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Keeping It In The Family

By Jim Hynes, President – Corporate Legal Consulting LLC

Many business owners believe that bringing family members and close friends into their company will create an especially harmonious group of employees. Doing so offers certain advantages, but also opens up the possibility that smooth operation of the company may be compromised. Reviewing the following points will help you determine if hiring your family and friends will be worth it in the long run and can help you minimize the effects of a wrong decision by taking certain steps at the time of hiring.

Advantages
Family members and close friends may come into a business with a strong commitment to the company. Because relatives may think of the company as an extension of the family, they may be more likely to work into the evening and over weekends when needed, realizing that they will personally benefit from the long-term success of the company.

When it comes to relatives and friends, you know them well and are familiar with their capabilities and shortcomings. This may enable you to place them in just the right position. Also, your familiarity may allow you to train them more quickly than other new employees.

Hiring your own children can offer special financial advantages. First, your company will be able to expense their salaries just like that of any employee (with the advantage that your children are earning extra money). Second, if they are under the age of 18, you will not have to set aside payroll taxes for them if your company is unincorporated.

Disadvantages
A relative or friend may take advantage of their status, knowing that it may be more difficult for you to fire them.

Other employees may see the hiring as nepotism, especially if the family member is given a preferred position without having the appropriate experience or training.

Family problems may be brought into the workplace. It is one thing to have a family disagreement at night and be able to leave it when going to work in the morning, but if you are facing the same person at work, the strain could affect the entire business.

Managing the disadvantages
Make sure that the relatives or friends you are hiring really have the skills and experience for the job. Never hire relatives or friends unless you would hire them even if you had never met them before the interview process started. This will minimize the chances of having to let them go, and will placate employees who may feel unfairly passed over in favor of a relative.

Write a detailed job description and make it clear that if the relative or friend does not perform as expected, he or she will be let go. Hire on a probationary basis, establishing a two-week or month-long period to see how things work out. One way to take the sting out of firing a friend or family member is to make it clear at the time of hiring that the person’s job performance will be reviewed during the probationary period by a group of managers or employees. This will help take you and other family members off the hook if you are ‘outvoted’ and have to let the person go.

Corporate Legal Consulting LLC advises business owners on important business and legal issues. For more information, or for a free legal consultation, please contact Jim Hynes at jim@corporatelegalconsulting.com.

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