Hiring and managing employees for a small business

By Rosana Beechum

In the early days of a small business, it is common for entrepreneurs to do as much as they can on their own. Bootstrapping a venture is sensible. Why spend money when you can make use of existing resources, i.e. your own time and talents? However, no man (or woman) is an island, and there will come a point when you need to hire fresh talent to fill a skills gap or shoulder some of the burdens of running the business.

Make no mistake, employees are a big investment, both in terms of money and time. Many small businesses may make do with freelancers in the early days, but while there is a good case for sticking with freelancers or contract workers to fill temporary skills gaps, such workers are not invested in the success of the business in the same way an employee is. Hopefully you will find someone who shares your vision, whether that’s helping arrange your floral displays for a wedding you have booked or helping create a tasting menu for your new restaurant. But before you place a job ad on an online recruitment website, make sure you can commit to an employee’s salary and benefits

Factor in employee costs

Check what the going rate for a position is in your geographic area before you start looking for someone to work for you. If you pitch a salary too low, you won’t attract anyone worth employing. If you pitch it too high, you will be inundated with applicants.

Calculate how much the employee will cost you in real terms. As well as their base salary, factor in recruitment costs, the cost of providing physical space for that person, training, employment taxes, and employee benefits such as health coverage and life insurance. An MIT study found that costs are typically 1.25-1.4 times the base salary, but you may need to adjust this to take into account extra costs, such as the provision of a company vehicle, for example.

Once you are certain your business can shoulder the financial burden of an employee, the next step is to begin the recruitment process.

Write a staffing plan

Do you actually need an employee, or could the role be done by a freelancer? If this is a temporary problem, for example, you need someone to update your website, it makes more sense to hire a freelancer or contractor. That way, you don’t have to cover their costs apart from a wage. There are many areas where hiring freelancers makes more sense. These include accounting, IT, SEO, and PR.

If you are sure you need an employee to join your small business, think carefully about what roles you are trying to fill. Do you need an admin person, a salesperson, or an IT person? Don’t run before you can walk. If you don’t have a product to sell yet, hang fire on recruiting salespeople – unless you want to pay them to sit around doing nothing. A marketing whizz, on the other hand, could be useful.

Write a staffing plan for the next 3-5 years. Think ahead. Who will you need going forward? If you have plans to expand, extend your product/service range, etc., work out who you are going to need and whether the role could be filled by a freelancer or an employee.

Recruiting staff

Paying a recruitment agent to find you suitable candidates comes at a cost. New small businesses are better off networking instead. Put feelers out and see if anyone you know has contacts looking for a challenge. Referrals are always better than random hires because they come with a bit of back history and personal information. The people you know will have screened this person first, so in theory, it should eliminate some of the least suitable candidates. In addition, people rarely recommend a job to a friend or acquaintance unless they think it suits them, so the person is less likely to decide a month in that the job doesn’t suit them.

If networking doesn’t produce any success, advertise your vacancies on LinkedIn and online job boards.

What is workforce management?

Managing employees is a full-time job in itself. You can’t hire someone and then leave them to get on with it. You need to have systems in place, so their needs are taken care of. Larger businesses have a Human Resources department to manage the workforce, but that isn’t necessary for a small business. You want to prepare yourself for your growth to help you succeed.

Workforce management is one of the more difficult parts of running a business. You can find information on workforce management from this blog post that goes into the subject in more detail, but the gist of it is that you need to have basic logistics in place before you begin the recruitment process.

These include business processes to pay wages, schedule shifts, keep employee costs in check, and track your team’s performance. There is plenty of software available to automate all aspects of workforce management, which frees you up to grow the business. Examples include QuickBooks Payroll, SentricWorkforce, and Deputy. Try a few out and see whether they are a good fit for your business.

Employees are your biggest asset, but only if you manage them correctly. Bear this in mind before you start hiring!


Rosana Beechum is a business and marketing undergraduate from Nottingham Trent University from the UK, who is attempting to share my knowledge through my written articles for small business owners.

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