What they call "side projects", I call "practice" and "dedication".
If person after a work is doing same thing again and doing it on weekend, than this person has more practice in his or her field. More practice equals experience. It also shows that this person has interest, dedication and motivation towards his or her field. Will you hire an older man who just learned software engineering because of good salaries or a student who spent years in this field and loves it?
Both, practice and dedication are core components of success. If you really want something, but not doing anything, you will never move forward. If you are just doing something and don't care about it, you will never bring best results for the people. Many people are wasting time, doing some actions, but only few win, have you asked yourself why? Because last ones iterated and adapted more. Dedicated person more likely to see own mistakes, more likely is willing to learn something new, to optimize own processes.
Dedication is a fuel of success.
Mind controls body, body controls actions, actions interact with physical world, interaction with physical world bring real results. First, to control the mind, person should say to him or herself - "I want it", "I, mindfully, am aware and understand what it will take" and "I really want it". This is where most of the people fail. There is a huge difference between "I want" and "I really want" and without mindfulness, progress will be very short. Person must be aware of many problems and failures he or she will face in the way.
More practice builds reflexes, trains subconsciousness and resilience. Person with more practice is more likely to recover after a stress and to do so faster, and less likely to run away from responsibility or surrender.
Businesses need success, businesses need experience and businesses need dedicated and reliable people. If person can't answer a question "Why are you here?", then why this person is even here?
I don't care are you watching anime, dramas, scrolling Facebook or working on side projects, until you get stuff done.
From legal perspective, employees have rights for lunch / free time, sport activities. If person wants to spend some time still sitting on the chair and writing other code, this is only this person's decision. So far there is no illegal or forbidden action (by company policy, for example), everything is fine.
However, there should be clear line between practice and very dangerous blind fanaticism.
At the end, business is ONLY about real world results, it means doing what needs to be done and not what people want to do.
Today, I would say, especially in younger professionals and startups, this blindness is the most dangerous part, for example, you may have an amazing expert in your team, but that person will be doing what he or she wants with or without your company and not what you really need at a time. Executives and managers need to learn to distinguish dedication, goal oriented people from fanatics.
I would say it varies, but overall, I would work with a person who I already know and what he or she is capable of by looking on those side projects. After all, around a hundred of those side projects made me who I am, and given me experience from many other domains, like design, writing, marketing or business.