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Should You Hire a Relative for Your Business?

We all come with family members and business owners are no exception. Inevitably, the sticky question will arise: Do I want to hire a brother, sister, cousin, uncle or some other close relative to work for me? This question can have particular urgency in times of high unemployment. When an opening occurs, you may feel pressured to give special consideration to an out-of-work relative. The decision you make can have a significant effect on future success or failure in your business.

Plan ahead

If the situation hasn’t yet come up, it’s best to be prepared. Design a family employee policy that explicitly addresses your goals and expectations if and when a relative joins the business. This policy can cover such topics as overtime, how disciplinary measures will be carried out, and the need for termination. A family member, like any other employee, should be evaluated after the first 90 days and at regular intervals thereafter. If the prospect of such a discussion sends shivers up your spine, it may be a warning sign of trouble ahead.

In any case, don’t wait until your brother-in-law is seated at the desk outside your office to draw up workplace guidelines.

Why it’s a Good Idea

In some cases, hiring a close family member might eliminate the need for references or an extensive background check. You likely already have an idea about how reliable this person is and where their strengths and weaknesses lie. You also know whether or not you’re willing to interact with them on a daily basis.

Depending on the individual, a relative may be more willing to pitch in wherever needed and to work odd hours at lower pay. Your son or daughter, for example, is probably much more invested in the success of the business than an outside hire. They may take a special interest in attending to small details ignored by others or be more motivated as a matter of family pride.

There may also be sizeable tax benefits, particularly if you intend to transfer wealth to the next generation in your family.

Why it’s a Lousy Idea

For one thing, if you can’t stomach sitting across from your second cousin at Thanksgiving dinner, you probably shouldn’t invite them in for a job interview. Pre-existing family conflict and animosity are never good starting points for a new hire.

Family members sometimes take advantage of their unique status in the workplace. This can translate into:

  • A lack of respect for authority (yours, that is)
  • An inclination not to take one’s job responsibilities seriously
  • Inappropriate sharing of personal family issues with co-workers
  • An unwillingness to change one’s work habits when necessary

Keep in mind the effect of hiring a relative may have on the rest of your workforce. Any hint of favoritism—let alone granting a promotion or pay raise considered undeserving by others—can seriously damage employee morale and motivation.

Finally, when you encounter a close family member both at home and in the office every day, work issues have a nasty habit of coming home with you. This can be especially unpleasant if conflict is involved (dating back to some long-ago family quarrel) or when you’re faced with a difficult business decision. All these elements cause unwanted distractions for even the most focused business owner.

If You Decide to Hire

After careful consideration, you decide that hiring Uncle Bob for that accounting position makes good business sense. Here are positive next steps:

  • Make clear he’s being hired on a three-month basis, and that a judgment about future employment will be made at that time.
  • Be sure it’s understood he’ll be treated the same as every other employee (that includes being fired if necessary).
  • Establish clear lines of communication, as well as appropriate ways for Uncle Bob to interact with you.
  • Draw up a written contract that outlines specific duties and responsibilities. This helps elevate the personal to the professional level.

The ultimate decision about hiring a relative depends, to a great extent, on your existing relationship with him or her. Don’t rush into bringing family members on board. Think through the likely outcomes and then make the choice that’s best for your business.

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