Many businesses employ family members at some point. Along with the advantages of employing family members who are likely to be truly committed to the success of the business and represent a built-in succession plan, there are also disadvantages that arise from different expectations between the business owner and family members about how they fit into the current and future needs of the business. So, what is the secret to successfully employing family members?
How do family members see their role in your business?
If your family members see their participation in the family business as a ‘duty’ or a ‘right’, then you will experience friction. There are many ways to support family members without employing them in your business. If you cannot make a good business case for an individual’s employment, then you should explore these other options. If you decide to involve a family member in your business, you must create clear job descriptions and expectations for each position.
Employment contracts
An employee is an employee whether they are related to the business owner or not. This means that every worker has certain entitlements, obligations, and rights which cannot be removed or altered without great difficulty. Some of these rights and entitlements can be implied by a court based on the way their personal services are deployed by the business unless a written employment contract indicates otherwise.
The key protecting your personal relationships in business is to set expectations as early and clearly as possible. The best way to set those expectations is for the parties to enter a comprehensive written agreement as to the terms of employment. Any good employment contract will cover all the important aspects of an employment relationship, including:
- Remuneration;
- Employee entitlements and obligations;
- Termination of the employment relationship;
- Role descriptions and KPIs;
- Confidentiality requirements; and
- Post-employment restraints (if necessary).
Approach the employment of family and non-family workers in the same way. Don’t hesitate to engage external experts to assist you in the negotiation and preparation of an employment contract if you are concerned about maintaining objectivity.
If a family member employed in your business underperforms, does the wrong thing, or otherwise causes problems, the employment contract is the easiest way to correct their behaviour or stop them from participating in the business altogether. It sets an objective standard of behaviour and clearly states the consequences of acting inconsistently with promoting the business’ interests. It imposes ‘distance’ between the family member, and the owner, on sensitive workplace matters.
When drafted clearly and with the employee’s input, an employment agreement can help both parties improve the situation while remaining on good personal terms. However, if a family employee engages in serious misconduct or the personal relationship with the business owner completely breaks down, it may be necessary to dismiss them.
In these unfortunate circumstances, a well-drafted employment contract will minimise the financial impact of the relationship breakdown on the wider business.
Dismissal
Despite the real ‘personal’ aspects to family employment relationships, to the courts there is no difference between the rights afforded to family employees and regular employees. This means that family employees are similarly entitled to sue you (the business owner) for ‘unfair dismissal’ or bring a ‘general protections’ claim against you if their treatment/termination by the business satisfies the legal requirements.
Ultimately, an employer should always follow the correct procedures when dismissing a family employee. These can be found in the applicable Award, the employment contract, and the Fair Work Act 2009 (Cth). If the factual circumstances are complicated, or the law is unclear in your given circumstances, it is recommended that seeking legal advice be obtained to ensure that the process is handled correctly.
In family employment relationships, it’s very important to maintain the personal relationships between family members. Fighting against a loved one in Court is the best way to make this objective as difficult as possible to achieve. Therefore, it is preferable to set clear expectations from the beginning about employee conduct and take the ‘personal’ out of your decision-making.
You want your family business to be a profitable, professional organisation. This starts with how your employ your family members.
