It’s been a long time since I’ve updated startup school, so let’s come back to it with some valuable information and lessons for new business owners looking to start up their first business venture.
So let’s say you’ve set up your business, you have a separate bank account for all business transactions, you have chosen a suitable business structure and you’ve decided what your business culture/values are all about.
Business is growing, demand is on the up and up and you suddenly wake up one day with absolute existential dread thinking to yourself:
“Oh, no, there is NO WAY I can keep doing this all on my own!”
You, the overworked business owner
Ok, no need to lose your cool. Remember, you can always hire some individuals to help you with your business. There comes a time in all business’ lives that you will need to start growing your team to help you run the business.
In today’s lesson let’s look at some suggestions and strategies on how to grow your team.
Sole traders on a contract basis
Before you start drafting employment agreements, job descriptions and registering your business for PAYE – consider contracting individuals on a contract basis first.
What this means is that instead of employing them as employees (with all the legal ramifications that come along with hiring an employee) – you contract them as sole traders/self-employed individuals, clearly specifying the hours required or the work that needs to be done.
For a new business, this is the easiest way to grow your team without having to deal with all the paperwork. All you need to do is:
- Find someone to work in your business
- Issue them a fixed hours contract
- Issue them a bill every time you pay them
They will need to manage their own taxes and you don’t need to worry about giving them leave or holiday pay as they are not employees.
Now, there are some disadvantages to this method.
The first one being – if you are looking for highly skilled and very qualified people to work in your business, you are not going to find many takers if you are offering them work on a contract basis (but then again – it might differ based on the industry).
The second disadvantage is that you have no rights as an employer over the work that they do and any potential dispute you have with them may need to be settled in a consumer tribunal. If you don’t write your contract correctly, you may find yourself being swindled of your money!
This method is mostly suitable for very new businesses looking for someone to help out at less than 10 hours a week. Anything more than that, you will want to consider hiring a…
Part-time employee
Let’s say you have a decent amount of customers and orders coming through and you need someone who will work at least 20 hours a week with you on this business. Then you need to find a part-timer who will help you with your stuff.
To begin with, you will need to draft out a job description and an employment agreement. The requirements for these documents vary from country to country. If you are based in NZ, there is a really handy employment agreement builder which you can access here.
From a practical point of view, part-timers are no different to full-timers, with the exception of how leave/holiday pay is calculated. Depending on what you choose, you can allow part-time staff to accrue annual leave or you can pay them 8% of their gross pay out as holiday pay (NZ regulations).
Most businesses in NZ will go with the 8% holiday pay method as this is easier than calculating annual leave for part timers.
How many hours the part-timer will work and on what days is up to you and your new part-time team member to decide.
Also note that once you have hired an employee, you will need to agree on the frequency of pay and you will have to do PAYE tax (more on this in another article) for each employee.
Full-time employee
Business is booming and you realise that you need some full-time hands on deck to keep the business running. That’s when you get a full-time employee.
By this stage, you should have a very clear idea of what you will need the full-timer to do. As with the part-timer, you need a job description and employment agreement to hire a full-time employee.
The main difference between hiring a full-timer and a part-timer is the amount of hours they work (obviously) and that full-time staff usually accrue leave as they work. If you are based in NZ, the legal requirement is that each full-time employee MUST have at least 4 weeks of leave for every 12 months worked for the business. That being said, full-time employees can also opt to be paid 8% holiday pay instead of accruing 4 weeks of annual leave – but this is rare.
As with part-timers, you need to sort out their PAYE as well.
But what about casual employees?
If your business is seasonal, casual employees may be suitable for your business. Casual employees are only paid for the hours that they work.
Bear in mind that hiring casual employees also means you need to draw up a job description and an employment agreement – however casual employees aren’t subject to the same legislation that part-timers and full-timers are.
For example, in NZ: Casual employees cannot accrue leave, cannot be paid a fixed salary and can decline to work if they choose to do so (but they don’t get paid for it, obviously).
In a lot of ways, they are no different to having a sole trader on a contract basis, with the main exception being that you, as the business owner will have to manage their PAYE. Haha.
Unless you have a working payroll system that handles your PAYE for you, sometimes it might be a better idea to contract someone instead of taking them on as a casual employee.
In conclusion, as a business owner, you can use this article as a starting point for figuring out whether or not you need to hire some team members. If you are NZ-based, I highly recommend checking out the government’s employment website for more information.