When to hire your first employee
Have you reached the point where you can't keep up with the demands of your business, alone? It may be time to hire staff, or at least get some help.
1. How to know you've reached your capacity
When your business succeeds, you're soon going to hit your personal capacity. No matter how hard you work, or how many hours you spend on your business, there's only so much you can do on your own. At this point, you'll need to bring on some people to help. The question is - what will they do? And what sort of employee do you need? To sense check whether you're ready to take on staff, ask yourself the following questions.
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Do you have more work than you can handle?
If you're getting more orders or more customers than you can manage, you need someone who can help you maintain your standards of delivery for customers.
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Do you need to find and service customers?
Sales and customer service has to be done right. But it can take a lot of time, and many business owners have many different tasks to juggle.
This could be an opportunity to bring on a customer service person. This person could manage existing customers, answer enquiries and help bring on new customers, while you focus on delivering your core business.
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Are you spending too much time on admin?
Admin cuts into the time you have for income-generating work, but it has to be done. As well as the usual bookkeeping and customer invoicing, you might also need to spend time to order stock from suppliers, managing stock levels and complete customer-related paperwork.
An office manager could free up your time to focus on income-generating, and ensure all your admin is done right. Often, an office manager can double as a customer service person as well.
2. How many hours a week will you need the person?
Your new person might not need to be full time. Part time, casual and contracting are all options that can be more cost-effective, depending on the workload and type of work.
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Full time
A good option if you have a regular, dependable stream of work, or if the person needs to be available all the time.
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Part time
If you only need a certain amount of time each week, a part time employee can provide the extra help you need without committing to the cost of a full time employee.
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Casual
If your work flow is unpredictable, you may be able to find one or two people you can call on as required to work a few hours here and there.
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Contractors
If you have a specialised project-oriented need, a contractor might be a better approach. You sign someone on for a specific task, agree payment and afterwards go your separate ways.
3. What experience level do you want?
When you're deciding on what sort of person you want, think about their seniority. The more experience someone has, the sooner they'll be a productive team member. The difference comes down to long term costs, and what you want the person to bring to your business.
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Entry-level
Entry-level employees cost less, which is good. However, they will take time to get up to speed and it will take a lot of your time to train them. During that time, your total productivity might drop overall.
On the positive side, you can train them to do things your way, and they have a lower total cost over the long term.
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Experienced
People with some experience cost more, but they reach full productivity faster. You'll spend less time teaching them the ropes, and they might even have different approaches that could benefit your business.
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Senior
Senior people have the highest cost, but they can often hit the ground running. They don't need as much management or training.
They might be able to add value to your business in different ways, as well. They could have a strong existing business network, know alternatives suppliers or have different ways of doing things that could refresh your existing processes.
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Manager
No matter how senior, all employees need management, and this will cut into your available time.
You need to factor in that time when working out your business' new total capacity. Be prepared to spend some time settling in your new employee and getting them up to speed with your business
When you have employees, managing people and helping them develop will always be an important part of your day.
4. Total cost of employment
Employees can be a significant expense to the business. It's important to work out their total cost of employment, so you can be sure your new employee will add to your total profit.
Employment costs may include some of the following:
- Their salary or wages
- Your contributions to their KiwiSaver fund - at least 3% of their gross pay
- ACC premiums
- Additional insurance - talk to your broker to check your policy details
- Equipment required for the job - computers, vehicles, uniforms
- Recruitment
- Training
- Contribution to use of their assets, such as a vehicle or their phone usage
This business.govt.nz calculator can help work out your total cost of employment.
5. Business potential
When you're on your own, your business is all about you achieving results through your own efforts. With an employee, your business changes and it becomes all about achieving results through others.
That can be a challenge for business owners used to working solo, but without people, your business will only ever be as big as you.
Your employees can help expand your offering, and bring in more revenue and more customers. Over time, you can grow to the point where you can even step away from your business for a week or two and know your team will be running it efficiently for you until you return – and that's a great feeling.
Keep reading
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This page is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and should not be relied on. This information has been prepared without considering your objectives, financial situation or needs. We recommend you seek independent professional advice and contact Inland Revenue before acting on this information.
