When a small self-employed business starts gaining momentum, with an increasing number of clients and work, the need for additional help — employees — often arises. Can a self-employed person hire employees? What needs to be considered? Here are some tips, based on frequently asked questions.
Yes, of course! A self-employed person — an individual engaged in economic activity, or a sole proprietor conducting business, has the right to hire employees. However, keep in mind that a self-employed person registered with the State Revenue Service cannot hire more than 5 people simultaneously. To hire more than 5 employees at the same time, a different business structure needs to be chosen.
When hiring employees, a self-employed person — an individual engaged in economic activity or a sole proprietor — becomes an employer and must take into account additional responsibilities and obligations, such as:
To hire an employee, an employment contract must be concluded, and a report on the employee's hiring must be submitted to the State Revenue Service. This report must be submitted no later than the day the employee starts work. In case of employee dismissal, a similar report must be submitted no later than 3 business days after the change in the employee's status.
A self-employed person — an individual engaged in economic activity or a sole proprietor — as an employer, is obligated to withhold taxes from the employee's gross income every month:
From the calculated gross income of the employee, social insurance contributions at a rate of 10.5% are first calculated. Additionally, the employer pays social contributions for each employee at a rate of 23.59%. From the gross income, after deducting social contributions, the non-taxable minimum, and various allowances, income tax is calculated. This is done based on established rates. Monthly, by the 17th day, the self-employed must submit an employer’s report where the taxes on the employee’s wages are calculated.
Additionally, a self-employed — an individual engaged in economic activity or a sole proprietor – as an employer must pay a business risk state duty for each employee from their own funds. This duty of 0.36 euros is paid by individual enterprises, farmers, fishermen's households, and sole proprietors. Persons engaged in economic activity registered with the State Revenue Service do not pay this duty for employees.
To better understand the procedure for submitting information about employees and taxes, it is recommended to carefully study the regulations of the Cabinet of Ministers.
If you have employees, you have the right to write off representation expenses intended to enhance the company's prestige. These include expenses for hosting and meals with business partners, as well as expenses for inexpensive items with the company logo, distributed to promote the brand.
Representation expenses throughout the year can be written off at no more than 5% of the total employee salary fund. For example, if you have an employee receiving a gross salary of 1000 euros per month, the total salary fund for the year is 12,000 euros. In this case, representation expenses should not exceed 5% of 12,000 euros. For more information about representation expenses, read here.
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