What you need to bear in mind if family members work with you

22. May 2017 | Reading Time: 3 Min

When may a family member help out with the company – and when does he/she have to be insured with the regional health insurer? All you need to know about family members working in your company in Austria– especially important for SMEs – can be found here.

In small and medium-sized enterprises – particularly in family businesses – it is common for family members to jump in at short notice and help out the owner – if, say, a lot of orders come in at once unexpectedly or the workload is temporarily very high for other reasons.

For a long time there were no clear regulations setting out which family members and under what circumstances were allowed to help out without an entitlement to remuneration and without establishing an insurance relationship with the regional health insurer. Therefore, last year the Federation of Austrian Social Insurance Institutions and the Federal Ministry of Finance published a joint information sheet on family involvement in companies.

Assistance obligation for spouses / registered partners

For spouses and registered partners there is a kind of marital duty to assist. This (unpaid) involvement in the company is the norm – only in exceptional cases does an employment relationship exist.

An employment relationship for spouses / registered partners is only deemed to exist if there is a written contract and the agreement stands up to external comparison. This means that the agreement would also have been entered into as such with a third party outside the family. If there is no such agreement in place, an auditor performing a tax audit could refuse to accept the operating expenses regarding the wage bill.

Live-in partners: employment relationship as exception

Although, generally speaking, there is no marital duty to assist for live-in partners, here the establishment of an employment relationship is regarded as an exception as well. The same statements apply here as for spouses.

Special regulations for children

If children (including adopted children and stepchildren) are involved in the company, it is assumed that this involvement is on the basis of family ties – unless otherwise agreed and full insurance exists due to gainful employment or the child is in school education, vocational training or higher education. If an employment relationship is agreed, this must again be agreed on arm’s length terms.

However, an employment relationship requiring full insurance exists if the child

  • is over 17 years old,
  • is not engaged in any other occupation as a main job (or in higher education, school education or vocational training),
  • is not employed in a farming or forestry business, and
  • regularly works in his or her parents’ business.

Where non-remuneration is agreed, the monthly contribution base is EUR 801.60 (2017). As an alternative to full insurance in this case a marginal employment relationship (2017: remuneration below EUR 425.70 per month) could be agreed.

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Parents, grandparents and siblings

With parents, grandparents and siblings an employment relationship does not exist if

  • they are fully insured due to gainful employment, or
  • they are in school education, vocational training or higher education, or
  • they have their own pension or a comparable retirement or survivor’s benefit, and
  • the work is short-term.

Other relatives

The more distant the family relationship, the more likely it is that an employment relationship will be assumed. If, however, non-remuneration has been agreed (and this can be proven), an employment relationship will not be assumed in the case of short-term work.

TPA tip

To prove non-remuneration, a written agreement should be concluded. The authorities involved have placed a corresponding agreement template and information sheet online (in German):

 

Family activity in corporations excluded

Please note: The regulations listed only apply to relatives of a sole trader or to relatives of partners in a general partnership (Offene Gesellschaft), civil-law partnership (Gesellschaft bürgerlichen Rechts) or similar. In corporations (limited liability company [Gesellschaft mit beschränkter Haftung] or joint stock corporation [Aktiengesellschaft]) family activity is excluded in principle. What must be assessed here, on a case-by-case basis, is whether the activity of close relatives meets the conditions for an employment relationship.

 

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