Does the thought of hiring a new employee make your relieved to have some extra help, or worried that you simply can’t handle the expense? Chances are, you’re feeling a bit of both.
If you’re considering hiring a new employee but aren’t sure if your business can swing it, read on for our tips.
Signs you need to hire a new employee
If you’re considering hiring a new employee, it may be because you’re already feeling the strain of being understaffed in your day-to-day operations. Raise your hand if any of the following sound familiar:
You’re turning away business because you don’t have capacity
You have an opportunity for a new revenue stream, but no one to manage it
Your business would benefit from an employee with a specific expertise or certification
You’re unable to manage your workload alone
Your personal life is suffering at the expense of your business
If one or more of these scenarios is occurring at your business, your next step is to determine whether you can afford to onboard a new team member.
Costs associated with hiring a new employee
Wages are the primary ongoing cost associated with hiring a new employee, but they aren’t the only thing you’ll be responsible for paying. In addition to a regular paycheck, you’ll also need to pay:
Payroll tax: Employers are responsible for paying certain taxes on behalf of their employees, including Medicare, Social Security and state taxes. You should keep this in mind when considering how much you’re able to pay an employee and what his or her take home pay will be.
Unemployment tax: As an employer in your state, you may be required to pay into the state’s unemployment fund benefitting workers who have lost their jobs. Contact your state’s Department of Labor to learn more.
Workers’ compensation insurance: Workers’ comp protects you and your employee if the employee is injured on the job. Consult the Department of Labor or a financial advisor to determine whether your business is required to carry this insurance.
Benefits: To attract top talent, you’ll need to offer a competitive benefits package to your employee(s). This could include health insurance (medical, vision and/or dental) and a 401(k) retirement plan.
Payroll is a complex operation, and if this is your first employee you may also want to budget for payroll software and/or a bookkeeper to help you manage.
Preparing financially for a new employee
Now that you’re familiar with the costs, examine your current financial picture to see how a new employee could fit.
Set a budget: How much can you afford to pay a new employee? Remember that wages aren’t the only cost; a good rule of thumb is to budget an extra 30 percent in addition to what you plan to pay the employee in wages.
Forecast your revenue: Create financial models demonstrating your revenue with and without the new employee. How might the new employee bring in new revenue?
Trim what you can: If you’re currently outsourcing the future employee’s duties or paying for software or services the employee could handle, remove those from your future budget to free up more money.
Still can’t afford a new employee?
Consider outsourcing. Outsourcing allows you to retain professional expertise without the costly overhead. If you’re looking for positions in fields like marketing or finance, this is a great solution.
The financial experts at Patin and Associates can help you determine whether your business is ready to grow team – just as we’re happy to be part of that team. Contact us today to learn more.