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You made the plunge and set up a small business. Things are going rather swimmingly, and an expansion is on the horizon. You’re at the stage when it’s hard to do everything alone. It worked in the past, but now you need some new hands on deck to lighten the load and grow your business with you.
Hiring your first employee is a substantial (and quite emotional) step for every small business owner. It signifies the first big change in your organisation as you’re letting other people in. This type of decision can’t be taken lightly – and you should consider the following things before hiring anyone:
How many employees do you need?
This is the first time you’ve ever had to hire someone – so how many people do you need to hire to help your business? It’s a tough question to answer, but here are a couple of other ways of phrasing it to help you work out the solution:
- What jobs are you struggling to do?
- How much can you afford to spend on employees?
Both of these questions are important, though the second one may be the defining factor. Nerdwallet estimates that the annual cost of an employee is around 1.4 times their salary. That’s because you must take into account the cost of recruitment, increased energy bills, training, benefits, sick days, etc.
Based on the average salary for the jobs you’re hiring, how many employees can you conceivably afford before it damages your business? Hire too many and your expenses go through the roof. It’s better to start small – maybe make one new hire – and then take it from there.
Think about the jobs and tasks you’re struggling with the most to decide who you employ and what specialities you’re looking for. E.g. You’re having a hard time dealing with marketing your business as well as providing the services/products. In that case, it makes sense to hire a marketing expert to manage that side of things.
How will your new employees work?
You’ve figured out how many employees you want to hire, but how will they work? We’re talking about their contracts and work schedules: are they full-time or part-time employees? Will they be in the office/workplace with you every day, or will they work from home?
Lots of questions spring to mind, but they’re all important. You need to work out how your employees will work for you to determine the types of contracts you give them. For instance, if you only require someone to do part-time work now and then, it could be better to hire them as an independent contractor rather than a full-time employees. Doing this would mean you don’t technically have to provide benefits and can pay them for their jobs instead of giving them a set salary.
You can already see how a decision like this impacts the way your business functions and how much money you need to spend when hiring someone. Also, even if you want to hire permanent staff, figuring out their work schedules helps you answer the next question on this list.
How much should you pay your employees?
Consider the salary for your future employees to understand how much money you’ll need to spend on them. Yes, this point ties in with the first one, as it will help you figure out how many employees are too many.
It goes without saying that you should pay your workers a fair wage. Use an average salary checker to see the normal pay rate across different jobs in your industry. Don’t forget to search for average salaries by location! Certain locations will pay more than others, and you need to align your salaries with those around you.
Offering a salary under the average will almost certainly mean nobody wants to join your company. It’ll extend the recruitment process, which (ironically) makes it more costly overall. Don’t skimp on salaries or payment rates for your future employees; pay fairly at all times!
How will you pay your employees?
The way you pay your employees will depend on how they work for you. Independent contractors aren’t technically “employees”, and you can pay them however you want. Reach an agreement – this could mean payment via PayPal or a direct bank transfer at the end of each week or whenever they complete tasks for you.
On the other hand, permanent employees should be paid via a payroll system. Arm yourself with the latest and greatest software to pay your employees on time, all the time. Payroll systems let you establish a recurring payment date – for most small businesses, this will be the start or end of the month. From here, it’s a case of setting up their salary, and the system handles the rest for you.
What are the employment laws?
Your final consideration revolves around everyone’s favourite part of business: the law! You need to stay updated with the latest legal regulations and laws surrounding business contracts and employment. Specifically, be aware of the many things you must abide by as an employer. You didn’t have to worry about these when working alone, but adding another person to your business means things change. Check the laws revolving around permanent employees and independent contractors. Seek legal counsel, if you need it, to explain what you can and can’t do in either of these situations.
Most of the laws revolve around things like fair wages, sick days, unfair dismissals and employee rights. It’s the most boring part of hiring an employee, yet arguably the most important. Fail to follow the laws and you open yourself up for some pretty bad lawsuits that could shatter everything you worked so hard to create.
Pose all of these questions to yourself before you hire the first employee for your small business. They’ll encourage you to work out the best way to hire someone, how many hires are necessary, and so on. Expanding your business with new employees isn’t something you can do blindly, and it will take a long time to implement. Be patient, and check yourself at every turn to be sure you’re doing the right thing.
Note: This is a collaborative post
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