Dad may be the boss at home but should he be allowed to be the boss in the office also? The vice president’s daughter needs a summer job but should mom be allowed to hire her to a position when other candidates are equally or more qualified? Uncle Joe works at the bank his nephew, Jim, wants to be hired at, but should Joe help him out, or will the family relationship become a hindrance to the hiring process?  Should a Human Resources department develop an anti-nepotism policy in their code of conduct or should they allow employees to have their relatives work in the same company? What about hiring a client’s relative to work in the company?

Your Workplace Magazine, a Canadian publication, defines nepotism and provides insight into the reason the term is used as something looked down upon: “appointing or hiring relatives to positions based on family status rather than on merit, [and it’s] considered a way of circumventing the competitive process—of cheating. Problems include family members bringing family problems to work, excluding non-family employees, inappropriate sharing of confidential information, jealousy, scheduling difficulties when the family goes on vacation, and personal work problems spilling over onto other family employees. Favoritism and inequality are common complaints from non-family members.”

The idea of hiring a client’s relative was posed to the Boston Globe’s BostonWorks Hiring Hub: Ask the HR Expert: “Firms should always be prudent before hiring a client's family member. Accusations about nepotism can lead to questions regarding ethics, favoritism, fairness, equal opportunity, and the general ethical culture of a company. On the other hand, this is done all the time, and can be done well if not done in excess.”

Some of the critical, best practice questions to ask when hiring a client’s child are the following:

• Is the client’s son or daughter as competent as other potential candidates?
• Have they gone through the customary application, screening, and interview process?
• Have multiple people participated in the interview process and considered the implications of having a client’s offspring working at the firm?
• Is the person being hired because of a looming contract or sales opportunity?
• Will the individual in question be privy to confidential information that could impact an existing or impending contract?
• Has the client pressured the firm or made any quid pro quo references to ongoing business?

So long as these questions are answered carefully, and in line with company policies and ethics, the periodic hire of a client’s son or daughter can be ethical and possible. However, if anyone in the organization voices a concern that the hiring could easily compromise daily operations, contract negotiations, professional reputations, privacy, or the freedom to engage in competitive bidding in the future, then in all likelihood it is the wrong decision for the firm. A sophisticated and valued client will understand and respect your decision, as well as the ethics that lie at the foundation of your decision.

The BostonWorks advice concludes with this guidance: be careful, think through potential ramifications (e.g., what happens if the person needs to be terminated?), involve multiple people in the decision, and do not make it a regular practice.”

Should you complain if an employer is hiring a worker based on familial relationship? Some people say no, because the employer can hire and fire whomever he or she wants to.  Others say yes, because it can become a hazard for the work environment. Your Workplace says: “Often, those hurt by nepotism don’t speak out. When a supervisor hires relatives, other employees see many cases of favoritism but may not speak up. This tension often leads to lower productivity, lower morale, and higher turnover as employees go elsewhere, where they believe they will be treated ‘fairly.’ Even when supervisors try to not favor family members, other employees will question the motives and actions of the supervisor and family employee, leading to claims of conflict of interest, favoritism, or discrimination. Hiring relatives in the same work unit, even when complying with the provisions of existing nepotism policies, can limit flexibility and the ability to promote individuals in the future.”

Are there companies that have it in their Human Resources policy not to hire relatives? A search of nepotism in the workplace on Google shows that many universities including Emory, Tulane, and Cornell (among others) include non-nepotism policies within their code of conduct, as put forth by the Human Resources department.  Some universities include the admissions process as something that cannot be influenced by relatives. Some companies actually use their non-fraternization policy as an anti-nepotism stance by showing that no “relationships” should be allowed in the office.

There are actually some benefits to nepotism when the term is not met with such a stigma. Who knows a candidate better than their relatives? If an employee is an efficient and effective worker, maybe the pedigree will be passed to their relatives. Instead of giving a relative a pass for poor performance, many relatives will be a lot stricter with a relative for whom they gave a recommendation because they know it will reflect badly upon them if the new hire performs poorly.

There are other benefits to hiring a relative. According to a 1997 article from Nation’s Business: “If you employ a teenage son or daughter in your business this summer, both the child and your company may be eligible for a break on payroll taxes. In addition, you can deduct the wages as a business expense, and your child can start saving money for college. The downside is a reduction in college financial aid if the student makes more than $1,750 in a given year--whether on your payroll or someone else's.

The tax break is an exemption from the requirement that you withhold Social Security and Medicare taxes (together called FICA, or Federal Insurance Contributions Act, taxes) from your child's paychecks and pay an equal amount on the child's behalf. By not paying FICA taxes and not withholding them from your child's paychecks, together you save taxes equal to 15.3 percent of wages--7.65 percent each. The FICA exemption is available for children under 18.”

This tax code is still valid today.  In addition, there are other ways to make hiring a child beneficial. If you have a child over 18 years old who is going to college, and you do not receive the education credit or earn more than the exemption (in other words, the parent makes enough money that they don’t get the exemption for the child), the child can take themselves as a dependent and takes their own education deduction. This only works in certain businesses, but it can provide another tax break if one hires their own child.