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How To Terminate Wife's Employment in Family Business?

By: Maggie Lonsdale BA (hons) - Updated: 7 Sep 2012 | comments*Discuss
Employment Contract Law Question Wife


My friend, who runs his own limited company, currently employs his wife in a combined role of bookkeeper and business promoter. He feels, however, that she is not fulfilling these roles and would like to know what processes he must go through in order to to terminate her employment?

The fact that she is his wife and they are getting divorced, I believe may complicate the issue. I would greatly appreciate your advice?

(H.P, 12 March 2009)


Hello and thank you for your very interesting question. Essentially, the fact that your friend is married to the person in question is neither here nor there, assuming he is committed to upholding the rules of employment law. If he is just being petty because they’re getting divorced, it’s quite another matter.

Is There an Employment Contract?

Let’s look at the first instance – an employer wants to terminate the employment of an under-performing member of staff. He should start by looking at the Employment Contract, if there is one, to ascertain any written rules they have both agreed to. If there was no such document, it can be inferred that both parties were happy with the arrangement – the pay, the hours, the conditions and so on, if it was fair under UK employment law.

In order for him to be disappointed with her performance, he must have had some expectations of what her performance would be – how efficiently she would complete the bookkeeping tasks, or how many promotional phone calls or visits she would make each week, for example.

He would need to speak to his wife and assess how she is upholding the targets or expectations of her role. This would then be able to be documented as a record. Over the following weeks, these targets could be revisited to see how she is getting on, with a verbal warning if targets are continually not met, in accordance with employment law.

It would be ideal if your friend was already doing this, with verbal warning and written warnings as any employee would be subject to, but it seems unlikely in the circumstances you describe.

Don’t Be Bitter

What must not happen is that your friend just decides to sack his wife because they’re getting divorced and he doesn’t want to work with her any more, for perhaps spiteful reasons as well as commercial considerations. This leaves him open to the possibility of a legal challenge for unfair dismissal because she would not have been given any prior indication that her performance was not up to scratch. Add to that ‘a woman scorned’ and you have an expensive battle on your hands.

The best advice is to see the situation as you would between any other underperforming employee and their employer. Ensure all warnings are fair, appropriate and clearly written down in the personnel file before her employment is terminated, and your friend will be in the clear.

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Please note, I am not legally trained, but am a director for a small company, with my wife as an employee.The advice given in the article is clearly from a HR, legal perspective and on that basis does appear good, however there are some wider issues that you may wish to consider.Consider the consequences of talking to your ex wife about her work performance and how she is likely to respond. What is the atmosphere going to be like for the other employees? In her current role she has the contact list for future business, how much damage could she do to the future earnings?An alternative approach (which whilst not cheap, may well be considerably cheaper in the long term) would be to have a very different conversation with your ex wife along the lines of:"Your hearts not in the job any more is it - at to be honest its not surprising. I need to remove you from the business, but I understand that just sacking you is unfair. I have aranged appointments with 3 seperate solictiors firms for you, you are welcome to appoint any solicitor you choose to represent yourself, not just from these 3 firms, and in good faith we will try to negotiate a fair severence settlement package."The key reason to use this approach is makes the cost to the business defined and it limits the overal risk. A protracted and bitter dispute between you and your ex could destroy the business, and if you can avoid it for a lump of cash out of the company accounts, then its in both of your interests.This approach may not be appropriate for your situation.
Mike - 1-Feb-12 @ 11:35 AM
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