How do I know when to hire?
Opinions expressed by Entrepreneur contributors are their own.
We are a software licensing company that is growing quickly. We need an easy way to determine when it's time to hire. Is there a formula showing how much it costs to hire someone new.Many companies simply hire when there is more work to do than the current staff can get done. You are wise to think that there is more to it than that. Your chief financial officer should work with your line management to develop the company’s staffing plan along with the budget
for staffing based on your revenue, productivity, and profit goals.
Timing for hiring is normally based on what the company needs and can afford to do versus what the company wants but may not be able to afford to do.
What is the expected ROI for each type of employee you bring on board? Some employees are overhead, but necessary to maintain momentum, while others help to expand revenue growth.
Good planning is the key to success. You can begin by looking at how you are organized now and what your organization will need to look like to achieve your business, revenue, and market share growth goals. Then you can put together a plan for adding to head count.
Adding full-time, regular employees includes many of the following costs, although not all will apply to you: recruiting fees, wages, workers' compensation contributions, Social Security tax, unemployment tax, training, office/worksite space and associated overhead, equipment (telephones, computers, copiers, fax machines, kitchen/break facilities), supplies (paper, pens, markers, folders, files, etc.), insurance coverage (health, dental, vision, life insurance, etc.), short-/long-term disability, retirement plan contributions, profit sharing, bonus/incentives, paid time off (vacation, sick, holiday, personal leave).
So when you are budgeting to add to head count, be sure to consider all of the costs associated with hiring. Many companies are looking at more virtual employees in the mix to keep overhead down and/or outsourcing some of the work to contractors for shorter-term contributions or to help the company keep up with demand during crunch periods. Perhaps one of options might be worthwhile for you.