Employing Family Members

This video is all about employing your family members in your business if you are a sole trader.

Employing a family member means that you are spending money out of your business. Well, hey. But that gives you a reduction in profit, and that could be a double woo-hoo. Because obviously a reduction in profit does mean a drop in tax that you will have to pay. So sometimes we look at that as a brilliant thing.

Now, it is possible to employ your family members. It could be your spouse, your partner. It could be a brother or sister. It could actually be your children, provided they’re over 13. Anybody you can actually employ within your business.


The problem of employing a family member, is it might look to be a bit dodgy. So the rate of pay you pay your family member must be commensurate with the duties being performed. You can’t pay someone 1,000 pounds a week if all they’re going to do is answer the phone.

It has to be relative to what you would normally pay in the market for that kind of job. If it was 1,000 pounds and they’re answering the phone 24/7, then that could be a bit of a difference.

But what you’ve got to bear in mind is, you may pay somebody slightly more than what you’d get at the market, because what you’ve got to think about is the trust levels you are putting on that person. Potentially the unsocial hours they might be keeping, and also the different types of services they might be providing.

If you had somebody to be your PA, yes, they might be taking phone calls, they might be making notes for you. But they also might end up doing bookkeeping accounting work. Which a PA could do, nothing wrong with that. But it might be a higher skillset from what you would get with somebody just answering the phone. So your pay must be commensurate with what they’re actually doing.

You do need to take out employer’s liability insurance. Whether they’re an employee or a self-employed person under your guidance, it’s always best to take that out. Especially if they’re working from your base, you need to make sure you have responsibility for their health and safety. If they’re coming into your house, you have trip hazards, you need to make sure they are sorted out before you get any employees working for you.


If they are self-employed people, that’s fine, but they must have an invoice from them to you, addressed to your business, and you must actually pay those invoices. What you shouldn’t do is have your spouse working for you, and you pay them to a joint bank account.

Because then that looks like you’re just withdrawing money from the business and putting it into your bank, and not potentially an employee’s bank or a self-employed person’s bank account. So you must pay the invoice, and ideally you should be paying it to their own bank account.

I would also make note of their unique tax reference number, and their National Insurance number. And at the bottom of their invoices, get them to put that they understand that they are responsible for their income tax and National Insurance. That’s kind of the way to make sure that they definitely are self-employed. And if they can quote those valid numbers, then that covers you for not just paying any random person.


Of course, the other way of doing it is putting them on a payroll scheme, especially if they’re not able to be a self-employed person. So that could be a child could be a payroll person and not on self-employment.

Things you need to look out for, if you want to pay them, then you need to also do PAYE and National Insurance. So you’d have to account for the employee’s and the employer’s National Insurance. If you are employing a child, you need to make sure you are fully familiar of the working time regulations for children.

And you have to have a think about whether the people that you employ, if they’re not children, whether they should be entitled to a workplace pension scheme. Now that depends on their age, and it also depends on the rate they’re paid and how much they are paid. So you need to check that out.

If you do pay an employee over 120 pounds a week, you should be registered as an employer and operate PAYE. I have to say, even if they earn less than that, sometimes it’s best to put them on PAYE anyway. And then you know it’s definitely all above-board and you’re complying with as many rules as you can.

It is possible to employ children, young people, as long as they’re over 13 years old. Young people are always defined as between 13 and 18. Now, they are entitled to certain things. They are entitled to time paid off to study. They also, and I don’t wish to say this for a 13-year-old, they’re entitled to statutory maternity pay and statutory paternity pay, if needed. They can only work full-time, as in up to 40 hours a week, once they have reached the minimum school-leaving age.

Now, technically children don’t have to be on a payroll if they’re under 16 years old. But as I said, it’s the safest way to do it. So paying them into their own bank account, not their parents’ bank account. But if they are going to earn above the personal allowance, even if they’re 14, then they must be on a payroll scheme.

As you are aware, school-age children are not entitled to minimum wage. But as soon as they hit their 16th birthday, they are entitled to it. So have a think about paying them very little. So just pocket money. I didn’t say that really.

At 18 years old, adult employment rights do kick in. Now there are many additional rules to check out for employing children, so please have a look at that government website that I’ve listed here, and look at the additional restrictions you do need to comply with.

Obviously, there are always exceptions to the rule, and in the music, arts, entertainment world, we often find school children in films, plays, concerts, et cetera, et cetera, et cetera. They do have rights to work, but they do have to get a licence so that they can work in that kind of environment.

So they normally go and get the licence from the child’s local council, and the local Child Performance licence is issued by them. One thing you should note, is if the child will not be with a parent or school teacher or a home tutor, they must be supervised by a chaperone that is approved by the council. And chaperones can also apply for approval from a council so they could be employed to take care of children in theatre and film environment.

All right. So just beware. You can have children that come in and work for you, pay them commensurate of their details. And if it’s going in a film or a play, then get a licence for them to work.

Any enquiries, then please drop me an email and I will try and help – [email protected]


About the Author