So you can hire a spy and pay him. Can somebody please explain to me what he is actually doing? I have never witnessed him providing any insights about the other cops. (at least until day 30) The only thing my spy does is receiving money.
For the majority of the game, snitches work as Nakor says - they report when they think you're about to get shafted by your people, and when they do report to the Union, the snitch lets you know who dobbed you in (so you can take care of them or buy them off).
As Nakor says you won't ever get dobbed in unless you're mean, as corrupt as possible and greedy.
Towards the end of the game snitches actually have an additional function - they let you know the officer's political preferences once this becomes important. But you can always hire them at that point (the game lets you know when you reach this point).