Ask the family business experts

How do I approach the sensitive issue of pay in my family business?

Question: “My sister has dropped back to four days a week to care for her child but Dad hasn’t brought her salary down. What should I do?”

Judy Choate, Partner, Piper Alderman

This looks like favouritism. Communication is vital. I assume the father is the sole decision-maker? He may have overlooked reducing the salary, or perhaps he made a conscious decision to maintain the salary for valid reasons. I think the first step is a private conversation with the father to understand what has happened.

If the father is favouring the sister, he may not have thought through all of the consequences, including the effect on other, non-family, employees. Looking for solutions with the father and, ideally, also with the sister, is likely to produce the best outcome. Experience shows that people who regularly approach problems in this way learn to develop as an effective team. The ideas generated by a team are generally more creative and the solutions are far more likely to succeed if developed and supported by all involved in a respectful and inclusive process.

Paul Smith, Carnegie Management Group

This can be a particularly dangerous issue because it can simmer below the surface, creating ongoing tension rather than being a dramatic event that has to be dealt with immediately. The key here is found in the family constitution. While it’s impossible to have a plan in place for every problem that can arise, issues like this show the importance of keeping the constitution flexible and able to be added to. In discussing changes in availability due to parenting it’s important to keep family members engaged and not blame anyone for failing to adjust pay. Some options that have worked for families I work with include:

– A regular lunch at the workplace for parents on leave and their children.

– Providing a permanent on-site crèche, for which parents pay a fee.

– Providing a qualified nanny at home one day a week.

– Child carers made available for things like school pickups, meal preparation and so on.

It is absolutely critical that these sorts of programs be written into the family business constitution and be made available to all staff, not just family. The benefits will greatly improve workplace engagement and talent retention!

Philip Pryor, Principal, MorphThink

If there is a family constitution that provides guidance on this then it makes life much easier. The main issue here is fairness – but as always, fairness is a matter of perception. There are often ‘unwritten family rules’ where family members feel that exceptions should be made for them but this sort of attitude of entitlement and double standard leads to all sorts of difficulties. Family members forget how much other staff members watch them and how much they know – seeing this sort of behaviour does significant damage to credibility and relationships with other employees. Your sister may think it’s unfair that she is not allowed to keep the salary she is used to but it’s likely that everyone else thinks it’s unfair that she is working four days and getting paid for five.

The issue has to be addressed in a frank, honest yet sensitive conversation as soon as possible. If it’s put off it’ll only get harder. Regardless of the outcome of this conversation, it is the process that’s important. Fairness is important to people, in families, it is even more important.

This article was first published in Family Business Magazine, to view it in its original form click here.