Family businesses—employment and succession

This subtopic considers some factors to consider when employing family members and non-family members in a family business and when passing on or selling a family business.

Employing family members in a family business

There are advantages and risks involved in employing family members within the family business. 'Hot topics' often include how members of a family can join the business, how their career progression will be regulated and what they will be paid. Potential problems can be avoided or minimised by putting in place a carefully drafted family employment policy regulating these issues.

Before an effective policy can be drafted, the family needs to decide how they are going to balance the risks and advantages of employing family members and quantify the trade-offs that they are willing to accept. Potential advantages of employing family members include trust between family members, understanding of the culture and ethos of the business and long-term commitment to the success of the business. Potential risks of adopting a ‘family first’ approach to employment include detrimental effects on the moral of non-family employees and ultimately on the economic performance of the business.

Key

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