You might think that all you need to spend on a new hire is ‘cost to company’, aka CTC. Think again. Have you ever stopped to consider what else you’re paying for, beyond your employee-to-be’s salary package? Here are five things to consider before signing someone on:
Let’s begin at the beginning: just finding the right person for the job can cost you. It takes time to do the admin of advertising for the position, sifting through hundreds (or thousands!) of CVs, and conducting interviews. We know that time is money, so it’s not surprising that many business owners would prefer to pay an agency to do all of that for them – and that doesn’t come cheap.
• Our pro tip: Bypass an agency and use word-of-mouth or the power of networking – it’ll save you time and money, and you’ll get much better candidates.
Most businesses need a proper space to perform their job, whether it be an office, studio, or workshop. But this costs money. The more employees you have, the bigger the space you need, and the bigger the space, the higher the rent or bond. If you’re working from home, this may not be an issue for you… yet. But the more your business grows, the more space you’ll likely need.
• Our pro tip: Many small business owners think that having an office of their own makes their enterprise seem more legit. This is only partially true, and it can be a massive waste of money. If you’re still finding your feet, consider a shared co-working space – it’s a lot cheaper, and it’ll open up opportunities for collaboration.
South African employees are entitled to 15 working days of annual leave and three days family responsibility leave per year. Don’t forget about the 12 public holidays and additional 30-day sick leave in a three-year cycle. That’s a whole lot of money that employees are entitled to, even when they’re not at work, and it’s something that definitely needs to be factored in.
• Our pro tip: If you’ve just started an SMME, think about whether or not you actually need full-time employees just yet. Can you do the bulk of the work yourself, or make a few hires who work less than 24 hours per month (then public holiday and annual leave pay don’t need to be factored in). Even better, make hires that are virtual, like (ahem!) a digital accountant.
Small costs build over time, but tea and coffee is a non-negotiable. Even though these costs aren’t that significant, they’re recurring and frequent. In addition to cleaning consumables and stationery, these general office supplies often get overlooked when working out the cost of an employee.
• Our pro tip: Read our top three tips to manage your business budget (spoiler alert: tip number-one talks about doing a consumables audit!)
5. Equipment and resources
As a business owner, you need to provide the resources and equipment for your employees so that they can do their jobs. Items that need to be replaced or upgraded periodically, like computers, laptops, and specialised software, could result in a high cost per employee per year. And don’t forget about insurance on valuable equipment.
• Our pro tip: Unless you’re in the design industry, your office probably doesn’t need to be kitted out with the latest iMacs; a VOIP system can be a lot cheaper than fixed phone lines; and look into paperless set-up.
Employees are an investment and we’re all about job creation, but being informed about all the potential costs that come with a new hire is essential, otherwise you could get a few nasty surprises…
Don’t like surprises? Contact Outsourced Finance to find out exactly how much your employee(s) are costing, or will cost, your business.