Guide

Family-run businesses

Develop a remuneration strategy for your family business

Remuneration needn't be a thorny issue for family-run businesses. It is advised to have a remuneration strategy which is consistent, fair and open.

Resentment and conflict tend to occur when these three attributes are missing - for example, if family staff members are paid more than non-family employees without good reason.

Family members who hold shares but who aren't active in the business may also question the remuneration of those who are.

Develop a remuneration strategy for your family-run business

When creating a remuneration strategy for your family business, consider the following:

  • An individual's pay should be based on their value rather than their personal need. Look at what the market rate is for the job.
  • Family members shouldn't be lured into the business with inflated salaries. Likewise, they shouldn't need to endure unreasonably small salaries to prove their loyalty.
  • Benefits, bonuses and incentives should be based on set criteria.
  • Unreasonably high salaries and phantom jobs shouldn't be used to transfer tax-deductible wealth to family members.
  • Post-retirement remuneration plans should be agreed before they come into play.
  • Non-family employees doing the same work as family members should receive the same remuneration.

It's important that your remuneration policy is seen to be fair and objective. Write it down, be open about it and review it regularly.

For further information see set the right pay rates and employing family members.

Advice from an outsider - a HR consultant, for example - can be invaluable in avoiding remuneration disputes.