Around 12 million people are employed in a family business. If you run a family business it is essential that you have the correct policies in place in order to avoid nepotism and potential claims from non-family employees.
It is true that family businesses are often in the firing line for being nepotistic and there are times where is seems that family members are being promoted above better qualified non-family employees. But there is no denying that family businesses can be very successful and it is often these family relationships based on trust and commitment that are at the root of the success.
But looking at it from a legal point of view- is it legal for firms to promote family members preferentially?
The answer is yes. In UK law, discrimination can only be claimed if it falls under one of the ‘protected characteristics’ such as sex, race or religion and a family relationship is not covered under the anti- discrimination legislation.
Therefore, if the CEO’s inexperienced son is promoted above a more experienced long serving employee, the long serving employee cannot claim that he has been discriminated against.
That is not to say that other problems may not arise in your business as a result of favouring family members. Other employees may feel frustrated and become demotivated or disillusioned.
High staff turn over and potential claims for unfair dismissal or breach of contract could occur.
How do you deal with a family member who is not performing?
It can be very difficult to deal with performance issues or inappropriate behaviour if they are a relative. Often, families that work together may stick together to cover for one another to prevent any actions for wrong doing. The personal relationships, that we spoke of above, that can benefit a business can also lead to problems. It is also very easy to fall into a trap of not having the correct documents in place, such as contracts of employement, because you are reltated to the individual and you know them. Your contract of employment is essential for setting clear boundaries, this can prevent personal relationships leading to professional problems.
Transparency is important in family business to avoid non-family employees becoming disillusioned or angry about perceived or sometimes actual favouritism. Relationships within the business should be made clear and effective policies and procedures would be in place to deal with any contentious issues. There should be clear policies in place for if things go wrong.
As with any business, be it a family one or not if it is well managed it can be extremely successful despite potential pitfalls.
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