You can't make a decision about adding employees without knowing what it's going to cost to hire them. Salaries and benefits are the obvious costs of having additional employees, and they're the most important ones. But they're hardly the only ones. It also takes money to hire employees, just as it does to compensate them for their work. In addition to the ongoing costs, you'll have to budget for some or all of the following one-time hiring costs:
- Paid newspaper classified advertising to attract job applicants
- Your own time or staff time to screen, sort and file incoming resumes and applications
- Time or money (if you use an outside service) to conduct background checks on potential employees
- More of your time and money to conduct interviews
- Money to pay travel expenses for candidates who are located in other towns or states
- Training for new employees to get them up to speed
- Lost productivity resulting from new employees who don't work out
- Fees for executive search consultants or recruiters
You probably won't have to pay all these costs for every employee. But if you hire a significant number of new workers, you're likely to face all of them sooner or later. Budgeting for them now can help you make a realistic assessment of the costs of growth.
It's important to note that the traditional full-time employee isn't your only hiring option. In fact, more and more companies are turning to alternative arrangements, including hiring temporary employees, part-timers, interns and leased employees. All these strategies can save you money, and some can save you headaches, too.
Employee leasing lets you add workers without adding administrative complexity. Employee leasing firms manage compliance with state and federal regulations, payroll, unemployment insurance, W-2 forms claims processing and other paperwork. Some also offer pension and employee assistance programs.
By combining the employees of several companies into one large pool, employee leasing companies (also known as professional employer organizations, or PEOs) can also offer business owners better rates on health-care and workers' compensation coverage. The net effect can be significant savings of your time and money.
While many business owners confuse employee leasing companies with temporary help businesses, the two organizations are really quite different, explains a spokesperson at the American Staffing Association (ASA). "Generally speaking, temporary help companies recruit employees and assign them to client businesses to help with short-term work overload or special projects on an as-needed basis," according to the ASA. On the other hand, with leasing companies, "a client business generally turns over all its personnel functions to an outside company, which administers these operations and leases the employees back to the client."
Employee leasing is a contractual arrangement in which the leasing company is the official employer. Employment responsibilities are typically shared between the leasing company and the business owner. You retain essential management control over the work performed by the employees. The leasing company, meanwhile, assumes responsibility for such tasks as reporting wages and employment taxes. Your main responsibility is to write a check to the leasing company to cover the payroll, taxes, benefits and administrative fees. The PEO does the rest.
If your business's staffing needs are seasonal--for example, you need extra workers during the holidays or during busy production periods--then temporary employees could provide the flexibility you need to grow. Temporary employees, as the name indicates, are hired only for limited periods of time. So they are only there when you need them for specific growth spurts.
Temps also have other advantages. Because most temporary help companies screen--and often train--their employees, entrepreneurs who choose this option stand a better chance of obtaining the quality employees they need.
In addition to offering pre-screened, pre-trained individuals, temporary help companies can help contain your overhead and save time and money on recruiting efforts. The cost of health or unemployment benefits, workers' compensation insurance, profit-sharing, vacation time and other benefits doesn't come out of your budget, since many temporary help companies provide these resources to their employees.
A growing number of entrepreneurs use temporary workers part time at first to get a feel for whether they should hire them full time. As a result, many temporary help companies have begun offering an option, temporary-to-full-time programs, which allow the prospective employer and employee to evaluate each other. Temporary-to-full-time programs match a temporary worker who has expressed an interest in full-time work with an employer that has like interests. The client is encouraged to make a job offer to the employee within a predetermined time period if the match seems like a good one.
Another way to grow flexibly and inexpensively is by hiring part-time workers. You save money right off the bat with part-timers because you're not legally required to provide part-timers with medical benefits--although, of course, you may.
What are the other benefits to you? By using permanent part-timers, you can get more commitment than you'd get from a temp but more flexibility than you can expect from a nine-to-fiver. In some industries, such as fast food, retail and other businesses that are open long hours, part-timers are essential for filling the odd hours during which workers are needed.
Students provide one traditional source of part-time employees. These workers are typically flexible, willing to work odd hours and don't require high wages. High school and college kids like employers who let them fit their work schedules around the changing demands of school.
Although students are ideal for many situations, there are some potential drawbacks. A student's academic or social demands may come first, crimping your scheduling style. You'll need to be firm and set some standards for what is and is not acceptable.
Students aren't the only part-timers around, however. Retirees are another, often overlooked source of part-time employees. Often, seniors are looking for a way to earn some extra money or fill their days. Many of these people have years of valuable business experience that could be a boon to your company. Seniors typically have excellent work ethics and can add a note of stability to your organization. And keep in mind that if a lot of your customers are seniors, they may prefer dealing with employees their own age.
Parents of young children may also represent a qualified pool of potential part-time workers. Many stay-at-home moms and dads would welcome the chance to get out of the house for a few hours a day. Often, these workers are highly skilled and experienced.
Finally, one employee pool many employers swear by are people with disabilities. Workers from a local shelter or nonprofit organization can excel at assembling products or packaging goods. In most cases, the nonprofit organization will work with you to oversee and provide a job coach for the employees. To find disabled workers in your area, contact the local Association of Retarded Citizens office or the Easter Seals Society.