Most businesses have accounting, computer and vacation policies. Why do so few have family employment policies?
Making decisions about hiring younger relatives can be difficult. Skills and talents may vary widely, or maybe there’s not a job for everyone. And sometimes a family member just doesn’t work out as an employee.
Hiring the kids requires a lot of thought, and the time to do the thinking is before the next generation comes of age. Employment in a family business is not an entitlement; business needs and individual abilities must determine hiring decisions.
When creating family employment policies, consider:
Experimentation: Summer jobs can be a great way for kids to “try out” the family business and vice versa. Create a summer job policy outlining the type of work kids are expected to perform, along with personal learning goals.
Education: Is a college degree required to work at the company? Perhaps a graduate degree in a certain specialty? If so, detail the company’s expectations before hiring family members.
Situation: In what position will the children start? Will they rotate through jobs in a training program? Should they work outside the family business first? Address these questions in writing.
Compensation: Family members should be paid based on fair market value for their job responsibilities. Detailing salary and bonus formulas will help to ensure that everyone is treated fairly.
Performance: All employees, including family members, deserve regular performance reviews. Spell out review schedules and adhere to them.
Separation: It’s imperative to consider a separation protocol for family members. Indicate performance requirements for continued employment, and include specific behaviors or actions that will not be tolerated. Also specify severance package details.
Human resources issues are complicated. Having formal family employment policies in place can alleviate at least some of the emotion and angst inherited in mixing family and business.
Considering the development of Family Employment Policies? The Business Transition & Family Enterprise Advisory Services team can help, contact DJB for assistance.
Article adapted 2/11/2016 by Paul G. Stringer, CPA, CA, FEA, Partner from the BOP Fall 2008 article – purchased by DJB for our use.
Read more articles on topics related to business transition and family enterprise.
Paul G. Stringer, CPA, CA, FEA obtained his FAMILY ENTERPRISE ADVISOR™ certification through the Institute of Family Enterprise Advisors (www.ifea.ca) in 2013 after completion of the UBC Sauder School of Business Family Enterprise Advisor Program. This skill set, along with his extensive business and accounting experience, qualifies Paul to help leaders of family businesses manage the more complex and sensitive issues they face when making important decisions about the future of their business and their family legacies.