Advantages and Disadvantages of Hiring a Family Member

It is good to hire family members. But there are advantages and disadvantages of doing it.

You, as the owner, is also the decision-maker. Be reminded that failing to decide on some issues can complicate and can slow down your business growth. Always think that it’s great to give your family member a chance to work with you and help them bring some positive and productive results to your business.

Above all, it’s important to weigh the advantages and disadvantages before making your final decision.


  •    Some issues affecting your business can be easily resolved. According to several financial experts, the issues that affect your business may be caused by your employees’ weaknesses. Because you’re hiring your own family member or that of your employee’s, it can be easy to address any problem because the weaknesses of your newly-hired employees are already known.
  •    Delegation is much easier. Of course, you’re familiar with your family members’ potentials and strengths, so you can use those to improve your business. For instance, if your daughter is  CPA, you can assign her to lead the accounting division of your company.
  •    Background checking is no longer needed. It is a must that you know your employees well. But if they are your family members, there’s no need to spend a lot of time in conducting a background check.
  •    It’s not difficult to divulge some of your confidential files and information related to your business to a loved one. Always remember that there are things about your business that shouldn’t be revealed to other people.
  •    Your family members can provide emotional support when your business is going through bad times. You can easily talk to them and ask for help in any way.
  •    Tax deductions are always available for your business. The IRS will recognize it as a basis of tax discounts when you have your family members working in your company or small business. When you pay the health insurance of your immediate family, your tax will be reduced.
  •    Social Security Benefits tend to increase. This is one of the amazing benefits. Please take note that when someone dies, his non-working spouse will receive only half of his social security benefits. But when you hire your wife, for example, such benefits will double.

Despite all these benefits, always keep in mind that you still have to adhere with the Labor and Industry regulations when hiring a family member. There are states that are very strict with respect to it. One of these is Washington.

There are, however, particular pitfalls when hiring your family member to work for your business. This is known as the “negatives of nepotism.”


  • Yes, your children may have the potential. However, there are instances they don’t use such potential to help your business grow.
  •    Resentment among your other staff is possible to happen and this must not be taken for granted. Favoring your children over other potential candidates for specific positions can trigger disapproval among your staff
  •    It’s more likely that your non-family staff may feel that they are being exploited. Yes, they can feel that they’re being set aside. This may cause chaos if not addressed well.
  •    Disharmony in business-related matters can exist anytime. There are times when your family member may bring up any family problems into the workplace. This is a dangerous thing because it can cause issues in some of the important business transactions.

Always keep in mind that those issues that could happen when hiring family members should not last longer. They must be resolved right away. The success of your business will always depend on your staff — whether they are your family members or not.


Small business owners can directly pay the wages and other forms of remuneration by way of legal tender, which includes but not limited to direct deposit, check and cash. There are tax benefits if the staff being paid is one of  your relatives or family members.

However, if you’re paying for a certain family member working for you, the payment or wage should follow all federal and local tax withholding and reporting requirements. Why do you need to do this? This is very important to make sure that the tax obligations are given to the U.S. government.


Any company should create comprehensive and great job descriptions. Otherwise, the applicants will get confused on what to do when they get hired. This is the point when hiring family members is just an option. But then again, hiring them always bring out advantages for your business.

The job description gives a clear overview of a particular job. The knowledge and skill set required should be laid down. Otherwise, you’ll compromise your business when the basic job qualifications aren’t met. Granting that the family members you’re going to hire can meet the qualifications and all skill requisites, the negatives of nepotism will be avoided. This is important to bring harmony and to ensure high productivity rate and growth of your enterprise.

Training your relatives is always fine. Always make sure that they have the things you need for every particular job. Never hire a family member or relative who isn’t fit for the job. You should also consider the welfare of your business instead of just keeping an emotional attachment with a family member.

In one way or another, you have to manage them and make sure they are doing an excellent job. You have to evaluate their work and performance. Make sure to leave constructive feedback or comments for them to learn more and grow as person or as an employee.

You need to be careful when hiring your child and his or her spouse. It’s not prohibited, but there are husband and wife issues that may hinder each individual from performing their work. Hiring couples sometimes create an obstacle in the workplace.

Other issues such as take-home pay, advance payments, and termination fees should also be discussed properly.

Furthermore, you have to understand that there are tax advantages related to federal and state level when your business is run by sole proprietors. These advantages are as follows:

  •    Wages exemption for spouses and children under 18.
  •    Social Security and Medicare deductions for children under 18. Your business is not required to pay a portion of the taxes.
  •    Federal unemployment taxes will not be paid until your children reach the age of 21.
  •    Even if your children have enough income, their tax rate is still lower than yours being the owner.

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