Insight: Fair Pay, Clear Roles in the Family Business

Running a family business can be incredibly rewarding but it also comes with unique challenges, especially when it comes to assigning roles and setting compensation. For many family-run enterprises, the tension lies in the mistaken belief that “fair” should mean “equal.” But when it comes to business, those terms are rarely synonymous.

Family members often join the business at different stages in their careers, bring varying levels of experience, or contribute in different ways. Some might work full-time in leadership roles, while others are less involved or only participate seasonally. Equal pay in these scenarios may feel emotionally fair, but it can undermine the health of the business and the morale of the team.

The key is to establish clear expectations and boundaries, starting with roles and responsibilities. A family business should operate with the same level of accountability and transparency as any other well-run company. That means job descriptions, performance evaluations, and compensation structures should be tied to responsibilities and market standards, not last names.

Open communication is essential. Avoiding tough conversations around pay or promotions may seem like a way to preserve family harmony, but it can lead to resentment, confusion, or financial instability down the road. Instead, create a structured process for discussing roles and compensation. This can be supported by involving a third-party advisor or compensation consultant to help remove bias and bring objectivity to the conversation.

It’s also important to separate ownership from employment. Just because someone is a shareholder or future successor doesn’t automatically mean they should receive a salary. Compensation should reflect work done, not potential or heritage.

Ultimately, fairness in a family business means treating people with respect, clarity, and consistency—not necessarily treating them the same. That’s the real fairness, one that protects relationships and the bottom line. When family members understand the “why” behind decisions, even difficult ones become easier to accept.

Join us for a deeper dive into this important topic at the virtual Family Business Exchange on July 23rd from 8-9:30am. Reach out to Beth Renga, Director of Consulting Services, for registration details.