Employing Family Members

If you owned a small business back in the day, keeping it in the family was a no-brainer – in the same way that the eldest prince of a nation spends his life preparing to take over the throne, the eldest son of a business-owning family would’ve been trained up from birth to take over his parents’ little kingdom.

Nowadays, when more opportunities are available for everyone, personal ambition is more important and the laws of equality trump the traditions of ascension, having a family member take over your business is an altogether more complicated affair.

Public liability insurance

Perhaps you’ve always assumed that your son and daughter will join the family business, and their education and involvement in the company reflects this. Hopefully, this means they’ve got valuable experience and have already proven their worth to you and your team – your staff has faith in their abilities and their ambitions, and will support your decision to keep them around full time.

But it could mean that your offspring have never really considered alternatives to joining the family business, or your staffers have insights about their character which give them cause for concern. Talk to everyone – in depth – about what they expect and what you expect. Raising potential problems now will save time, hassle and relationships in the long run.

  1. 1. Separate earnings, shares and dividends

Your family member might have a share in the business, or otherwise profit from its running: it’s crucial you don’t take this into account when working out their salary. The money they earn is for the job they do, it’s not an extension of their pocket money or part of what is ‘owed’ to you. Dividends are also taxed differently to earnings, so it’s important they’re clearly defined income streams.

Also make sure you’re open about your business plans: do you want it to evolve and improve as a company, or just make it a valuable asset to sell on? Your family member hasn’t just got a financial interest once they’re employed by you: they’ve invested time and effort. You want to be on the same page or you risk alienating them.

  1. 2. Have a set appraisal, advancement and awards system for every employee – family and non-family

If you haven’t already got one, it might be helpful to employ someone from outside the family in a HR role. Having someone dedicated to employee wellbeing will give staff a place to turn when they’ve got concerns, without them feeling as though they’re in danger of crossing family lines. Yearly assessments of all staff, including yourself, will give people a chance to discuss any issues they have; if they’re handled by the HR department then you can’t be accused of nepotism or favouritism.

Which you’re less likely to be, if you have a bridge between you and your staff: not only will a person who’s objective and well-versed in conflict resolution, assessment procedures and employment law reassure them that the company is still professional and open, they’ll give you a sense of perspective when it comes to decisions about any family you employ. You need to make sure they’re advancing at a similar rate to everyone else, and not being promoted without it being reflected in an increase of their responsibilities.

  1. 3. Employ a small business consultant

The service that consultancy firms offer will be invaluable to you – find one that specialises in small or family-run businesses, and they’ll act as an impartial eye, a mediator and an advisor. If your son or daughter is looking to take over from you when you retire one day, it’s likely they’ll have ideas to modernise or do things differently: a consultant can help you balance the old with the new, help resolve any disputes and provide flexible solutions in difficult times.

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