Examine the pros and cons of hiring your children
Hiring your own children — whether employed part-time emptying wastebaskets or full-time managing your operations — is often a great idea. As an employee of your business, a school age youngster can develop a strong work ethic and money management skills. His summer income may be used to pay for school clothes, music lessons, or sports camps. Hiring an adult child may be less risky than bringing a stranger onboard. After all, you probably won’t need to scour a five-page job application to know your kid’s capabilities and commitment level.
Tax advantages also abound. Your child can earn up to the standard deduction for the year and pay no income tax. In a sole proprietorship or family partnership, you won’t be required to withhold social security or Medicare taxes if the child is under age 18. Of course, if the IRS audits your firm, you’ll need to show that your kid’s wages were reasonable in relation to the jobs performed. An unskilled child who sweeps the factory floor shouldn’t be paid the same wage as a skilled mechanic or accountant.
But in some cases, hiring your children — especially adult kids — may not be prudent. Suppose your recent college graduate takes advantage of her status as a family member to take extended lunch breaks. If she’s given (or perceived to be given) preferential treatment, the morale of other employees may suffer. Fire her and you can expect a strained family relationship. Your 22-year-old son who brings personal problems to the office may expect Dad to address those issues during work hours.
If you’re thinking about hiring your kids, consider the following five suggestions:
- Make sure they’re qualified. They need to fit your company and contribute to its success. Your adult son whose sole work experience is running a lawn mower shouldn’t be ushered into the vice president’s chair.
- Hire them on a trial basis. Employing them for three to six months on a probationary basis may prevent problems later.
- Get it in writing. Don’t rely on a handshake or verbal agreement. Specify duties, responsibilities, and wages in a written contract.
- Follow the chain of command. Your child should report to someone else for her work schedule, performance reviews, compensation, and bonuses.
- Don’t be your kid’s first employer. Let your child develop skills and a professional identity at someone else’s firm. He or she should learn to function as valued employee before applying to work at your company.