Running a family business in Australia presents numerous challenges, and with more than 1.4 million of them currently operating across the country, it's easy to see why entrepreneurs turn to shared trust, loyalty, and a strong commitment to breed success. However, when it comes to hiring family members, navigating the unique blend of personal and professional relationships can be tricky. While there are benefits to bringing relatives into the fold, these decisions can also introduce issues that complicate workplace dynamics.
Did you know that family businesses:
- Account for approximately 70 per cent of all businesses operating in Australia.
- Span various sizes and industries from small, local shops to large, established companies.
- Employ 50 per cent of the Australian workforce.
- Generate an estimated $4.3 trillion in wealth.
Here, our experts dive into the family business dynamic, explain the intricacies of hiring and firing, and share how even the best intentions can lead to tension, drama, and legal action.
Let's start with the advantages
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Trust, loyalty, and commitment
High investment, shared vision, and working towards a common mission are just some of the reasons why hiring family members can lead towards a business' success. The trust that inherently exists within a familial relationship can go a long way in fostering teamwork and reducing overall stress.
- Future-proofed with easier succession planning strategies
Looking ahead can be daunting for any business owner. Still, when family members are involved early on, they can provide peace of mind, ensuring that valuable experience translates into a smoother transition and prepares the business for the next generation's workforce, industry, and ownership challenges.
- Increased flexibility and convenience
When employees are more invested in the business, they're more willing to step in and go above and beyond during busy times, often working irregular hours or overtime when needed. From covering last-minute shifts or helping during peak season, having trusted relatives can fill staffing gaps quickly and without added worry.
Now, onto the challenges
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The intricate web of Australian employment law and compliance risks
Just because they're family doesn't mean they're exempt from employment laws and governing legislation, such as the Fair Work Act 2009 (Cth) (FW Act) or the National Employment Standards (NES). Businesses must meet the same obligations as they would for any employee hired, including providing written employment contracts, award wages, superannuation contributions, and other entitlements.
- Favouritism – intentional or not
Hiring a relative can intentionally foster resentment. If other employees perceive favouritism or special treatment, it can irreparably harm morale and lead to a toxic workplace culture.
- Blurred boundaries
The overlap between professional and personal lives can result in conflicts, including disagreements that begin at work and spill over into family relationships or vice versa, thereby complicating both dynamics.
Five best practice tips for achieving family business success
- Clear and enforced documentation: formal written employment contracts that outline roles, salaries, responsibilities, and expectations, regardless of how informal the hiring process might be. Proper documentation reduces risks, protects the business and the employee.
- Crossing every T and dotting every I concerning compliance: whether it's employment laws, payroll requirements, or workplace safety standards, every business must ensure compliance with every aspect of industrial relations laws. It's important to remember that even family employees have the same rights under the FW Act and NES.
- Effective communication of expectations: ensure clear discussion of roles and responsibilities to align expectations about what the business requires and that regardless of their family relation, they'll be treated like any other employees. Open communication can prevent misunderstandings in the future.
- Distinguish between family and business relationships: create and enforce boundaries between personal and professional interactions. This can manifest in holding structured performance reviews, applying disciplinary measures consistently, and treating each employee with fairness.
- Planning for the future: solid governance structures, such as family charters or advisory boards, are critical frameworks that establish guidelines for decision-making, roles, and conflict resolution. Enforcing strict rules can help prevent tensions from impacting company operations, morale and the future direction of the business.
Here's an example of poor policies, family-business drama, and office tension
How do the complexities of family relationships intertwine with employment law? A 2024 Fair Work Commission (FWC) case explored this very question, examining the dismissal of a long-term employee from a family-owned business.
A long-term employee and significant shareholder in a family-owned steel fabrication business, Breakwater Metaland Pty Ltd, was dismissed amidst ongoing family conflicts and shareholder disputes. The company, founded by the worker's grandfather, had become dysfunctional due to tensions among family members, leading to legal proceedings in the Supreme Court of Victoria. The worker, along with other family members, sought to either have their shares purchased by the majority shareholder or to wind up the company. The workplace culture was described as toxic, with compliance and governance issues identified by the newly appointed CEO.
The worker challenged his dismissal, claiming it was unfair and that proper procedures weren't followed. He argued that his almost three-decade-long tenure and unblemished record should've been considered, and that the incident leading to his termination didn't justify dismissal. The FWC found that while the worker's conduct, including ignoring workplace rules and raising his voice at a colleague, warranted disciplinary action, it didn't constitute a valid reason for dismissal. Additionally, the dismissal process lacked proper investigation and procedural fairness.
The FWC ruled the dismissal unfair but deemed reinstatement inappropriate due to the unworkable relationship between the worker and the company, exacerbated by ongoing legal disputes. Instead, the worker was awarded the maximum compensation of $49,400. The case highlighted the importance of maintaining proper HR practices and separating shareholder disputes from employment relationships in family businesses.
Water-tight policies aren't just a suggestion; they're a must for every business, small, family, or large
Hiring family members can strengthen a business when managed professionally, but it demands careful planning and compliance with Australia's complex industrial relations laws. By maintaining clear boundaries, fostering open communication, and upholding consistent fairness, family-run businesses can effectively leverage the loyalty of relatives without compromising professional standards. This is where Citation HR can help.
HR policies are a simple way to ensure your business is well-equipped to handle several common workplace issues. Citation HR's HR software solution allows you to download all the above HR policies and more. Better yet, Citation HR's Workplace Relations Specialists will draft tailored HR documents, employment contracts, and policies to suit your unique business needs.
After all, a structured and thoughtful approach protects not only your business but also the family relationships that are at its centre.
For over 30 years, Citation Group has been providing Aussie and Kiwi businesses with comprehensive workplace compliance solutions. From HR and safety management solutions and ISO and NDIS certification to legal and migration services they can take care of the time-consuming, complicated, and challenging components of your business, so you can get on with it.
