The Good and Bad of Hiring Family Members

Mafia family“Just when I thought I was out, they pull me back in!” Michael Corleone famously laments in The Godfather: Part III.

While the “family” he was working with had a bit more sinister and, well, let us say organized quality than traditional families, there’s no doubt that hiring and working with relatives can cause even people of a much less scenery-chewing bent than Al Pacino to tear their hair!

Employing family (either yours or other staff members’) can undoubtedly pose certain pitfalls, but it also offers great benefits that are worth exploring.

The key to maximizing the positives and minimizing the negatives of nepotism is simply an issue of using the right approach.

The downside of employing family:

First, let’s address the pitfalls, since knowing about potential problems is the first and best step towards avoiding them altogether.

  • When hiring your own relatives, you run the risk of causing resentment amongst your other staff, or of giving the impression of favoritism
  • Sometimes family members can be expected to do or give more than other employees simply because of their blood-ties, causing them to feel exploited or put-upon
  • Working with relatives can create discord if family tensions or problems fail to remain at home where they belong

Unfortunately this last issue requires a mature and determined effort to overcome the natural imperfections of human nature, so its success depends upon the individuals involved.  The other problems, however, have more concrete, easily-implemented solutions.

How to handle employing family:

Creating well thought out job descriptions is a good idea for any company, and not just one looking to employ family members.

In the case of family employment, a thorough job description objectively clarifies what knowledge and skills are required for a position. Provided that the family member you place in that position actually meets those pre-defined requirements (and receives compensation commensurate to their role) an impression of favoritism will not be created.

If you wish to train and groom a relative for a particular job that they are not yet qualified for, first give them a trainee position with a title and wage that are reflective of this.

Manage your family members and appraise their performances as you would for any other staff members.  In essence, treat the employment of relatives with fairness and transparency and you will effectively defang nepotism of much of its worst potential.

How to handle hiring staff members’ relatives:

As for hiring the relatives of other employees, this too has its positives and negatives.

A family member or close friend of a great employee may end up being a great employee too.  However, as with your own family, employing staff members who are related to one another can possibly result in family issues and tensions inappropriately rearing their heads in the workplace.

Be especially careful about employing people who are spouses or domestic partners: This is important not only because of the possible troublesome blurring between home and work life, but also because this can put you in a bind during vacations or family emergencies, and can make issues of pay, advancement, or termination particularly thorny.

As always, having well-constructed job descriptions is critical: Knowing exactly what a job requires allows you to determine if a staff member’s friend or relative really is the best fit for the position, and also gives you a good out if they’re not right for it.

This way, rather than having to issue a flat-out no to considering someone’s relative, you can simply cite the job description’s clear-cut requirements.  “Unfortunately, your brother doesn’t have the computer skills that this position calls for,” is a more gentle let-down than, “I don’t think your brother is right for this position.”

The benefits of hiring family members:

There are many good reasons to hire family members:

  • You are more intimately familiar with their weaknesses, strengths and potential than you are with any other employees
  • There’s no need to perform background checks on your relatives, and you can trust them with critical and confidential aspects of your business in ways you cannot with many other people
  • Relatives have a vested interest in seeing you and your business succeed
  • In times of need, you can depend on family members to go the extra mile for you, working long or odd hours, taking less pay, or just functioning as confidantes and cheerleaders

The financial advantages of hiring family:

  • There are tax deductions available for your business when you pay for health insurance for a spouse or child employed by you
  • Because a survivor’s benefits under Social Security are only half of the deceased spouse’s benefits, hiring a spouse — particularly a non-working one — helps to build up each of your Social Security earnings

Most tax advantages on a federal and state level are predominantly for sole proprietors.  For sole proprietors:

  • You can exempt wages for spouses and any children under 18
  • For children under 18, Social Security and Medicare deductions do not have to be withheld from their pay, and your business does not have to pay its portion of those taxes either
  • You don’t have to pay federal unemployment taxes on a child until they turn 21
  • Even if your child makes a high enough level of income to incur a tax liability, the tax rate for your child would still be lower than your own as an owner of a successful business

Don’t forget that you still need to adhere to Labor & Industry regulations regarding hiring children!  These requirements are fairly strict in Washington state.  You can find more information on their website.

The wrap-up:

In a way, hiring family is a lot like living with family—there are positives and negatives, and it’s the thoughtfulness, fairness, and care with which you approach situations that will determine whether it’s the good or the bad that predominates.

Provided that your business doesn’t involve hiding horses’ heads in people’s beds, working with your family can be an extremely positive, productive and profitable experience!

Originally published in the Kitsap Peninsula Business Journal.

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