Hiring and Firing a Family Member

When I am asked to speak in front of business owners, I always say that “Employee No. 1 is one of the biggest risks that you can take.”  Why?  Often, start-up business owners hire the first employees from the pool of family and friends that surround them and that want to help and support the business.  However, that trust (or perceived trust) can come back to haunt you if you did not take care to establish policies and procedures and to manage the employer-employee relationship as you would with anyone else.

At first, some of that procedure seems overkill.  Who wouldn’t trust their parents, siblings, cousins or even close friends or members of their church, etc.?  When problems inevitable arise over compensation, shares of the business, control and decision making, valuation of sweat equity and a host of other problems, the law will treat your friends and family exactly the same was as if you had hired a stranger.

This recent article in Forbes reminded me to post again on this topic.  Any business should take care to establish the infrastructure necessary to support having, and paying for, employees before they hire the first position.  It’s well worth the effort.