Handling the Costs of Hiring a New Employee
Some days it would be a huge relief to have an extra set of hands to tackle the workload, and there are few things in business more crucial to get right than hiring. Among other considerations, a new team member requires thoughtful review of the costs and benefits.
Before you hire a new employee, consider the following factors:
Is it time to add a new employee?
If you’ve just started expanding your business, you need to think critically about whether a new employee will bring you money or hurt your limited resources. Before posting a job, consider whether any of these situations apply to you:
You’re turning away new clients because you don’t have the capacity
You’re unable to explore new products or services
Your team lacks critical expertise
You’re unable to manage your workload, and your personal life is suffering
If any of these sounds like your situation, it may be time to hire a new employee.
The real cost of hiring
Salary isn’t the only cost associated with adding a new employee. If this is the first employee you’ll be hiring, you’ll discover there are many legal requirements you need to meet that can be costly.
Below are some of the non-salary costs related to hiring an employee:
Payroll tax: You will need to make tax payments to the IRS on behalf of your employee. This includes federal and state taxes, Social Security and Medicare. This can be tricky to navigate, and you may need help from a tax professional to establish new employees.
Unemployment tax: You’ll need to work with your state’s labor department to register to pay unemployment tax. If your employee works in another state than where your business is located, you’ll need to pay taxes in that state.
Worker’s compensation insurance: Worker’s comp protects employees who are injured on the job. Check with your state’s labor laws to determine whether your business is required to purchase worker’s comp insurance.
Benefits: Finding the best employee often means competitive perks beyond a high salary. Offering healthcare and a 401(k) retirement fund will make you a more attractive employer. If you plan to offer these benefits, budget for at least an additional 30 percent of the employee’s salary.
Recruitment: Finding the right candidate is not always as easy as posting a job on your website and hoping someone finds it. Budget for posting on paid job sites and marketing materials.
Time: Hiring and onboarding a new employee takes time. While the goal of hiring a new employee is to ultimately to save you time, consider what else is going on when you plan to hire and whether new employee training is the best use of your time.
Hiring, outsourcing and contracting
If after looking at your company’s needs and your budget you’re still not sure if you should hire a new employee, consider outsourcing or hiring contractors. If you have a short-term project, like a website refresh, hire a professional to work with you on a contract basis. If you have work that is ongoing, but perhaps not a full-time gig, look to outsourcing. If you spend all day looking at spreadsheets and not managing the business, you may want to outsource your company’s finances to a bookkeeper.
To learn more about hiring and managing employees, contact one of our HR specialists at Patin & Associates today.