Is your business healthy enough to hire a new employee?

Grow Your Business Mar 08, 2016

Before you hire a new employee, consider how this will impact the health of your business and calculate all the associated costs.

Can you afford to hire a new employee? Can you afford not to? For small business owners, the decision to hire is complex. Determine how this will impact the health of your business, remain objective, and consider all your alternatives.

Side effects of understaffing

The most likely reasons to hire a new employee are because you personally 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 result of not hiring could include:

  • Limiting your growth
  • Damaging morale of employees who are already overworked
  • Letting customer service slide
  • Seeing quality suffer because current staff must work faster or take shortcuts

In addition you may 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.

Before you set the hiring process in motion, think strategically about what you want this new hire to accomplish.

Consider different remedies

Before you set the hiring process in motion, think strategically about what 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? 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 the long-term vision for your company. How many employees can you comfortably manage?

Determine the health of your bottom line

The costs related to hiring a new employee start adding up before you sign the first paycheck. Estimate these as accurately as possible:

Recruitment Whether you post a free online ad or use a recruiter, the process of creating a job description, posting ads, reading resumes, and interviewing takes 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.

Taxes Figure the cost 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. In addition, add vacation time and sick leave, employee savings or retirement plans, 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, and work-related vehicles. Worker compensation insurance varies depending on the industry and type of job.

Training Even the most qualified new hire will need time to adapt to your processes and culture. Chances are some specialized training will be required, too. The time it takes for a new hire to get up to speed can range from a few days to weeks or months.

ROI How long will it take for your new hire to make a difference in your bottom line? This is more easily measured in a sales position, but for any new hire, consider the impact he or she will make in the next month, six-months, and twelve months.

Once you’ve done the math, you’ll have a realistic view of what a new hire will contribute to the health of your company.

Kelly Burkart is a freelance writer from Minneapolis, Minn. While she has spent most of her time writing about financial services the past 15 years, she has also explored and written about everything from cardiovascular health to travel, higher education and sustainable energy practices.


Article by KELLY BURKART, Content Strategist/writer