Paper Sample on Managerial Nepotism: Employment of Family Members in the Workplace

Introduction

There would occur issues with an organizational policy which does not allow the employment of a relative or spouse, for the primary rationale that the reasons for the particular prohibition were in terms of the marital or family relationship of the employee with an existing employee. The non-promotion or non-employment of a spouse or a relative of an existing employee in a company is a common area of concern with authorities of anti-discrimination. An employer should ensure they are careful with respect to non-promotion or non-employment or a spouse or relative in such a situation. The reason is that the practice would be perceived as discriminatory based on the grounds of marital status.

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Discrimination is likely to happen when an organizational policy is in terms of, for instance, stereotyped perception of how individuals of a given status behave. For example, married individuals cannot work together or that the criminal activity of one of the partners will have an automatic impact on the other partner. Whereas discrimination against an existing worker as a result of who their spouse is will not be illegal across all situations, an employer is required to handle every personal case based on its merits instead of having a given organizational policy on the matter. A worker who suffers dismissal on the grounds of his or her marital status is likely to claim unlawful dismissal. An employer ought to possess an objective rationale for executing an organizational policy or procedure. For instance, there would legitimate grounds to ensure an existing employee cannot have direct involvement with or impact the selection of a spouse for a given position at the organization. It may also be required to find legitimate reasons for selecting a spouse for the performance of work where he or she is supervised by a relative. The reason is that the individual is hired or promoted based on their merits, which functions as a reinforcement in the other employees’ minds that an individual promoted or recruited is not in terms of grounds of a family link.

Hiring Your Spouse as an Employee

The majority of married couples may work in their business together, and in other cases, one of the spouses may work for no benefits or pay (Powell & Eddleston, 2017). Nevertheless, if your spouse works in the firm on a regular basis as an employee, you are likely to take into consideration putting the spouse on the payroll to function as an official employee based on numerous grounds (Kauder & Potrafke, 2015). When you place your spouse as an employee, there are certain associated advantages and disadvantages.

Spouse on the Payroll

When an employer has a spouse, who wants to help out and the employer has sufficient money that comes from the business or alternative sources, he or she may be tempted to have a spouse work in the firm, although not regarded as an employee. A spouse may also function as a part-owner of the firm, and he or she may be entitled to receive dividends in the case of a corporation, or the spouse may receive a share of the net income from a limited liability company or a partnership. In such a situation.

Employment of Spouse – IRS

One of the spouses may have control over the firm and the responsibility of making management decisions. In contrast, the other spouse is put under the control and direction of the other spouse, the IRS, in this case, perceives it in terms of an employer-employee relationship (IRS, 2020). However, when both spouses possess equal power in the business and offer considerably equal services to the business, and that they both make a capital contribution to the business, the IRS perceives the relationship as a partnership (IRS, 2020). Therefore, the spouse is required to pay tax based on partnership business ownership even when there is the absence of a formal partnership agreement (IRS, 2019).

Social Security Credit and Retirement Benefits

When a spouse works in an organization without pay, they do not accumulate any credit towards social security. However, hiring a spouse to function as an employee shows that the spouse is entitled to social security credits which happen towards receipt of social security income when the spouse retires (Urbancová & Šnýdrová, 2017). If an organization has a retirement program which is referred to as contribution plan that is qualified by the internal revenue service (IRS, 2020). The working spouse potentially receives retirement benefits. The annual contributions of the firm to the retirement plan alongside other additions to the account of a participant cannot surpass lesser of 100% of the compensation toward the participant and 55000 USD.

Healthcare Coverage

Where the organization offers health insurance coverage to all employees, the employer is likely to find it cheaper to cover the spouse viewed as an employee. The cost of paid premiums by the company for the health insurance of a spouse is deductible to the business. The payments of the business are not taken into consideration as wages. Therefore, they are not subject to Medicare, social security or federal income tax withholding.

Business Travel

If a spouse as an employee possesses legitimate ground to travel with the employer on business trips, the travel costs of a spouse are deducted as a business expense on if the spouse serves as a paid employee and he or she goes for the travel for business purpose. It is required that an individual ought to justify why the spouse should accompany him or her on business travel as an employee. The rationale given needs to relate to the position of the spouse with the business. For instance, the spouse could be holding the position of marketing manager, and he or she accompanies to a trade show.

Spouse Treatment Like Other Employees

When an individual in the management position decides to put his or her spouse on the payroll as an employee, the person ought to treat the spouse as an employee across all ways. The spouse should receive a title and an appropriate salary for the given title. The spouse must also complete all the necessary new hire forms and authorizations for payroll. All necessary deductions should be made from the pay of the spouse. A spouse should also be included in the overall benefits coverage offered to other workers if he or she functions as an employee to the organization (Urbancová, H., & Šnýdrová, 2017). It is necessary that the employer is in a position to prove that the spouse performs work for the company to receive payment. If a spouse is also an owner or officer of the corporation, maintain all salaried duties separate from any activities of ownership.

Appointment of an individual who is related to staff members must meet the requirements for employment and should not be discriminated based on their relationship with a member of staff. The spouse should have complete qualification for the post for which the person is considered (Wolrd Bank, 2020). Besides, the appointment of the spouse should not be as a result of preference by virtue of their relationship with a staff member. When a spouse is appointed to an organization, he or she should not be assigned to a post administered or supervised by the other spouse. It is also required that members of staff whose official functions would include them in the review or decision-making process that affects their spouse to disqualify themselves from participating or undertaking the process.

Conclusion

In conclusion, the employment of a spouse in an organization should observe the general rules for employing any other person into the organization. The appointment of a spouse may raise conflicts among staff employees since if the promotion of the spouse occurs, they may perceive it as nepotism. In contrast, denying certain spouse benefits due to the relationship may appear as discrimination. However, proper guidelines exist on how to appoint a spouse as an employee. All benefits that other workers receive should be extended to the spouse if he or she functions as an employee.

References

Internal Revenue Service (IRS). (2020) Married Couples in Business. https://www.irs.gov/businesses/small-businesses-self-employed/married-couples-in-business

IRS. (2019). Tax treatment for family members working in the family business. https://www.irs.gov/newsroom/tax-treatment-for-family-members-working-in-the-family-business

Kauder, B., & Potrafke, N. (2015). Just hire your spouse! Evidence from a political scandal in Bavaria. European Journal of Political Economy, 38, 42-54. https://doi.org/10.1016/j.ejpoleco.2014.12.007

Powell, G. N., & Eddleston, K. A. (2017). Family involvement in the firm, familytobusiness support, and entrepreneurial outcomes: An exploration. Journal of Small Business Management, 55(4), 614-631. https://www.tandfonline.com/doi/abs/10.1111/jsbm.12252

Urbancová, H., & Šnýdrová, M. (2017). Remuneration and employee benefits in organizations in the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 65(1), 357-368. https://doi.org/10.11118/actaun201765010357

Wolrd Bank. (2020). Employment Policy. https://www.worldbank.org/en/about/careers/employment-policy