What Is Nepotism in the Workplace?

What Is Nepotism?

Nepotism is the practice of showing favoritism toward family members, relatives, or close personal connections in employment decisions, including hiring, promotions, compensation, work assignments, and disciplinary actions. Nepotism prioritizes personal relationships over qualifications, merit, and performance—undermining fairness, damaging morale, and creating conflicts of interest. The term derives from the Italian word “nipote” (nephew), referencing historical practices where powerful figures granted positions and privileges to nephews and other relatives regardless of competence.

Key takeaways

• Define conflicts of interest, require disclosures, and separate reporting lines for relatives.
• Use objective criteria and independent panels in hiring and promotion.
• Communicate policy widely and enforce it consistently at all levels.
• Related: Employee code of conduct.

Research shows 56% of employees have witnessed nepotism, and 84% believe it harms organizational culture. Companies with nepotistic practices experience 40% higher turnover.

Types of Workplace Nepotism

Nepotism shows up in different ways:

Hiring Nepotism

Bringing in unqualified relatives over better candidates, or bypassing your standard hiring process entirely because “they’re family.”

Promotional Nepotism

Fast-tracking relatives ahead of more experienced, more capable colleagues who’ve been waiting years for advancement.

Compensation Nepotism

Paying family members above market rate without justification—while everyone else earns market wages or below.

Assignment Nepotism

Giving relatives the best projects, easier workloads, or prime work locations while others get the grunt work.

Disciplinary Nepotism

Overlooking disciplinary infractions by relatives while holding everyone else to strict standards. When your nephew gets a pass for behavior that would get anyone else fired, that’s nepotism.

Legal Implications

Private Sector

No federal law outright prohibits nepotism in private companies. But here’s the catch: it can violate anti-discrimination laws if it disproportionately excludes protected classes (race, gender, age, disability).

Public Sector

Stricter anti-nepotism regulations apply to prevent corruption. Government employers face much tighter restrictions on hiring relatives.

State and Local Laws

Some jurisdictions regulate private employer nepotism beyond federal requirements. Check your state laws.

Fiduciary Duty

If you’re a corporate officer or board member, hiring unqualified relatives may breach your fiduciary duty to shareholders.

Discrimination Claims

When nepotism systematically excludes protected classes, it creates liability under Title VII, ADA, or ADEA. You might not be hiring relatives to discriminate, but if the effect is discriminatory, you’re exposed.

Impact on Organizations

Nepotism doesn’t just feel unfair—it measurably damages organizations:

• Morale craters — 32% lower engagement among non-family employees
• Turnover spikes — 40% higher turnover among top performers who see no path forward
• Productivity drops — Unqualified family members underperform, dragging down results
• Credibility erodes — Leaders lose respect when they prioritize bloodlines over merit
• Recruitment suffers — Top talent avoids companies known for nepotism
• Toxic culture — Creates insider/outsider dynamics that poison collaboration
• Innovation stalls — Fresh perspectives get blocked when the same families control decisions

Nepotism in Family Businesses

Legitimate: Hiring qualified family through standard processes, higher standards for family, mentorship to earn roles, objective evaluation, equal discipline. Problematic: Placing unqualified children in leadership, different standards, family overriding managers, disproportionate pay, no accountability.

Success strategies: Require outside experience first, objective qualification criteria, non-family input in hiring, separate governance from management, capability-based succession.

Anti-Nepotism Policies

Core elements: Define covered relationships, require disclosure, prohibit direct reporting between relatives, require approval for hiring relatives, establish violation processes.

Implementation: Enforce uniformly including executives, include in handbooks and onboarding, document exceptions, audit regularly, provide anonymous reporting.

Prevention Strategies

• Objective hiring: Structured interviews, multiple interviewers, documented justification, blind screening
• Transparent promotions: Published qualifications, objective metrics, panel decisions
• Standardized compensation: Market-based pay, equity audits, documented justification
• Separated reporting: No direct supervision between relatives
• Performance accountability: Same or higher standards for family, consistent discipline
• Third-party oversight: Independent review of family advancement
• Merit culture: Recognize performance, model fairness

How Employees Can Address Nepotism

Document patterns, use internal channels (HR, ethics hotlines), request objective criteria in writing, consider external opportunities if unaddressed, seek legal consultation if nepotism creates hostile environment or excludes protected classes.

Related Practices

Cronyism extends favoritism to friends and social connections. Favoritism encompasses any preferential treatment over merit. Effective policies address “personal relationships” broadly.

The Bottom Line

Nepotism erodes trust, drives away talent, reduces productivity, and creates legal risk. Merit-based family employment requires rigorous objectivity, transparent processes, and higher standards for relatives.

Effective organizations implement clear anti-nepotism policies, objective hiring criteria, separated reporting relationships, and uniform enforcement. The antidote is transparency, accountability, and rewarding competence over connections.

Try ShiftFlow’s workforce management tools to publish codes of conduct, log acknowledgments, and track conflict-of-interest disclosures—see our guide to employee code of conduct.

Sources

• U.S. Office of Special Counsel — Prohibited Personnel Practices (Nepotism): https://osc.gov/Services/PPP/Pages/PPP.aspx
• U.S. Equal Employment Opportunity Commission — Prohibited Employment Policies/Practices: https://www.eeoc.gov/prohibited-employment-policiespractices