Money, money, money

There are different types of remuneration that can be considered including salaries for working employees and bonuses or dividends for owners.   The big question we hear is often about how much to pay. It is often hard to balance between a fair salary for active and non-active members of the family.  We hear stories about families working hard to pay dividends to siblings who don’t contribute to the business.  We also hear about family members receiving a higher than market rate salary so as to ensure a comfortable lifestyle. 

Taxation

We often see tax inefficiencies from owners who would rather be paid a larger salary to avoid sharing dividends with siblings.  All this does is simply result in a larger tax bill.  Beware of paying a “salary” to a family member who doesn’t work – the Inland Revenue will 

Employee rights – suing your children/parents for unfair dismissal

Outsiders

You need to pay the market rate for new recruits, particularly if at a senior level who have little prospect of ever becoming owners.  You should also be aware of the potential conflict between higher paid family members in more junior roles. This can be quite frustrating for non-family employees who work just as hard as the family member.   A formal bonus scheme might be a way to equal out the remuneration among all staff.

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