Many small businesses started off with one person leaving their day job for any of a number of reasons - redundancy, desire for autonomy, a lack of satisfactory opportunities on job sites or a suitable franchise opportunity. That person probably needs to be a jack of all trades and master of most. Most startups that have made it through the first year or two are probably still going to be growing. The business owner then needs to decide whether to limit further growth and continue without employees perhaps for lifestyle reasons - a legitimate choice - or increase turnover by employing someone. That requires a whole new set of skills.
When contemplating taking on the business's first employee to increase capacity, what the business owner is effectively doing is taking the existing workload at that time, and dividing it between two workers. Training will slow everything down for a while, the wage bill will approximately double, and for this to be sustainable, the turnover will need to continue increasing for a while. That requires sales effort that is impacted by bringing the employee up to speed. It is often a stressful and expensive undertaking at least in the short term.
Some practical things to consider when hiring:
- Is it possible to employ someone part time, with a view to offering increased hours later?
- Does a prospective employee have annual leave available at their current job for a paid trial of 5-10 days? In addition to allowing that time to assess the employee's suitability without the pressure to make a permanent offer (as the employee would still have their old job if it doesn't work out), the employee would be able to assess whether they could handle working in such a small business and prefer it over their current position.
- Can the business owner guarantee the amount of work they say is available? Cutting back hours, even if the Employment Agreement allows it, is problematic in a lot of ways.
- When the employee reaches full productivity, are the overall working conditions and the hourly rate competitive?
The main risks would be:
- underperformance through lack of management skills
- unproductive hours while turnover catches up (or falls for any reason)
- backlog of work increasing while training is in progress
- resignation causing loss of training invested in the employee.
Short courses and seminars on employment are well worth the investment for inexperienced employers and could help to avoid pitfalls that impact profitability and growth.
(T Price, 14 Sept 2019)