Keeping It In The Family

Many business owners choose to employ family and friends in an attempt to reduce potential employment disputes, and there are of course significant advantages associated with this approach.

Family businesses generally work very well on the basis that everyone knows and understands each other, bringing with it higher levels of commitment and loyalty and often increased productivity.

So far, so good, but there is also a tendency in family run businesses, either to neglect the legal obligations that apply to the relationship, or to fail to apply normal safeguards. Trust is an essential element of any employment relationship, but employing people ‘on trust’, even family members, should be avoided. Whether a formal contract is in place or not, anyone considered as an employee has the same legal rights as any other employed person – the only exception to this being a ‘true’ volunteer. Even a niece or nephew who works on a casual basis through the summer holiday enjoys legal protection and the basic minimum rights entitling them to receive, for example, the national minimum wage, statutory sick pay, holiday pay and a whole string of other benefits.

It can be difficult to deal with family in the same way as other employees. Entering into the same formal relationship when “we’ve known him since he was a little boy” may be awkward and it is tempting to think “we don’t need a contract”. But it is crucial that family and friends should be treated in exactly the same way as other employees. All employees need to know what is expected from them, and the consequences of failing to meet those expectations.

When things go wrong in families they tend to go with a bang, whether the problem has arisen from outside of the business, or from within. Either way, the impact on your business is likely to be bigger than a problem which arises between two unrelated employees.

It is not safe to assume that you can take action against a family employee, just because of a problem in the family. Likewise, it is not safe to assume that a family member can be trusted, or that any family relationship is safe. We have experience of a father suing his son for unfair dismissal; a sister claiming constructive dismissal because of the actions of her brother and sister in law; and the all too common problem of a husband and wife separation among other things. More often than not, these develop into employment tribunal claims because the employee was not treated with the same respect or care given to a non-family employee.

In a family/employment dispute, the bitterness can be severe, and positions often become entrenched. The argument becomes one of principle, rather than the generally more straightforward issue of compensation.

Ensuring that the normal and necessary employment practices are followed in relation to employed family and friends should help to avoid most problems. However, care must be taken when introducing new contracts and policies for existing employees. Consultation is always an important part of this process, and when involving family and longstanding friends, it is prudent to have a more open and extended consultation than normal so that those employees feel involved and valued, enabling the business to benefit from the added value of their input.

Contact Matthew Huddleson on 01392 685351 or email matthew.huddleson@foot-ansteys.co.uk