18 Nov Should I hire my children – or other young people – to work for my business?
Hiring your own children – or other young people, for that matter – comes with both advantages and disadvantages. It can be an excellent investment, particularly if your business is willing to train and nurture its young employees. Hiring your own children can offer financial and practical benefits, but it also comes with emotional and legal complexities. It’s essential to set clear boundaries, manage expectations, and ensure that everything is done in compliance with tax and labor laws to avoid complications down the line.
At Reconciled Solutions, I’ve hired my own three children to work for me at various times – when their busy schedules allow it! I brought them on to help with administrative tasks. One thing I’ve learned is that my 17-year-old daughter is a different employee than my 13-year-old son. Be ready to be flexible and adjust assigned tasks based on your own child’s strengths!
Here’s a breakdown to help you small business owners decide whether hiring your own children is a good fit for your needs:
What roles you can you hire your children to fill?
At Reconciled Solutions, my kids typically helped me out with general administrative work. This included filing, sending thank you cards and packages, running errands, contact management, and shredding.
Many kids have mad technology skills! They have grown up in a digital world and know a lot about modern technology, social media, and digital tools just from using it in and outside of school. They can bring fresh perspectives to your business’s online presence or help with technology-driven tasks. Can you use their skills for online research? Making social media posts look pretty? Website improvements? Cleaning up your smarter-than-you device?
Do you need photography and advertising images of your kids for business promotion purposes? Maybe they can be a model for your products and services.
Do you need something cleaned or painted in the business? Maybe your business requires laundry service. Your kids can do those types of tasks as well. Think outside the box!
The advantages of hiring your own children
Tax Benefits of hiring your own children
If you hire your own children to work for your business, you can take a tax-deductible business deduction for wages paid to them, reducing your taxable income. The wages must be reasonable and appropriate for the work your child performs.
If your business is a sole proprietorship or a partnership where both partners are parents, you generally don’t need to pay Social Security and Medicare taxes on wages paid to your children under 18. Are you running your business as a sole proprietorship or partnership? If so, your child’s wages are not subject to self-employment tax, which is usually around 15.3% of income.
If your child works in your business and earns below the standard deduction threshold ($13,850 for 2024), they won’t owe federal income taxes. This allows your child to earn income without paying federal income tax, as long as their earnings are under the threshold. This saves you from paying employer and employee payroll taxes on their wages.
Your child can contribute to a Roth IRA if they have earned income. By hiring them and paying them wages, you can help them contribute to their retirement early. This can be a powerful tax-saving strategy since contributions grow tax-free.
When your child is also your employee…
In my own experience hiring my own children to work at Reconciled Solutions, it created both some pleasant advantages and unpleasant situations for both them and me. Here are a few of my observations.
Establishing an employee boss/relationship with your children can be tough
This was a first job for each of my children, and they were working for their mother. This meant they did not necessarily start out respecting that employee/boss relationship. For example, they needed to plan their work days ahead and let me and my staff know in advance when they would be coming into the office. They thought that since they were working for Mom and I had given them flexibility on when they would work, they did not need to schedule their work hours in advance.
It may take time to help set your kids up for success in the office
Younger workers in general may sometimes lack the maturity or professional skills needed in certain environments, which can affect how they handle responsibilities, customer service, or team dynamics. This in turn leads to mistakes and inefficiencies in the business and additional training required.
My kids were doing mainly administrative functions in my office, so my staff often needed get things set up in advance before the child could do their part to complete the task. They also had to remember to clock in and out of the payroll function and to check completed items off the to do list. The concept of planning your work and working your plan required more molding than I expected.
They had to be careful not to interrupt conversations when they had a question. It also created tension on the part of my other employees because nobody wants to tell their boss that “year kid is doing a crap job!” Put measures in place before your child starts working to avoid larger issues.
Hiring your own children means helping them build important life skills
Hiring my kids for light administrative work at the office meant I got to be the mom who taught them how to be a responsible employee. I explained to them that they were getting paid for their work contribution. It has been good to help build their confidence in job skills, and they’ve started learning important lessons in professionalism.
I saw these skills really play out for one of my daughters recently. She used her business skills and applied what she learned to receive more college scholarships. She has done a great job presenting herself for scholarship opportunities and doing the legwork required to be considered.
My kids are also building an understanding of what a good, contributing employee looks like. This will help them recognize potential career choices they may or may not want to pursue in the future.
An opportunity to teach your children about financial responsibility
My kids have also received the benefit of extra cash in their pocket. That came with many conversations around responsible spending. Many of them focused on the concept of putting money into their different “Profit First” buckets for spending/saving/giving. They also experienced their first entry into employment taxes and what it is like to have part of your paycheck deducted to pay taxes.
The benefits of hiring young people in general
Younger employees typically require lower wages, especially if they are starting out and looking for experience. This can be beneficial for small businesses with tight budgets. Younger employees are often eager to learn and gain experience, which can make them highly trainable. This can create opportunities for mentorship and growth within your business. Over time, they can become loyal, long-term employees with a deep understanding of your business.
Hiring your own children: doing it the right way
There are many details to consider when hiring your children to work in the business. Here are just a few to consider carefully.
Complexity with Tax and Legal Rules
There are strict tax laws and labor regulations regarding hiring family members. For instance, wages must be reasonable, and the work must be necessary to avoid tax penalties from the IRS. You must pay your child a reasonable wage for the work they perform. The IRS scrutinizes overly generous pay to children, so it’s important to ensure the pay is in line with the market rates for the tasks they perform
Paperwork
You’ll still need to handle payroll documentation properly, which could be complex if you are not well-versed in these rules. Keep proper documentation of the hours worked, duties performed, and wages paid to avoid any issues with the IRS. Ensure that you comply with child labor laws in your state regarding the minimum age for employment and types of work minors can perform.
Consider scheduling conflicts and high turnover
If you hire students, their schedules might be inconsistent due to after-school activities, exam schedules, and school holidays, which could create gaps in availability. In addition, young people tend to change jobs more frequently, which could result in higher turnover for your business. You may spend more time and resources on hiring and training new employees.
Be mindful of your existing employees and the atmosphere in the workplace
Mixing family and business can lead to strained relationships. Issues such as favoritism, unrealistic expectations, or poor performance can cause tension at work. Your own children may not take the job as seriously because of the family connection, which can lead to performance issues or less professionalism in the workplace. Non-family employees may perceive favoritism, which could affect the overall morale of the workplace.
Weighing the pros and cons of hiring your own children
Hiring younger workers who are eager to learn and earn money is understandably appealing to many small businesses. If structured correctly, hiring your children can be a legitimate and beneficial tax strategy. However, it’s important to be aware of the unique job duty restrictions that are in place to protect youth. You must carefully weigh their potential against the added costs of training, supervision, and possible high turnover rates. For a small business, finding a balance between experienced workers and younger, eager-to-learn employees may offer the best outcome.
Looking for more guidance? I recommend this resource shared by Isabella Wood, Research Analyst at ResumeBuilder.com: The Small Business Guide to Hiring Minors. This guide was created to assist small businesses in determining whether hiring young individuals is a practical option. It also addresses federal and state child labor regulations, provides guidance on applicant interviews, and suggests strategies for establishing a youth-welcoming work environment.
Hiring your own children can be an excellent way to teach work ethic and responsibilities, as they will learn the value of work and how to handle job duties. You can offer your own children more flexible hours to better accommodate your family’s needs, which might be hard for them to find elsewhere. Involving your children can also teach them valuable lessons about business and life, which they will use for years to come—whether they continue working in the family business or pursue a different career.
