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How Much Should My Son Be Paid?

Full Question:

Dear Harry,
My son has been working in the business for two years. He will no doubt end up taking over from me in about 10 years time, but meantime, I hear via my daughter that he feels underpaid. In my opinion, he is paid fairly. After all, he has numerous perks working for me. How do we establish once and for all what his remunerations should be - I am a great believer that people should be paid what they earn and not what they need.
Frustrated Father.
Answer - Harry says:
The main issues in this case are:
• Remuneration• Entry into family business• Performance

Dealing with the issue of family remuneration is one that many family businesses find awkward. It often requires making objective assessments about the ones we love and that brings to the forefront the fundamental issue of how you negotiate the overlap between family and business values.
Your comment ‘I am a great believer that people should be paid what they earn and not what they need’ indicates that you believe the business should be run on professional lines.
In all likelihood your son is benchmarking his salary against his contemporaries in the corporate or professional world and it sounds as if he is feeling that he is being left behind. It might be time for a discussion with him in which you set out your long term objectives for the business and his role in it. If he buys into your vision for the future and can see the opportunities it presents, the short term situation might be put into perspective.
Assuming that his remuneration is at market rates, there is also the opportunity to formalise his package and at the same time put in place performance measures.
Good family business practice is to clearly separate the rewards from labour from the rewards from ownership. If family members require additional financial support this is best done directly by the family, rather than through the business.
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