How do you decide whether or not to hire employees?
1. Is this work which must be done by an employee over a long term or could you buy it in some way?
Work can also be done by:
- independent contractors who specialize in the area,
- temporary staffing services,
- consultants for a project or a specific need,
- an interim executive, or
- sub-contracting.
And, too often, small organizations add a non-core position because of short-term or part-time needs and then realize that work has expanded to fill the time, not because of actual necessity. So a real 10-20 hour a week need has become a full-time employee.
2. Can I afford the costs of having an (or adding another) employee?
Total costs of an employee include the fixed costs of the person's pay and also:
- government-mandated benefits including: OASDI ('social security'), unemployment insurance, workers compensation insurance
- costs for space and equipment for the employee
- pay processing and accounts establishment costs
- legal compliance and risk management costs
- any other benefits you offer (insurance, holidays, vacation, etc.)
Talk to your CPA firm about payroll support and other services they can recommend to help you comply with all the legal and tax requirements without having to do them in-house.
Consider employee leasing if you think you will need to have a number of employees. Employee leasing firms are co-employers with you so you still have hiring and firing rights as well as day to day management of your staff. But they handle all the legal, payroll, and tax aspects. And since they are usually larger operations, they can offer better benefits than most small firms. This means you have access to a bigger pool of potential applicants which can help you attract and retain the talent you need. They are not the right option for every organization but may be worth a look for yours.
3. What type of work and level do I really need?
Classically, small employers want folks to wear multiple hats. But the work combinations must make sense and be right for your organization's needs.
There may be a terrific sales person who is happy to be doing administrative work half of the time but I have not met such a combination of attributes. Two part-timers or outsourcing would make far more sense in situations where the work needs are very different.
The other classic is to want to hire a senior-level person to show you are growing and to get some strategic advice but then want that person to also do basic level work. A CTO is not going to do programming. And hiring a CxO of any sort usually results in hiring several more layers as well. So, you had a Manager of Accounting and one accounting clerk before and now have a CFO and 5 staff, but no more revenues.
If you are not sure how to structure a position, and do not want to hire a specialist or consultant to help you do so, you can do several things. Take a good look at similar job ads from larger organizations: what set of skills and requirements do they combine? Many put fairly detailed descriptions on their website employment section. Check to see if your trade association offers sample job descriptions you could tailor to your needs. Ask other business owners. Ask your vendors in that area for ideas.
Before you add a position, make a clear list of exactly what business necessity creates the need, all specific responsibilities that need to be fulfilled, and what increased revenue will result. Then take a look at whether you should hire or out-source the work and how you will need to change your job as well.
4. I have decided to hire an employee, now what?
First, be realistic about what you need and what you will pay. While it is a real temptation to pay at a minimum level, too often this results in poor work quality and high turnover. Both are very costly! Research comparable pay in your market. Recognize that if you do not offer benefits coverage or you offer very limited benefits, you will need to pay a higher wage to compensate in most cases.
If you can offer part-time work or flexible hours or telecommuting, you will increase the pool of people who might be interested in your job significantly. This offers you more quality applicants to choose from.
Before you hire, learn how to do so effectively. The investment in learning how to hire well and the time to do this correctly will increase your effectiveness and cut your costs going forward far more than the time and money up-front will cost you.
5. I do not want an/another employee, but the work needs to be done.
Make a list of potential options: services vendors, independent contractors, temporary staffing services, consultants, interim executive firms, sub-contracting. Ask your advisors for recommendations.
Ask your current vendors - for example: often accountants and consultants know of other services, such as IT support, and can recommend firms/services to meet your needs.
In Sum
Hiring employees who can contribute to your organization's growth and success is an important step. A little thought and effort first to ensure you only add costs you can afford and you spend your money on the best possible solution for your needs will repay you handsomely. Unfortunately, too often the opposite is true - and having a staff becomes a nightmare of added work, added costs, and negative results. Ask questions, seek advice, consider alternatives - do all the things that you would do before offering any new product or service to your customers or clients. You will grow much more successful with less hassle if you do!