Working for the family

Unpaid work is similar, if not identical to, work performed under an employment contract but it is performed free of charge. It is usually registered in relation to family businesses. It may seem natural that people can work free of charge for a family business from time to time, but since the enterprise is a profit-making entity owned by an owner or owners (including a legal person under private law), it would be natural to pay the employees. As a compromise, companies within the meaning of the Commercial Code (i.e. that do not include foundations or non-profit associations) can register unpaid work. However, it is worth noting that unpaid work shall be very clearly defined. Providing assistance to close relatives is reasonable, but not as a permanent entry in the employment register, rather for a specific situation, or in exceptional cases for a period of time.

Since, as a general rule, unpaid work has the characteristics of work performed under an employment contract and an employment contract could also be concluded for a short period, the employer shall be prepared to substantiate the factual circumstances of the entry when registering unpaid work. Although unpaid work is more common in family businesses, it is not prohibited to make this entry for other persons, for example if a third party wishes to provide free assistance at a fair. What is important here is the specific limited nature of the situation and the motivation for not registering it as paid work.

Example 1: Arthur wants to participate in a fair, so he offers to help out Tamm & Tõru OÜ that belongs to his wife. A contract is concluded with him for the duration of the fair to present the products of the company, and an unpaid work contract is entered into the employment register.

Although this work is usually paid, performing this work free of charge in a specific situation for a family business is justified. This is a very clearly defined one-time instance.

Example 2: Arthur wants to participate in a fair, so he offers to help out Tamm & Tõru OÜ that belongs to his wife. A contract is concluded with him for the duration of the fair to present the products of the company, and an unpaid work contract is entered into the employment register. Arthur regularly participates in fairs as a presenter of the company’s products and does so on 58 days from June to August.

Irrespective of the entry in the employment contract, Arthur is a person working under an employment contract. His activity is equivalent to that of a person who is employed under an employment contract and who receives remuneration. The employer has the right to organise the work process, give instructions to the employee, and inspect the work. Since the activity is permanent, it is a concealed employment contract.