DJM Solicitors

Family matters: What you need to know about employing relatives

Employing members of your family can prove difficult and put a strain on your relationships, but if you handle it well it can be beneficial to your personal life and business.

To make it a success, transparency and communication with both your family members and other stakeholders is vital. Everyone should feel they are listened to and have a part in developing the business. They should understand the company’s business strategy and how the interests of the business and of the family are linked.

You need to get key people around the table who have an interest in the company and are influential – it doesn’t matter whether they are employed by the company or not, their advice could be useful.

Regular review meetings with employees and an annual family forum for family members need to be held. Identify how they fit in with your business objectives, plans and approach, and set out conclusions to be referred to. In family forums discuss personal, business and family aspirations. If family members provide loans for the business, consider their security if any problems arise and be aware that you may not be able to protect them if the company becomes insolvent.

There should be a clear strategy for how disputes will be resolved; options include using mentors, professional advisers, mediators or arbitrators.

Be clear about the current ownership and management structure and how you see it developing in the future. Plan your approach for ownership in the future with both family members and other key employees and consider that there will need to be a gradual handover process to reduce fallout of any sudden change. Agree how change will be raised, and the criteria that will be used to assess it.

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