When Should You Hire That New Employee

When should you hire that new employee?  A question every small business owner asks.  Knowing when is crucial to both your business and the success of the new hire.  This is especially critical for new businesses hiring their first employee.

In general, things are happening in your business that has caused you to consider hiring someone.  While the following examples are not all inclusive, they are key critical reasons for considering to hire.  These are: 

  • Your revenue is consistent and predictable.
  • You see a new opportunity for revenue but need additional skills in your business.
  • You find yourself turning down work opportunities.
  • You are getting more customer complaints than usual.

 One more key important point.  You do not hire a new employee simply to grow.  You hire a new employee because growth opportunity is already there and this person will help you achieve it. 

Hiring a new employee does not necessarily mean you put them on your payroll.  One way, and most often the safest way, is to use a third party for your employee.  These are often called Temp Agencies, Staffing Agencies, etc.  While in some instances you could hire a contractor, the rules for doing this are relatively stringent.  If you choose to go this route I suggest you contact your business attorney for advice. 

An agency employee is often times a good first step for a variety of reasons.  You may only need them part-time, the Agency may allow you to use the employee for several months and then allow you to hire them without a placement fee.  This is commonly called a Temp to perm arrangement.  The Agency is responsible for all tax withholdings, tax payments, and other legal requirements that go with having an employee such as Workers Compensation.

If you are able to hire an Independent Contractor, commonly called a 1099 employee, they are responsible for all of the taxes and you, as a business are not.

At some point, however, you may decide to actually hire an employee on your payroll.  Before you make that decision a few more things have to be considered.  Among these are: 

  • Do you really need this employee or would one of the above arrangements work better for you?
  • What exactly do you need help with?  Is this something you could pay an external resource to do or must you have this employee on your payroll?
  • Do you have the skills necessary to manage and lead people?  If not, consider getting them from your local Technical School, a leadership trainer or some other source.  Lack of skills in this area can be extremely costly.
  • Can you actually afford this employee?  Understand that it isn’t simply paying them an hourly wage.  You must pay taxes, both state and federal, for this employee.  You must have certain insurances, all of which add to the cost.  Don’t think your $15 an hour employee will only cost you $15 an hour.  In some instances, it could cost you half again as much or more.

Hiring a new employee is natural as businesses grow.  Yet hiring a new employee at the wrong time, or hiring too many employees, could be problematic for your business.  Small Business Owners seem to be in a hurry to grow, sometimes they feed growth by hiring employees.  Consideration to part-time or contractors may be solutions.  Sometimes, when analyzing the tasks that need to be done you find you don’t need the employee, but perhaps a virtual assistant or outsourcing partner is more appropriate. 

The 800-pound gorilla in the room for small businesses and hiring, of course, involves the hiring of relatives.  This may well fly in the face of a reason for establishing a “Family Owned and Operated” Business.  Family relationships can be challenging.  Imagine those challenges spilling into the workplace and disrupting the business.  You need to carefully consider the ramifications of hiring relatives.

Some of the strongest small businesses I have seen are husband and wife teams.  Often with long experience of working together, compromising and collaborating, they can be incredible business teams.  If you choose to hire family members consider the following: 

  • Does the family member accept the vision you have for the business?
  • Does the family member have the work ethic you want in the business?
  • Does the family member have the skills you need for the work to be done?
  • What will you do if the family members performance is below your standards?

 Adding employees to your business can be an exciting experience.  It is a well accepted stereotypical way of measuring business success.  By following the simple steps I have shared, you can help ensure your business has those same positive experiences.  If you need help making the decision seek a trusted advisor.  In the long run, following the process and listening to strong advice is critical to your success.