In my line of work, I often see first hand the difficulties which employers can face when they have employed friends and relatives but have failed to document the employment relationship formally.
Things usually start well initially. At the outset, those involved trust and understand each other and everyone is focussed on the same business goals. There are many benefits to working with those you know. You are already aware of their strengths and weaknesses. They know yours. You communicate well. You are automatically going to be a winning team.
Things can be fine for many years when suddenly, out of the blue, a problem arises. There can be a multitude of reasons for things going wrong. Maybe, it’s a dispute over annual leave or a change in the dynamics of the business, perhaps because someone key leaves or passes away. There may be a difference of opinion about the direction of the business. Alternatively, people often fall out about something fairly minor, perhaps something personal, which then spirals out of control. Sometimes people change allegiances due to a divorce or a new relationship.
It is so often the case that where those employed were friends or family, no one sought to formalise arrangements in any way and there is no contract of employment. When things are going well, there doesn’t seem to be any reason to spend the time or money putting the documentation in place. It can also feel awkward making such formal arrangements with a family member or a friend you have known for years. The problem is that where things do go wrong and sometimes they do, a fierce dispute can ensue about what exactly the terms are. Such disputes can end up in the Employment Tribunal.
Sometimes things are less serious but it would be helpful to have arrangements clearly documented. For example, you may need to manage performance or to manage what appears to be an attendance or punctuality issue. Having clear contracts, job descriptions and policies will allow you to navigate such issues with less risk of bad feeling.
Have you thought about what happens when someone goes off on long term sick leave? It can be really difficult to know what to do but also, long term sickness can place a massive strain on a small business. Having robust employment policies in place will always help you to manage difficult situations fairly. Robust policies are also likely to help you to avoid the risk of costly and time consuming Employment Tribunal proceedings.
Indeed, employers are legally obliged to provide a Written Statement of Employment Particulars (akin to a basic contract of employment) to all workers. This applies to all employees, there is no exception for friends and family. In addition to this, I would always advocate having a number of clear employment policies in place for your business.
Ultimately, having clear documentation to govern the working relationship is good for everyone. It’s much better all round if everyone knows where they stand. A level of formality reminds everyone that whilst there may be important familial relationships and friendships, this is after all a business arrangement.
