Family Matters: What to Know About Hiring Adult Children into the Business

One of the benefits of running your own business is you can hire family members—and when they are your own children, you have the advantage of familiarity and trust. Plus, in many cases, your children have grown up around the business and understand its objectives and operations.

Of course, your adult children are loyal to you and the business. They’re invested in the company’s long-term success, as they inherently have a stake in its future. In many cases, hiring and training your children within the business is part of a broader succession plan, ensuring continuity in leadership and management as the company grows.

However, it’s crucial to approach hiring family members with caution and professionalism. You should clearly define roles, responsibilities, and expectations, and your children should understand they are part of a team—and what that involves.

The Biggest Issue: Perceptions of Favoritism

The most significant challenge when hiring your children is the potential perception of favoritism among other employees. My two oldest kids work at CorpNet, and my biggest challenge was not to favor?them over other employees—something that typically leads to resentment and a dysfunctional workplace. After hiring your kids, making decisions based on merit and not family connections is critical. It may be a hard lesson for your children, but it’s essential to establish that upfront before trouble arises.

Here's what I’ve learned:

• Don’t give your kids easier job responsibilities or more favorable working hours.
• Apply the same hiring standards to family members as you would for any other candidate.?
• Your children should undergo the standard onboarding and training process as any other new hire.?

Role of Supervision and Evaluation

Who wants to supervise their own children? Not me! I strongly advise you to have family members supervised by team leads or managers who are not their parents. This helps maintain objectivity in performance evaluations and daily management.

In addition, performance evaluations should also be handled by team leaders (and not the parents). Reviews should be based on the standards applied to all employees, ensuring fair assessment and opportunities for development.

Creating an Inclusive Work Environment

Finally, creating an inclusive work environment where every employee feels valued is essential. Ensure every employee (family or not) feels the company supports open communication and equal opportunities for growth and advancement.

While hiring your adult children can offer valuable opportunities, it also presents unique challenges that must be carefully considered. To maintain a healthy, productive work environment, ensure you uphold principles of fairness and professionalism.?

One More Thing

I would be remiss if I didn’t address the entity’s responsibilities of hiring your children at your business.?

• For parent-owned sole proprietorships or partnerships, children’s salaries are subject to income tax withholding regardless of age.
• If the child is under 18, you are not responsible for withholding Social Security and Medicare taxes.? If the child is 18 years or older, payments for the child’s services are subject to Social Security and Medicare taxes.?
• Payments for the services of a child under age 21 are not subject to the Federal Unemployment Act (FUTA)?tax.
• For parent-owned corporations, payments for children (regardless of age) are subject to income tax withholding, Social Security taxes, Medicare taxes, and FUTA taxes irrespective of age.