Harper James advises family businesses on employment contracts under the laws of England and Wales. A written agreement gives family and non-family workers a consistent account of their role, pay, working arrangements, benefits, confidentiality obligations and termination rights.
A family relationship does not determine employment status. The business should assess the actual working arrangement, including whether the individual works personally for the business, follows its direction and receives regular pay. A family member who is also a director may hold two distinct positions: director and employee. The documents should distinguish the duties, remuneration and termination arrangements for each role.
Employees must receive a written statement of key employment terms from the first day of employment. This normally covers the parties, job title, place of work, hours, pay, holiday entitlement, probationary arrangements, notice, disciplinary and grievance procedures, and any required training. The contract should also reflect statutory rights, including holiday entitlement, the National Minimum Wage, pension auto-enrolment and protection from discrimination.
Family businesses often need clear provisions on confidentiality, intellectual property, company property, conflicts of interest and use of business information. Restrictive covenants, such as non-solicitation or non-compete clauses, should protect a legitimate business interest and be no wider than reasonably necessary. A standard clause copied from another business may be difficult to enforce.
The contract should not leave informal family arrangements to fill important gaps. It should state who manages the employee, how performance concerns are addressed and whether benefits are contractual or discretionary. If the business changes pay, hours or duties, it should follow a proper process. Unagreed changes can create breach of contract claims and damage working relationships.
Employment contracts work alongside shareholder agreements, articles of association and succession plans. A family member who owns shares, serves as a director and works for the company needs separate arrangements for each capacity. The business should also document decision-making authority, conflicts of interest and what happens when a family member leaves employment but retains shares.
Regular reviews are appropriate after a funding round, acquisition, change of ownership or significant change in duties. Maintaining the same contractual standards for relatives and other employees supports consistent management and provides a clearer basis for handling grievances, disciplinary issues and succession disputes.