SMALL-BUSINESS OWNERS LIKE to say they treat employees like family. So what happens when a member of the family is so befuddled by personal problems that they can barely work?

Just ask Tom Walter, whose Chicago catering company, Tasty Catering, recently won top honors in "Best Places to Work in Illinois," a statewide program. In the nearly 20 years he's run the business, he's seen every calamity imaginable: messy divorces, sick children, financial crises. He and his two brothers, Larry and Kevin, also co-owners, have extended emergency loans and sought out everything from attorneys to movers for struggling employees. (And more recently, they've quietly slipped financially-strapped workers some extra money to cover the high cost of gas.) The payoff? "Our productivity is phenomenal," says Walter, whose company and 175-member staff catered nearly 10,000 events and posted $6 million in revenues in 2007. "You take care of employees, they'll take care of the business."

Not every small company can be as generous with its time or money as Tasty Catering. But there are a number of smart ways to help employees in a crisis, while also making sure you meet your bottom line. Here's how:

Provide time off. Sometimes, an employee only needs a few days to take care of a pressing problem, whether that's dealing with a legal issue or finding an elder-care facility for an ailing parent. If that's the case, give them a small chunk of time off (with pay) upfront "so they can come back relieved," suggests Cindy Ventrice, a Santa Cruz., Calif., workplace consultant and author of "Make Their Day," a book about employee-recognition programs. If they need even more time off, offer them unpaid leave and guarantee that they'll still have their job upon their return. (Keep in mind that businesses with more than 50 employees are required to comply with the Family and Medical Leave Act.) Meanwhile, see if others on staff can help in their co-worker's absence. "You would be surprised at how willing others are to pitch in," she says. Of course, be sure to check with the employee about how much you can reveal to the staff about his or her personal situation first.

Allow for flexible scheduling. A growing number of small businesses are allowing employees to adjust their starting and quitting times, work from home or even share jobs with other employees. (Read our story on flextime here.) For an employee who has an ongoing personal issue, such as caring for a spouse with cancer or tending to a special-needs child, flexible scheduling will allow them to take family members to doctor's appointments and therapy sessions while still completing their work, Ventrice says.

Be realistic. While it's important for business owners to demonstrate a willingness to help employees solve personal problems, they shouldn't let that sympathy become a burden on the company, says Joseph Grenny, a workplace communication expert in Provo, Utah, and author of "Crucial Confrontations," a book about resolving conflict. "If you really need a full-time person, you need to be clear on that," he says. Figure out a plan that works for both the employee and the employer, "otherwise you get on a slippery slope," he says. And don't be vague: If an employee needs to change his or her schedule, be very clear about the arrangement. "Otherwise, then the individual begins coming in at 10 and leaving at 2 most days — leaving lots of work undone," he says.

Check in. Especially if the employee's personal problem is ongoing, it's important to periodically review any new work arrangement and make sure he or she is able to get work done as promised. "As the boss, you say, 'you need to tell me if you can't do this,'" Grenny says. If the employee can't honor his or her commitment, then you should renegotiate the arrangement. Decide on a few events that might trigger a discussion — for instance, if the employee starts missing meetings, "that's a sign we should sit and talk about this," Grenny says. "You need to treat them like adults, even though they're adults in pain."

Pay for counseling services. Small companies that provide health insurance or an employee assistance program may already have this covered. If not, a business owner may want to consider paying for counseling sessions that can help an employee manage any number of issues — such as substance abuse, stress or depression — that are hurting their work performance, Ventrice says. "The return can be so huge for a small company, in improved productivity and reduced turnover," she says.

("Work & Life," a regular column written by Colleen DeBaise for smSmallBiz.com, advises entrepreneurs on how to better balance their lives. Write to her at cdebaise@smartmoney.com.)

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