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How to Hire Employees in a Family-Owned Business

Collaborative Post

Family-owned businesses make up roughly 88% of all businesses in the UK. Most of them are small local businesses, but others are huge like Dyson and Associated British Foods.

Choosing who to employ in your family-owned business is an important decision. Some smaller businesses are entirely family-run. Others end up hiring non-family employees in order to grow and branch out.

How much of your business you put in the hands of family and how much work you leave to non-family members is up to you. Some business owners pass down their company to their kids when they retire. Others meanwhile reduce family involvement over time, eventually selling it off to non-family employees or other entrepreneurs looking to buy a business.

Whoever you hire to run your business, it’s important that you do it properly. This post delves more into how to hire employers in a family-owned business.

What do you need to hire employees?

Whether you’re hiring family or non-family members, there are certain laws that you must follow. There are also several non-mandatory but highly recommended measures that you should take for the protection of you and your employees. Some of things every employer needs include the following.

An employer reference number

Every employer needs to obtain an employer PAYE reference number so that they can file employee tax and apply for liability insurance. You can apply for a reference number by registering as an employer through the HMRC website. Your employer reference number will be sent to you in a physical letter or email.

Employer’s liability insurance

Every employer needs to take out employer’s liability insurance before hiring employees. If an employee gets ill or is injured as a result of their work, they may file a personal injury claim which you must be able to cover. Employer’s liability insurance ensures that every employer can pay off a personal injury lawsuit so that there is always some compensation for health and safety negligence.

Payroll software

For many employers, it is mandatory to use some kind of electronic software when submitting tax returns. This typically involves some kind of payroll software that is approved by HMRC. There are lots of different payroll software options on the market that you can use. On top of helping you to be legally compliant, such software can help to make paying staff much easier by automating much of it and keeping employee payment details organised. Other types of software may be useful for employers to purchase too such as a field service CRM, timeclock/rota software or an employee benefits management application.

Employee contracts

You should give every employee a written contract – whether they are a family member or not. Contracts can provide hard evidence of promises you have made between you and your employees. This can benefit employers by providing grounds to terminate a contract or sue an employee if they do something potentially damaging to your company. A contract can also benefit your employees by providing written proof that you have agreed to provide them with a certain amount of pay or specific employee benefits. You can write then yourself or get the help of a solicitor.

Funds to cover wages

Most importantly, you must have enough funds to cover your employees’ wages. If you are not getting enough income to pay a full-time employee on minimum wage, you will need to consider other options to lift your workload such as hiring part-time staff, outsourcing services, automating labour or simply taking on less clients. Of course, there may be ways to increase your income in order to afford employees such as raising prices or taking on more customers. Alternatively, you could find ways to make big cutbacks so that you pay more money towards employees.

Should you hire family members as employees?

There are many advantages to hiring family members as employees. Your family members may already be very knowledgeable about how your business works and may even share certain skills that are key to the job. Family members are also likely to be very loyal and will likely care much more about your company’s success.

Of course, hiring family members as employees does come with its disadvantages. Creating a division between your personal and work life will be much harder and you may find that personal conflicts end up affecting your business if you then find it too hard to work together. If there are family emergencies, there will also be more absences. You also need to be careful of avoiding favouritism and leniency if you are hiring non-family members too.

Should you hire non-family members?

There are only so many family members who you can hire. If you want to expand your business and build a larger team, you may eventually have to hire non-family members as employees. There are also other benefits to hiring employees that aren’t family members. There may be certain roles that your family doesn’t want to take on or does not have the skills to perform, which could require looking for talent elsewhere. You can also hire employees who are able to keep your business running during a family emergency, plus you can reduce the risk of work quality being affected by personal conflicts.

Non-family members may require a greater amount of interviewing and training to make sure that they understand the company culture and can be trusted. This is something that you need to be prepared for. If you currently run your business from home, you may also need to consider whether you’re willing to let these employees come into your house. You may be able to hire a remote employee for certain tasks. For work that needs to be done on site, consider whether it’s time to move to external premises. Understand that this will require greater budgeting so that you can cover both employee wages and premises costs.

Retiring? Who should you leave your business to?

Eventually all business owners have to step down. Finding a successor is an important step, and you may decide that a family member is the best suited candidate. You will need to train them the necessary management skills to take over and you will need to plan an efficient way of slowly handing over responsibility. Choosing a family member as a successor may make it easier to still keep a foot in your business if you don’t want to retire fully. That said, it could also make it harder to fully leave behind your business if you’ve had enough of it, plus you may feel less willing to sell your business to a family member if you want to get money for it.

A family member may not always be a suitable successor. If you currently hire family members and non-family members, you need to weigh up the talents of each of them and consider who you really trust the most to pass the baton to. Certain non-family members may be able to hand over the takeover professional. Selling your business and making a sizeable profit is also easier when selling to a non-family member. You may even feel it’s better to let someone not currently involved in your company take over – this could be a budding entrepreneur or someone who already owns a business. This could be necessary if running your business requires a lot of expertise that none of your employees – family or non-family – currently possess. Such people may also be more likely to have the funds to buy your business outright if you want the whole amount upfront.

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