You can’t make a decision about adding employees without knowingwhat it’s going to cost to hire them. Salaries and benefits are theobvious costs of having additional employees, and they’re the mostimportant ones. But they’re hardly the only ones. It also takesmoney to hire employees, just as it does to compensate them fortheir work. In addition to the ongoing costs, you’ll have to budgetfor some or all of the following one-time hiring costs:
- Paid newspaper classified advertising to attract jobapplicants
- Your own time or staff time to screen, sort and file incomingresumes and applications
- Time or money (if you use an outside service) to conductbackground checks on potential employees
- More of your time and money to conduct interviews
- Money to pay travel expenses for candidates who are located inother towns or states
- Training for new employees to get them up to speed
- Lost productivity resulting from new employees who don’t workout
- Fees for executive search consultants or recruiters
You probably won’t have to pay all these costs for everyemployee. But if you hire a significant number of new workers,you’re likely to face all of them sooner or later. Budgeting forthem now can help you make a realistic assessment of the costs ofgrowth.
It’s important to note that the traditional full-time employeeisn’t your only hiring option. In fact, more and more companies areturning to alternative arrangements, including hiring temporaryemployees, part-timers, interns and leased employees. All thesestrategies can save you money, and some can save you headaches,too.
Employee leasing lets you add workers without addingadministrative complexity. Employee leasing firms manage compliancewith state and federal regulations, payroll, unemploymentinsurance, W-2 forms claims processing and other paperwork. Somealso offer pension and employee assistance programs.
By combining the employees of several companies into one largepool, employee leasing companies (also known as professionalemployer organizations, or PEOs) can also offer business ownersbetter rates on health-care and workers’ compensation coverage. Thenet effect can be significant savings of your time and money.
While many business owners confuse employee leasing companieswith temporary help businesses, the two organizations are reallyquite different, explains a spokesperson at the American StaffingAssociation (ASA). “Generally speaking, temporary help companiesrecruit employees and assign them to client businesses to help withshort-term work overload or special projects on an as-neededbasis,” according to the ASA. On the other hand, with leasingcompanies, “a client business generally turns over all itspersonnel functions to an outside company, which administers theseoperations and leases the employees back to the client.”
Employee leasing is a contractual arrangement in which theleasing company is the official employer. Employmentresponsibilities are typically shared between the leasing companyand the business owner. You retain essential management controlover the work performed by the employees. The leasing company,meanwhile, assumes responsibility for such tasks as reporting wagesand employment taxes. Your main responsibility is to write a checkto the leasing company to cover the payroll, taxes, benefits andadministrative fees. The PEO does the rest.
If your business’s staffing needs are seasonal–for example, youneed extra workers during the holidays or during busy productionperiods–then temporary employees could provide the flexibility youneed to grow. Temporary employees, as the name indicates, are hiredonly for limited periods of time. So they are only there when youneed them for specific growth spurts.
Temps also have other advantages. Because most temporary helpcompanies screen–and often train–their employees, entrepreneurswho choose this option stand a better chance of obtaining thequality employees they need.
In addition to offering pre-screened, pre-trained individuals,temporary help companies can help contain your overhead and savetime and money on recruiting efforts. The cost of health orunemployment benefits, workers’ compensation insurance,profit-sharing, vacation time and other benefits doesn’t come outof your budget, since many temporary help companies provide theseresources to their employees.
A growing number of entrepreneurs use temporary workers parttime at first to get a feel for whether they should hire them fulltime. As a result, many temporary help companies have begunoffering an option, temporary-to-full-time programs, which allowthe prospective employer and employee to evaluate each other.Temporary-to-full-time programs match a temporary worker who hasexpressed an interest in full-time work with an employer that haslike interests. The client is encouraged to make a job offer to theemployee within a predetermined time period if the match seems likea good one.
Another way to grow flexibly and inexpensively is by hiringpart-time workers. You save money right off the bat withpart-timers because you’re not legally required to providepart-timers with medical benefits–although, of course, youmay.
What are the other benefits to you? By using permanentpart-timers, you can get more commitment than you’d get from a tempbut more flexibility than you can expect from a nine-to-fiver. Insome industries, such as fast food, retail and other businessesthat are open long hours, part-timers are essential for filling theodd hours during which workers are needed.
Students provide one traditional source of part-time employees.These workers are typically flexible, willing to work odd hours anddon’t require high wages. High school and college kids likeemployers who let them fit their work schedules around the changingdemands of school.
Although students are ideal for many situations, there are somepotential drawbacks. A student’s academic or social demands maycome first, crimping your scheduling style. You’ll need to be firmand set some standards for what is and is not acceptable.
Students aren’t the only part-timers around, however. Retireesare another, often overlooked source of part-time employees. Often,seniors are looking for a way to earn some extra money or filltheir days. Many of these people have years of valuable businessexperience that could be a boon to your company. Seniors typicallyhave excellent work ethics and can add a note of stability to yourorganization. And keep in mind that if a lot of your customers areseniors, they may prefer dealing with employees their own age.
Parents of young children may also represent a qualified pool ofpotential part-time workers. Many stay-at-home moms and dads wouldwelcome the chance to get out of the house for a few hours a day.Often, these workers are highly skilled and experienced.
Finally, one employee pool many employers swear by are peoplewith disabilities. Workers from a local shelter or nonprofitorganization can excel at assembling products or packaging goods.In most cases, the nonprofit organization will work with you tooversee and provide a job coach for the employees. To find disabledworkers in your area, contact the local Association of RetardedCitizens office or the Easter Seals Society.
