Is your business healthy enough to hire a new employee?
Can you afford to hire a new employee? Can you afford not to? For small business owners, the decision to hire is a complex one. Here are a few considerations.
- Side effects of understaffing. The most likely reason to hire a new employee is you have more work than you can handle, or you can’t accept more work because there’s no one to do it. The long-term results of not hiring could include:
- Limiting growth
- Damaging the morale of already overworked employees
- Allowing customer service to slide
- Seeing quality suffer, because staff must work faster or take shortcuts.
You may also find you don’t have enough time to focus on the big picture because you are continually putting out fires caused by overstretched staff and resources, so:
- Be specific. What, exactly, do you want this new hire to accomplish? Write a job description and be as specific as possible. Could a part-time employee or contractor fill this role as easily? Is it a year-round job or do you need extra help getting through a seasonal uptick? Could tasks you currently handle be divided among existing employees?
Also consider whether hiring a new employee fits in with your long-term vision. How many employees can you comfortably manage?
Determine the health of your bottom line. The real costs of hiring a new employee start adding up before you even sign the first paycheck. Estimate these as accurately as possible.
- Recruitment. Whether posting a free online ad or using a recruiter, the process of creating a job description, posting ads, reading resumes and interviewing takes precious time. That means time away from other work.
- Salary. Calculate the salary or hourly rate you are willing to pay. Take into consideration the competitiveness of the job market and typical pay rates in your area, too.
- Taxes. What are the costs of federal and state unemployment taxes, plus the employer-paid portion of Social Security and Medicare?
- Benefits. Health care is a major concern for potential employees and a major expense for you. You will also need to add vacation time and sick leave, employee savings or retirement plans, membership in professional organizations, etc.
- Job-specific costs. What will a new hire need for the job? Calculate these expenses, from office supplies and uniforms to computers and office space. Don’t forget to include software licenses, phone plans, laptops or work-related vehicles. Worker compensation insurance varies depending on the industry and type of job.
- Training. Even the most qualified new hire needs time to adapt to your processes and culture. Chances are specialized training will be required, too. Also keep in mind the time it takes for a new hire to get up to speed can range from a few days to weeks or even months.
- ROI. How long will it take for your new hire to make a difference to your bottom line? This is more easily measured in a sales position, but consider the impact a new hire will make in the next month, six months and year.
Once you’ve done the math, you’ll have a far more realistic view of what a new hire will contribute to the health of your company.
For personalized help managing your business, contact your local SBTDC office.– Contributed by Kelly Burkart through a partnership with US Bank.
If you liked this post you might also like: