18th July, 2016
If your business has grown to the point where you’re considering hiring your first employee, congratulations! It’s a sign that your business has reached a turning point in terms of growth and expansion, and it’s an exciting time.
Before jumping in, there are a number of factors to consider before actually becoming an employer. It’s important to take into consideration things such as knowing if you’re ready to hire, what the actual job will be, and what kind of person is best to fill that role.
This is the very first question you should ask yourself. Consider the following:
If the answer to most of those questions is ‘yes’, then you’re in a good position to get some help.
Don’t hesitate to hire because you’re afraid of the paperwork and compliance, or because you’re worried about employing the wrong person and not knowing how to handle the situation. These are not good reasons to deny your business the chance to grow.
What is the role that needs filling? What skills will the ideal employee need?
Think about other practicalities, too, such as how many hours a week you’ll need them, how much responsibility they’ll have and what you’ll be paying them.
With all that in mind, decide which of these most common options is best:
Permanent positions can be full time or part time, and are without a finish date.
Permanent employees tend to be more loyal and have a vested interest in the business, as they have job security.
Positions may start out part-time and develop into full-time, so if that’s a possibility in the role you have available, make sure it’s clear to potential candidates.
The recent introduction of a 90-day trial period means that if someone isn’t suitable for the role, they can be terminated at the end of three months. However trial periods are voluntary, and must be negotiated in good faith as part of the employment agreement. An employee must a sign a written employment agreement containing a valid trial period clause before the employee begins working for the employer.
Fixed-term roles work well for projects. You know what your costs will be and when they’ll stop. However, you can’t use the 90-day trial period, and it’s sometimes difficult to attract good staff to fixed-term positions.
This works really well in some industries. Essentially, casual roles are for when a business needs an extra set of hands. There are no fixed hours, but employers have to be very clear about the casual nature of the work when drawing up the employment agreement.
What are the fixed and discretionary costs? Do you have an idea of the figures for the average industry wage, ACC levy, Fringe Benefit Tax, Employee Insurance and Kiwisaver?
What about the costs of recruitment, any consultancy services, set-up and training, and tools and equipment?
Work out the initial and ongoing costs to avoid any surprises down the track.
While this needs be financially sustainable for your business, a competitive remuneration package is a key factor in competition, as all businesses want to attract good talent.
Will the existing levels of business sustain the new employee? Otherwise, what level of new business would an employee need to bring in to pay for themselves?
If you find that employing staff doesn’t suit your business needs right now, there are other ways to go about getting help.
The most common alternatives are to hire contractors, volunteers or interns. These options don’t require you to register as an employer.
Contractors work best for project-based tasks.
The contractor controls when and how the work is done, and they can hire their own staff to carry it out. This means they pay their own tax, ACC and insurance levies. Usually they’re paid when the project is complete, or if it’s a lengthy project, in instalments.
For example, if you’ve decided your office needs to be repainted, you’d get a contractor for that and they’d supply their own equipment and materials.
Often these involve tasks that contribute to the community in some way.
For example, if you’re running a community garden, it’s likely that you’ll rely on volunteers rather than paid workers. They’re not paid for the work they’re doing, and their motivations can range from wanting to gain experience to fulfilling community-service obligations.
Another way to describe this is work experience. Interns aren’t usually paid for the work they do – their motivation is to gain experience in their chosen field.
For example, an engineering firm may take on student interns during their holidays, and the experience and references can then be included in their CV.