in the same amount as for an entrepreneur. This means that it is necessary to register such a person for retirement, disability, accident and health insurance (if he has no other title to be covered by insurance) and possibly for voluntary sickness insurance. Importantly, cooperating persons cannot benefit from tax exemptions in paying contributions as entrepreneurs.
  • on the basis of a specific work contract - here the interpretations of ZUS are not unambiguous. Such a person can be treated as a cooperating person, for whom contributions should be paid in the same amount as for an entrepreneur, or as an economic operator for whom contributions do not have to be paid at all.
  • on the basis of a mandate contract - a family member is treated as other contractors and is subject to the same insurance as the others. Contributions are based on gross wages.

Employment of a partner's family member in the company

As mentioned earlier, unincorporated companies may also be employers within the meaning of the Labor Code. It is possible to employ a family member of a partner in the company, but if the company acts as an employer, the definition of a cooperating person will not be met in this case. Accordingly, regardless of the degree of kinship and the fact of living with the partner, a person from the partner's family will be treated as an employee, contractor or principal. The confirmation can be found in the jurisprudence. The judgment of the Supreme Court of April 17, 1996, II URN 8/96:
“The Supreme Court stated that the person mentioned in Art. 26 sec. 2 of the Act of December 18, 1976 on social insurance of persons running a business and their families employed under an employment contract with a civil law partnership is subject to social insurance for employees (Article 4 (1) of the Act of November 25, 1986 on the organization and financing of social insurance - uniform text: Journal of Laws of 1989, No. 25, item 137, as amended), unless the scope of her duties does not include running and representing the company ”.
The judgment of the Supreme Court of February 18, 1998, UKN 525/97:
“The more so, it is impossible to talk about the insurance of cooperating persons arising from the act if the employer is not a natural person, but a civil law company. Such a company is an economic entity that may employ employees and therefore be an employer also for close partners ”. If a partner's family member helps him / her without a contract in running the company's business, then such a person will be treated as a cooperating person and it will be necessary to register him / her for insurance on the basis of an entrepreneur.

Example 2.

Mr. Janusz is a partner in a general partnership. His spouse helps him in running the company. This cooperation is not formalized by contract. Therefore, the spouse of Mr. Janusz should be reported to ZUS as a cooperating person.

Employment of a partner's family member in the company in costs

The Personal Income Tax Act provides for the possibility of including in the tax deductible costs the income resulting from the remuneration of the taxpayer's spouse and minor children of the taxpayer, and in the case of operating in the form of a company that is not a legal person - also spouses and minor children of partners of this company, due under an employment contract contracts, mandate contracts, specific specific contracts, managerial contracts or graduate apprenticeships (Article 23 (1) (10)).

Example 3.

Ms Janina runs a partnership with her cousin. The partner decided to hire her son to help. The employer in this case was the company. The son's salary will be tax deductible and should be disclosed in the income and expense ledger in column 12. - salaries in cash and in kind.

Summing up, the employment of a partner's family member in the company results in an employment relationship on the same terms as with an unrelated person. A close person will be treated as an employee, and their remuneration will be tax-deductible for the company, and not for the partner himself.