Family Employment Policy: Does your Business Need One?

Family businesses are the backbone of Hawaii’s economy. It’s fairly common to see multiple family members scattered throughout—if not handling the majority of—a company’s operations.

While family ties can be a company’s greatest asset, they can also be its biggest downfall. Some family members may feel entitled to a piece of the family pie. Others, especially those in line to succeed in the business, may not even want to work for the company.

So how can you maintain your business legacy without disrupting your family legacy—and vice versa?

One way is to institute a family employment policy. It sounds fancy and complicated. But really, it boils down to spelling out expectations for family members within the business. It ensures employment decisions are based on structure and not on emotional or personal issues, which often muddy the waters of operating a family business.

Tough questions a family employment policy can address

A family employment policy encourages your business to confront and iron out uncomfortable, but potentially problematic issues like:

• Is there a business need for the position? Or is the opening only being made to accommodate the family member?
• Can the business financially afford to hire a family member?
• Does the family member need relevant experience outside of the family business?
• Are there managerial structures in place? Who will supervise family members and who will family members supervise?
• How is compensation determined for family members?
• How will disciplining and termination of family members be handled, if necessary?

[RELATED ARTICLE: How to manage employees who are also family members]

The benefits of a family employment policy

Many businesses don’t think about these sorts of questions until it’s too late. But as your business and family grows, so may the need for a formal, written family employment policy. It can help your family business:

• Ward off claims of nepotism
• Create a framework to help make internal decisions related to family members
• Promote a work environment built on trust and fairness
• Maintain employee morale and productivity

Since no two families are the same, the terms of a family employment policy will vary from business to business. In general, it’s good practice to always run everyone—family member or not—through the company’s normal hiring and performance management process.

This article is for informational purposes only and does not constitute legal advice. Readers should first consult their attorney, accountant or adviser before acting upon any information in this article.