How to Handle Nepotism in the Workplace

As an employer, you want to make sure that you hire the most qualified staff and put together the best possible team. But sometimes you may come across a manager hiring one of their relatives instead of the best candidate. This unethical behaviour is called nepotism.

A report by Australia’s Public Service Commission estimates that corrupt practices may have cost the Australian economy up to a staggering $72 billion between 2012 and 2018. According to the same report, more than a quarter of respondents reported having witnessed nepotism in the workplace. Read on to find out why nepotism is so problematic, how you can identify it and what you can do to avoid it.

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What is nepotism?

Nepotism is an unfair workplace procedure that happens when someone in power, usually a manager or executive in a business, chooses to hire a less qualified family member than a more suitable existing employee or external applicant. We also call it nepotism when a decision-maker’s family member receives preferential treatment or is not reprimanded for mistakes that would land regular employees in hot water.

Smaller firms and family businesses tend to be more prone to nepotism than large corporations. It’s important to bear in mind that not every new hire who is related to the managing director is a case of nepotism. If they are genuinely more qualified than other applicants, then that’s perfectly fine. We only speak of nepotism when less qualified relatives are hired over more talented or experienced prospects.

Is nepotism in the workplace illegal?

Favouritism due to nepotism in the workplace isn’t illegal as such. But if this favouritism is discriminatory, then it can be considered unlawful. The Fair Work Act 2009 protects all employees in Australia from being discriminated against due to their personal characteristics such as sex, religion or race. So you might find that nepotism is only legally problematic if it can be demonstrated that it is discriminatory in nature.

Importantly, in Australia, managers are required to disclose any potential conflicts of interest when hiring new employees to make sure there is no underhand favouritism. Nepotism may therefore be considered illegal in certain circumstances if management fail to disclose that a newly hired staff member is a relative of someone in a position of power. Naturally, your HR department should be aware of these policies and raise awareness among other staff members too.

If you want to dive deeper into the issue, the Australian Fair Work Commission provides a host of information about discrimination in the workplace, including favouritism.

What are the effects of nepotism in the workplace?

Nepotism can lower employee morale and cause resentment among staff. After all, who wouldn’t be frustrated if you put in your best effort and someone else seemingly less qualified is favoured? As a result, skilled employees might leave the company, and the business will suffer because valuable resources are lost. A study at Istanbul University found that nepotism had significant negative effects on employees’ job satisfaction and their intention to resign. Even if employees stay on, they are less likely to put in a lot of effort and their performance – and ultimately the business – will suffer. If favouritism is obvious, management members are less likely to be respected and seen as objective decision-makers by their staff. This ultimately undermines employee confidence in their managers’ authority.

How can you avoid nepotism as an employer?

Avoid hiring family members

This may seem obvious, but the easiest way to avoid potential conflict or raised eyebrows is to simply avoid hiring relatives. Thoroughly evaluate all applicants to make sure you’re hiring the best person for the job. If your family member truly is the most suitable candidate, make sure they are evaluated and hired by a panel that does not include you and that the HR department approves of the decision. Ideally, they should also not report directly to you to avoid any situations that may give the impression that your relative is enjoying preferential treatment. Ultimately, you’ll be more relaxed too without the temptation of favouring them.

Maintain a professional environment

It pays to cultivate an atmosphere where professionalism is held in high regard and unprofessional behaviour is frowned upon. This will increase your team’s inner threshold towards any improper conduct and may make someone think twice before putting their cousin in a role for which they’re not really qualified, for example. After all, nepotism and any other kind of favouritism are highly unprofessional and will be looked at with contempt if you instil a sense of pride in professionalism in your team.

Focus on fairness

All employees should be managed fairly against the expectations and responsibilities of their role and rewarded based on their performance. Rotate duties to give every employee a fair shot at progressing and delivering their best work. And when they do, be sure to praise them and give them progression opportunities based on merit. It should not be about who they know, but what they know! When hiring for new positions, a transparent recruitment process is the way to go. Being a fair employer is very desirable, and word is sure to get out, helping you to attract even more great candidates.

Create anti-nepotism policies

Nepotism is best addressed alongside anti-discrimination guidelines. It’s a good idea to establish some written rules as the foundation for employees so they can be sure what is permitted and what is unacceptable when it comes to hiring new staff. You may, for example, stipulate that no person may directly supervise a family member. Draw up some anti-nepotism policies and include them in your company’s guidelines or code of ethics. In this way, all employees will be aware of these rules and have no excuse for breaking them.

Find great applicants

When you set out to fill a vacancy, always have some recruitment strategies for hiring great employees to fall back on. If you have an impressive pool of applicants to choose from, you won’t even be tempted to hire your family member out of a false sense of obligation. Indeed can help you find the best matches for your team in no time.

How can you spot nepotism?

There are a few clear indicators that nepotism may be present and someone may have been hired based on their family connections rather than their aptitude for the job. Watch out for these clues:

Lack of proper qualifications

You check the new hire’s resume and notice they don’t seem to have the proper qualifications needed for their role. This may surprise you until you realise that the new hire is the general manager’s niece – a red flag and a potential case of nepotism! It’s worth raising your concerns with Human Resources. After all, some jobs require certain credentials, and an employee not having them may represent a health and safety issue.

Poor conduct is overlooked

Everyone makes mistakes sometimes. But usually, there are consequences. If a manager’s family member displays unethical conduct but is not reprimanded, this may be a case of favouritism due to nepotism – especially if it happens consistently. To keep your corporate ship sailing smoothly, all team members should be held to the same standards. If someone is clearly not and getting away with questionable behaviour, this might be a sign that they are enjoying preferential treatment and something is amiss.

You’re getting complaints

Whether you work in Human Resources yourself or your HR department has brought the issue to your attention, complaints about possible nepotism are usually a dead giveaway. Especially if they pile up and you’re getting more than one! Any complaint about potential nepotism should be followed up to ensure there’s no discrimination. After all, you not only want to avoid legal trouble but also rest assured that your staff are being treated fairly. Respect your employees by taking their concerns seriously and carrying out proper investigations.

What to do if you encounter nepotism


If you suspect nepotism, your first step should be to thoroughly investigate the matter. Interview the parties concerned, and ask other staff members for their input and impressions so you can form an objective opinion on what’s happening. Encourage all employees to be open and honest when sharing their observations. You might even want to consider setting up a channel where they can report their concerns anonymously.

Take action

Once you have a good grasp of the situation and are sure nepotism played a role in corporate decisions, it’s time to take action. If necessary, disciplinary action might be the way to go, especially if your company policies already include a section on favouritism. Work with HR to determine the best course of action while ensuring you are adhering to legal guidelines. It’s important for your staff to see that you’re not turning a blind eye to the issue but actively doing something about it.


It’s worth bearing in mind that the perpetrators might not even be aware that they have done something wrong. This is why it’s important to educate all your staff about nepotism and the dangers of favouritism. You could offer a webinar and make it obligatory for all employees to watch. An online course along with downloadable information on the intranet is another way to make sure all your staff are on the same page when it comes to nepotism. Important policies can, of course, also be printed out and distributed among employees. Ignorance should not be an excuse for questionable conduct.


Nepotism can negatively affect a company in several ways. To start with, it sets a bad precedent that people are favoured based on their personal relationships with key decision-makers. Morale among your other employees will also suffer because they will feel less valued and believe all their efforts would be in vain.

Having a diverse, qualified team is an important asset to any company. Any hiring decisions should be largely based on applicants’ qualifications and experience rather than on who they know or are related to. When it comes to finding and securing new employees, our guide on how to make candidates a job offer they can’t refuse will come in useful. What’s more, if you tackle nepotism head-on, your staff will take note and appreciate that unfair behaviour is being dealt with. Unethical conduct like nepotism has no place in any reputable company, large or small. So refer back to this article, and make sure you take swift action if you or one of your staff members suspect nepotism in your business.

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