Family businesses: Getting relationships right

In family-owned businesses, the nature of the employment relationship is often agreed on an informal basis and the implementation of contracts of employments, directors service agreements and staff handbooks are overlooked, to the detriment of the business.

Situations can arise where one family member is looking to remove another due to a breakdown in the family relationship, an act of misconduct, or an issue with poor performance, so it is important to have these documents in place.

In addition, care should be taken to avoid special treatment. Family members must follow the same policies and procedures, usually set out in the staff handbook, as others, including standards of conduct, absenteeism and claiming expenses.

Inconsistent treatment could result in claims of discrimination or constructive dismissal if, for example, a non-family member is subjected to a disciplinary sanction more severe than a family member.

When hiring or promoting, employers should select the most qualified individual for the position, regardless of family status. A fair recruitment policy should be drafted and followed.

A family member’s role and all other workers’ roles should be set out in job descriptions where responsibilities should be clearly defined, which is likely to reduce conflict. Just because an employee happens to be the business owner’s sister, for example, may not mean she has the authority to appoint or dismiss staff.

All employees should undergo the same performance process. The business and the family member will benefit from honest feedback about areas for improvement and strengths. Where possible, include input from non-family members to limit the perception of bias.