Employment in a family owned business

Over the years I have come across all manner of employment issues in family owned businesses. 

They range from a fallout between family members which might leave the business in complete limbo as no one person can make a decision, to non-family members being (or feeling they are being) excluded or treated unfairly compared to family members.

The reverse can, of course, also be true – a family member might feel unfairly passed over in preference to a non-family member. 

These issues, and lots more, are by no means exclusive to family owned businesses. The strong emotions and principled positions that come with family owned disputes, however, do tend to be tough, and both sides can become entrenched quite quickly, making resolving them very tricky indeed. 

Trying to resolve the issues is often not helped by a lack of documentation and process. Not exclusive to family owned business, but certainly more prevalent where there is, generally, a greater level of trust combined with a tendency to discuss and agree things informally around the kitchen table or similar. 

Contracts

First things first. In any business it is important that each employee, whatever their role in the business (and position in the family), has a contract of employment. It is a legal requirement for a basic statement of terms (a section 1) statement to be given before employment starts; it sets out the basics: job title, pay, benefits, holiday entitlement, where they work etc. 

A contract of employment is far better than the legal minimum. It can include, for example, restrictions on what an individual can do if they leave (even if you don’t ever expect them to) and impose duties of confidentiality above and beyond the duties that exist during employment. 

In a family run business, more than most, it is difficult to envisage the relationship coming to an end, let alone ending badly. If it does, however, the chances of it ending nasty is greater and a contract, and the restrictions in it, can be worth their weight in gold and avoid many potential areas of dispute and argument.

Policies

Policies and procedures are important for the same reason as a contract. They set a level of expectation for family and non-family members that are important to follow for all. They will provide a framework for all manner of employment-related issues (amongst other things) and what should (if not will) happen if certain things happen or, worst case, the relationship turns sour.

Contracts and policies are one of the key foundations of any business. They are best put in place at the start – when there is no suggestion of anything going wrong and whilst all concerned are thinking of how issues should fairly be resolved and dealt with in the best interests of the business (and family) as a whole.

Perception of others

Having contracts and policies in place will also help the business and family. If they are in place and, generally speaking, have to be observed by all (family and non-family) this should minimise the risk of perception of preferential treatment – whether it actually exists or not.

Quashing the perception that a family member is preferred over non-family and removing the potential for demotivation within the wider workforce can only be good for the business as a whole. This can be as important amongst family members as it can be for non-family employees. After all, what business doesn’t want all of its workforce motivated?