Dear Money mentor,
Our son will be off on school holidays for June, July and August. He will turn 18 over the summer. What should we pay him? My husband feels he should not be paid, but that if he needs to buy something we will pay for it. On the other hand, I feel if he gets paid he will put a value on money. This issue has caused rows. We do need our son to help, as my husband works long hours. I am sure there are lots of other families in the same situation.
Many, many thanks,
Freda
Hi Freda,
Yes, you are right, there are a lot of other families who have been, and are, in the same situation.
Reading your letter made me remember the same conversation with my parents many years ago. I was getting a small flat payment per week. We had a guy working for us on the farm, and I felt I was doing as much – if not more – and should be paid accordingly. I thought I made my case well, until I was asked about the cost of food and accommodation that I would have to pay if I wanted the same wage.
I think your son should get paid for two reasons. As you say, it does allow him to not only put a value on money but also budget what he spends it on. The payment also puts a value on your son’s contribution, and he would feel that it is his money that he earned. It also avoids the need for him to ask you for money each time he wants to buy something. This alone would cause friction and inevitably lead to rows.
Tax advantage
The other benefit if you pay him a weekly wage is to reduce your tax bill. You can pay your son up to €8,250 free of income tax. The payment is also an allowable deduction from the taxable profit of the farm.
So if you were paying the 20% rate of tax, it would be an income tax saving of €1,650. If you were paying tax at the top rate of 40%, then the tax saving would be €3,300 – and even more when PRSI and Universal Social Charge (USC) are taken into account.
There are no PRSI or universal social charges either. Individuals with a total income of up to €13,000 are not subject to the USC. As employees earning €352 or less per week are exempt from PRSI, there is no liability. .
To ensure the deduction will be allowed you have to:
(a) Register for PAYE and operate PAYE – even though no PAYE may be payable on the wages.(b) Have evidence of payment ie pay by cheque, not cash.(c) The payment must reflect the commercial contribution of the child’s work, ie the amount you would pay to another person to carry out similar duties.“Child labour”
I know you said your son was 17, but for families with young children, under Labour Law a young person between 14 and 15 years of age may be employed for light work, provided it does not interfere with their schooling. Young people aged between 15 and 16 may be employed for up to eight hours a day or 37.5 hours per week.
The special PAYE tax credit of €1,650 is not allowed to children employed on a part-time basis and is only allowed to children of a farmer who are full-time employees in the farming business of their parents and where certain conditions are fulfilled. The conditions are:
(a) PAYE must be operated in respect of the employment(b) The individual’s income from the employment must be at least €4,572.How much is enough?
The big question is how much you should pay him. That is one you will have to decide together, but I prefer a flat rate per week, rather than a payment per hour.
One thing you do not mention is that if paying him will put pressure on farm finances. You said your husband works long hours. I can only assume that there is adequate return for that work. If not, then I think you should look at the whole system of farming, especially if you son is thinking of returning home to farm.
If you son is going to college, you could continue to pay him a wage if he was coming home at the weekends to work on the farm. Again, it benefits your tax situation, but he must be doing the work.
Going forward, for tax planning purposes, where a family member is employed full-time on the farm, it could make tax planning sense to pay that family member (son/daughter) sufficient to absorb their 20% rate band of €33,800, provided it is reducing the parents’ profits, which are taxable at 41%, ie an income tax saving of 20%.
So there are many benefits of giving your son a weekly wage over the summer months, from a tax and personal point of view. Like my parents, remind him of the value of food and accommodation, so that he puts a real value on what you are actually giving him. I would be interested in hearing comments from other families who have had the same dilemma and how they sorted it out.
Dear Money mentor,
Our son will be off on school holidays for June, July and August. He will turn 18 over the summer. What should we pay him? My husband feels he should not be paid, but that if he needs to buy something we will pay for it. On the other hand, I feel if he gets paid he will put a value on money. This issue has caused rows. We do need our son to help, as my husband works long hours. I am sure there are lots of other families in the same situation.
Many, many thanks,
Freda
Hi Freda,
Yes, you are right, there are a lot of other families who have been, and are, in the same situation.
Reading your letter made me remember the same conversation with my parents many years ago. I was getting a small flat payment per week. We had a guy working for us on the farm, and I felt I was doing as much – if not more – and should be paid accordingly. I thought I made my case well, until I was asked about the cost of food and accommodation that I would have to pay if I wanted the same wage.
I think your son should get paid for two reasons. As you say, it does allow him to not only put a value on money but also budget what he spends it on. The payment also puts a value on your son’s contribution, and he would feel that it is his money that he earned. It also avoids the need for him to ask you for money each time he wants to buy something. This alone would cause friction and inevitably lead to rows.
Tax advantage
The other benefit if you pay him a weekly wage is to reduce your tax bill. You can pay your son up to €8,250 free of income tax. The payment is also an allowable deduction from the taxable profit of the farm.
So if you were paying the 20% rate of tax, it would be an income tax saving of €1,650. If you were paying tax at the top rate of 40%, then the tax saving would be €3,300 – and even more when PRSI and Universal Social Charge (USC) are taken into account.
There are no PRSI or universal social charges either. Individuals with a total income of up to €13,000 are not subject to the USC. As employees earning €352 or less per week are exempt from PRSI, there is no liability. .
To ensure the deduction will be allowed you have to:
(a) Register for PAYE and operate PAYE – even though no PAYE may be payable on the wages.(b) Have evidence of payment ie pay by cheque, not cash.(c) The payment must reflect the commercial contribution of the child’s work, ie the amount you would pay to another person to carry out similar duties.“Child labour”
I know you said your son was 17, but for families with young children, under Labour Law a young person between 14 and 15 years of age may be employed for light work, provided it does not interfere with their schooling. Young people aged between 15 and 16 may be employed for up to eight hours a day or 37.5 hours per week.
The special PAYE tax credit of €1,650 is not allowed to children employed on a part-time basis and is only allowed to children of a farmer who are full-time employees in the farming business of their parents and where certain conditions are fulfilled. The conditions are:
(a) PAYE must be operated in respect of the employment(b) The individual’s income from the employment must be at least €4,572.How much is enough?
The big question is how much you should pay him. That is one you will have to decide together, but I prefer a flat rate per week, rather than a payment per hour.
One thing you do not mention is that if paying him will put pressure on farm finances. You said your husband works long hours. I can only assume that there is adequate return for that work. If not, then I think you should look at the whole system of farming, especially if you son is thinking of returning home to farm.
If you son is going to college, you could continue to pay him a wage if he was coming home at the weekends to work on the farm. Again, it benefits your tax situation, but he must be doing the work.
Going forward, for tax planning purposes, where a family member is employed full-time on the farm, it could make tax planning sense to pay that family member (son/daughter) sufficient to absorb their 20% rate band of €33,800, provided it is reducing the parents’ profits, which are taxable at 41%, ie an income tax saving of 20%.
So there are many benefits of giving your son a weekly wage over the summer months, from a tax and personal point of view. Like my parents, remind him of the value of food and accommodation, so that he puts a real value on what you are actually giving him. I would be interested in hearing comments from other families who have had the same dilemma and how they sorted it out.
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