What is the true cost of a new employee?
When looking at taking on a new employee or team member, some business owners cannot look past the annual salary figure and think “I can’t afford that!”
But in reality a team member or employee should end up saving you money.
You just have to look at it a different way …
For example, if you are outsourcing some of your work then this is giving you back valuable time which you can spend to grow the business. The onus is therefore on you to make sure the outsourcing is cost effective. Give yourself either three or six months to monitor your process.
When giving over the tasks calculate how many hours extra this will give you back a month and at what cost. Now, from knowing your average client value, you can work out how many extra clients per month you need to cover the cost of the outsourcing.
Spend some, if not all, the time you have got back on your marketing and have a goal of how many new clients you need over that three or six month period.
Don’t forget to keep track of the new clients so you can see if you are on target.
Knowing the extra time you have got back has covered the cost of outsourcing will make you feel a lot more comfortable with the agreement.
If you have taken on an apprentice, then you should look at this as an investment. You sign up for an apprentice for a year and in that time they agree to learn the business and you agree to assist them to do that.
Obviously in the first few months of their training they will probably be slow and may need some hand holding but we have found that in the three to six month section of the apprenticeship we have known whether the apprentice was cut out for accountancy work or not and I’m sure this will be the same in most industries.
By six months they should be earning you money and not costing you. The great apprentices we have had, have been such as asset for us by this point that we have rewarded them by increasing their salaries to a proper salary.
The ones that aren’t then you have the option to not continue their employment once the apprentice has finished. We haven’t had many that haven’t worked out but the ones we have usually left of their own accord by then anyway.
Part time of Full time staff
If you have hired someone as an employee then you should only look at this as a three month investment. Don’t think “Can I afford £20,000 salary?” think “Can I afford £5,000 to grow the business?”
When taking on a new employee that is knowledgeable about your industry they should really only have to learn the culture of the business and the way that the business does things. Having a great induction and a procedure manual will ensure that the new employee will be able to hit the ground running.
Therefore, you will know by month two if they are suitable for your company and if they are a hard worker or not, therefore, even if you have to give a months notice that longest you need to employ a bad apple should be three months.
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