For any small business, the need to hire an employee is a good sign that your business is moving in the right direction. However, there are various factors to consider in order to avoid unanticipated problems, and many business owners struggle to understand the real cost of bringing an employee on board.
Here are the three main points to consider if you are looking to employ for the first time:
1 – The recruitment process itself can be tricky, and many businesses hire a recruitment agency to find the ideal candidate. Of course this will not be free, a factor which should be considered beforehand.
2 – Calculating a salary can cause other pitfalls. The salary needs to ensure that a fair wage is met whilst ensuring that the ongoing business costs can still be covered. Many small business will often employ part time staff or offer a fixed term contract to assess the need and what works with the business cash flow. You need to be sure that you can afford to pay your employee every pay day.
3 – On top of the salary cost is the additional cost of National Insurance which can lead to serious penalties if not paid to HMRC. At this point it may be prudent to use the services of an accountant or bookkeeper to ensure the legal requirements are met.
In conclusion, if you feel your business is ready to expand and take on an employee, make sure you have thought of everything, even the timing. Choosing the right time to recruit is imperative – too early, and you might experience cash flow problems, too late, and you may be unable to meet demand and fulfill your businesses potential.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.