Is it Time to Hire More Employees?

Factors to consider before hiring more employees.

If your business is expanding or you’re finding it difficult to provide the level of service your customers need (or enough of your product), then hiring more staff may be an option worth exploring. But there are some important things to consider when making this decision.

Key consideration 1: The state of the economy

It’s important to consider the state of the economy and how it may affect your business. At the moment, both the inflation and interest rates in New Zealand are rising (like they are in many countries around the world), and this may result in an economic downturn.

If your business is likely to be affected by an economic downturn (for example, reduced sales), then you may not want to hire more staff until the economy improves.

Key consideration 2: Can your business afford to hire more staff?

Hiring more staff will obviously increase your business costs, so it’s crucial that your business will have the cash flow to support higher wage and salary costs. Hiring staff with skills, experience and qualifications will also be more expensive than those without. It’s also important to understand that there are hidden costs (beyond just wages or salaries) of hiring more staff, such as:

  • Paying 3% of each additional employee’s gross salary or wages to KiwiSaver for superannuation (compulsory employer contributions).
  • Training costs (which will be higher if you hire people without the necessary knowledge, skills and experience that you require).
  • Recruitment costs money as well as your precious time — which you may not have much to spare!

Ideally, hiring more staff will increase your revenue and profit, but if it won’t, you need to be sure that it is really necessary (see key consideration 3), and that you can afford to do so.

Key consideration 3: Can your business afford to not hire more staff?

If hiring more staff won’t increase your profit, it can still be a worthwhile decision in some circumstances. For example, it may be worthwhile to hire staff if failing to do so has the following negative impacts:

  • Reduce the quality of the service you provide (which may see you lose sales to your competitors as a result).
  • Results in your existing staff being overworked (leading to potential burnout, poor performance or their resignation).
  • Reduce your potential sales due to you not being able to produce enough products or serve enough customers (and you will lose sales to your competitors).

Key consideration 4: The performance of your current staff

Before you decide to hire more staff, you should analyse the performance of your current staff. Ask yourselves these questions:

  • Could they be improved with additional training?
  • Could they be improved by implementing more efficient processes?
  • Could they be improved by investing in better equipment or technology?

If the answer to any of these questions is ‘yes’, then it may be more worthwhile for you to invest more into these areas of your business rather than hiring additional staff.

Key consideration 5: Is your business growing?

If your business is growing, then sooner or later, you will need more staff. It becomes a question of timing. If you hire too early, you may not be able to get full value from hiring more staff. On the flip side, if you hire too late, you run the risk of losing sales to your competitors or failing to provide the level of service you’d like.

The decision to hire more staff shouldn’t be made lightly. Make sure you take all of these key considerations into account to help you make the right decision.

Hiring staff can be an investment. If you’re looking for capital or cash flow support, take a look at Business Finance options.

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