As most business owners know, bad hiring decisions can have steep costs. According to Forbes, replacing a bad hire can cost 30 percent of that person’s yearly salary. Poor hiring decisions can also adversely affect productivity and morale.

To avoid these issues, many business owners may consider hiring family members. However, as any attorney knows, this approach can offer drawbacks that business owners in Illinois should understand beforehand.

Potential benefits

Familiarity is a factor that makes many business owners consider hiring family members. This arrangement eliminates the need for background checks, which are a prerequisite to hiring for two-thirds of businesses, according to Forbes. Business owners also can avoid investing time in verifying employment history and references. Generally, owners know firsthand whether a family member is reliable and trustworthy. Additionally, family members are often committed to the success of the business.

Although these benefits are compelling, business owners should recognize the potential risks of hiring new employees who are relatives. This arrangement can lead to conflict, due to the expectations and emotions that owners and family members bring into the working relationship.

Common complications

Personal perceptions are a frequent issue when business owners hire family members. As USA Today notes, family members might demand special treatment or unconsciously expect it. They may undermine an owner’s authority or create the appearance of nepotism. In other cases, family members may feel they unfairly face greater pressure or expectations than other workers.

Hiring family members can also complicate or impede necessary employer actions. Pay disputes may have an emotional component, as both the employee and business owner may worry about the other party taking advantage. Addressing a family member’s poor performance through disciplinary action or termination may also prove difficult for many business owners.

Legal precautions

Business owners who wish to hire family members despite these risks can take various steps to protect themselves, as any Illinois business attorney could explain. These measures include:

• Evaluating the family member’s credentials and offering a position the family member is legitimately qualified for
• Hiring an under-qualified family member into a training position with official standards and measures of progress
• Drafting a job description and an employment contract to outline job requirements
• Discussing contingencies, from company growth to changes in the nature of the position, that might affect the family member’s standing

These steps should help establish expectations before hiring. These measures may also offer protection against allegations of nepotism, mistreatment or wrongful termination.

To further reduce the risk of legal disputes, business owners who are hiring family members in Illinois should consider partnering with an attorney. A business attorney may be able to provide assistance with the creation of employment contracts and other necessary protective measures.