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Hiring family members can be complicated but rewarding. Here's how to work with family members as employees.
Working with family members can be an excellent way to benefit your business and build stronger relationships – or it can be frustrating and problematic. If you’re considering hiring family members, know that it will take preparation, dedication and communication to make it work. Before deciding whether to hire a family member, you should understand the pros and cons of working with family and how to set up the situation for success.
Hiring family members is not a decision to take lightly. Here are five tips to help you successfully hire and work with your family members.
Setting clear expectations for employees is essential under any circumstances. However, communicating expectations is critical when working with family members. If you’re hiring a family member, provide a job description outlining their duties, responsibilities and functions. Ensure they know whom to report to if it isn’t you.
It’s crucial to treat a family member as you would any other employee. If your other team members feel you’re giving your family preferential treatment, it can cause resentment and discord, creating an unpleasant company culture.
On the other hand, you don’t want to abuse your relationship with your family member and mistreat them. Ensure that all your employees, family members or not, receive the same employee benefits package and treatment, and pay all employees according to their positions’ salary ranges.
Conduct effective performance reviews regularly for family members as you would for any other employee. Assess their progress, offer suggestions for improvement and reward them for excellent work.
When hiring employees, many small business owners fall into the trap of hiring family because they’re family, not because they’re the best person for the job. Though it may seem like the right thing to do at the moment, this can hurt your business in the long run.
If you’re considering hiring a family member, ensure they have the qualifications and experience necessary to do the job – and do it well.
It’s essential to prepare for the possibility of terminating your working relationship with a family member. You may need to let them go because you no longer need their services, or you may have to fire them.
Because of potential family complications, create a plan to communicate working relationship changes while maintaining your personal relationship.
Communicate to your family member that you must maintain a professional relationship at work. You don’t want them popping into your office and sitting on your desk during their breaks. Like workplace friendship boundaries, separating your personal and professional relationships with any family members you hire is crucial.
A similar tricky situation arises when colleagues have romantic relationships. Learn how to manage workplace relationships carefully, whether you’re having an office romance or two of your employees are dating.
Since family is about as personal as it gets, whether you should hire a family member depends on various factors.
Although it’s entirely legal to hire and work with family members, perceived nepotism can be divisive in the workplace. Establish strict policies in your employee handbook to prevent preferential treatment.
You need to consider some unique tax situations when working with family.
Consider labor and tax laws when employing your children. For example, children under 18 can’t operate dangerous machinery, and it’s illegal for children under the age of 14 to work at all. Carefully review federal and state laws, as they may vary.
Before your child begins working in your business, consider how you’ll pay them and withhold their payroll taxes; this will vary according to your business. The IRS rules differ for corporations and partnerships.
If you hire your spouse as an employee, you must withhold federal income taxes and FICA taxes from their pay. If your spouse is a business co-owner, you can file as co-owners. If you do this, you must consider self-employed tax rules and obligations.
You can also file as a qualified joint venture, which can simplify your tax reporting.
You should treat all adult family members you hire like any other employee.
You don’t have to pay federal unemployment tax or FICA tax (which covers Social Security and Medicare) on your children’s wages.
There are benefits and drawbacks to working with family. On the one hand, it can mean a loyal and trusted confidant; on the other, it can mean a tense and unprofessional relationship that doesn’t add value to your business.
Here’s what some real small business owners who work with family members had to say.
Pros of working with family members
According to a PwC survey, 67% of U.S. family businesses have next-gen family members working for the company who are expected to become majority shareholders within five years. This foresight ensures continuity if a founder dies or leaves the business.
If you’re concerned about employing family members, it may help to look at family-run success stories.
Hiring and working with family members is perfectly legal, but you should navigate the situation cautiously. Benefits include saving money and working with dedicated people you trust. However, it can also be challenging to establish clear boundaries and prevent work from affecting your personal relationship.
To secure a successful working relationship, clearly communicate your expectations, treat your family member as any other employee and ensure they provide value to your business. As long as they’re qualified, have a good work ethic and can deliver excellent results – and you clearly understand what hiring family entails – the relationship can benefit both parties.
Nadia Reckmann contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.