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IT’S NOTHING PERSONAL: EMPLOYMENT LAW IN THE FAMILY BUSINESS
Nearly half of the private sector workforce works for a family business of some sort, making these businesses a vital cog in our economy. But family businesses sometimes suffer from a reputation of nepotism. If you’re running a family business, how can you make sure you’re playing fair, and guard against some common pitfalls?
Many family businesses grow rapidly and organically, with a culture of informality. There are lots of positive aspects to this method of growth, but on the downside, it can leave family business owners and managers in a vulnerable position.
This ‘informality culture’ can mean that, when working with family members, there is a real temptation to overlook simple documents such as handbooks, formal policies, contracts of employment or director’s service agreements.
It may seem over-the-top and somewhat pessimistic to have contracts in place between family members when all is running smoothly, however, circumstances change, and sadly our experience is that disputes do arise. Having formal contracts in place can help protect against the cost of an elongated legal argument over the nature of an individual’s involvement in the business, and help achieve a swift and amicable resolution.
A fair approach to recruitment is also essential. It is legal for family businesses to preferentially promote family members (the law protects against workplace discrimination based on ‘protected characteristics’ – and ‘family relationship’ isn’t one of those), but you should make sure that non-family employees receive similar salary and benefits in comparison to family members.
Suspicions of favouritism can lead to high staff turnover and low morale. You should maximise opportunities for career progression for all – you risk losing talent if there’s an assumption that only family members will progress within the business. An open and honest approach to how individuals can progress in the business is the best one.
Matthew Clayton heads up Willans’ Legal 500-rated employment team. He handles the full range of contentious and non-contentious employment law issues for a client base which includes multi-national companies, owner-managed businesses and not-for-profit organisations. Contact Matthew at firstname.lastname@example.org.