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    Not enough information given.

    Does he perform as expected on his salary? What side projects does he do - work related, open source or something with intention of selling?

    If company provides chill-out room, what’s a company policy on using it? Could working on his side project count as chilling out?

    EDIT:

    Does he work on side projects in single 2-3 hour stretch or couple minutes here or there during overly long compiles, when other’s watch YouTube?

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      Good points. It’s the problem I had with both the question and then the answer which assumed one kind of situation. Contrary to person answering, I find it just as likely that the employee has a side interest that they simply like working on. It might be fun, building portfolio, side business, anything. Pay and dedication to company are only two aspects of motivation among many for employees. The person could even be a troll to employers for all we know. No data = know nothing.

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      Engaging the employee and putting actual compensation (monetary, perks, what ever) value to their work and efforts for your company should be apart of the management model regardless if the employee is daylighting or not.

      Here’s an anecdote about my professional life: I am employed full time, and currently work two contracts. That soaks up a lot of my days. I have a perk (see above) at my full time job of being able to work from home on days that I choose. This means I can take time during the day to get some contract work done that I would normally push into the evening or weekend. This has no effect on my output for my full time job. My employers also know that I like to contract, and that I am currently under contract on the side and they respect my decision to take on contracts.

      The point is, and I think the response to the question in the post takes the long way home to get there, is to be open and transparent with your employees about how the company is managed. Be open and transparent on what the expectations are for both parties. Communication is vital to the successful business.

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        If that same employee gets more work done than equally paid peers, keep that person!

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          What if the reason they get more work done is by skipping the bathroom and peeing in a bucket under their desk?

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            I know a company where something like that happened since nobody was letting them out for breaks. Staff cuts, etc. It was messed up. However, those workers were among the most dedicated with great people skills. They kept them. They made more money as a result.

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          Obviously. Should I fire an employee who spends half the day watching the X Files instead of working?

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            Depends on what season or episodes. Certain ones appeal to creative types more than others. Also, it could help if the project is a survival-horror game.

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              What do they accomplish in a day, and how much do I pay them? If they get done with the same amount of work as my other employees with decent quality, then you should not care. If anything it’s an indication that you should fire the other employees.

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                But watching X Files during the day is a clear lapse in judgement. It’s a show for night time. I can’t trust this person; they’re totally irrational!

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              Actually, be glad you have a software engineer. And one who is in demand, on top of that. Because we would very much need some more around here. She would be allowed to work on her side jobs, too.

              Half of her time for full (public sector) wage and a comfy chair to work from would be more than enough for us.

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                My approach would be:

                Is the engineer doing his job? If they are constantly behind on their tasks then I’d talk to them. No need to fire yet.

                Are they getting all their stuff done? Talk to them, congratulate them, and find a way to assign them more ambitious tasks, perhaps in areas they are interested in.

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                  I think the bigger topic is who owns the side work? If it was performed using company resources (which it seems very likely in this case it was), most IP contracts, and state laws say it belongs to the employer.