If the workload at your small business is too much to handle or if you need employees with skills in a special area, now might be the time to hire new people. Since hiring employees is a big financial commitment, it’s crucial to make sure your business has the funds to do it, so keep these financial considerations in mind before you make any new hires.
The Costs of Hiring an Employee for a New Small Business
The largest cost to consider when hiring an employee is the person’s salary. Whether the work is part-time or full-time, you must pay the employee at least the minimum wage for your area. If you want employees with specific skills, look up the average salary for the position you plan to fill so you know what to expect. Don’t forget to include the costs of new equipment, such as desks and computers, or the long-term costs of office space and utilities.
Other hiring costs include matching your employee’s required contribution to the Canada Pension Plan and paying for their employment insurance. You’re also legally required to pay each employee for national holidays and vacation time.
Payroll is a time-consuming process. When you add an employee, that means more work for your payroll department. Make sure you factor in the cost of either spending time handling payroll yourself or having an employee do it.
The Importance of Managing Your Cash Flow
Once you’ve added all the hiring costs for a new employee, you should have a clear idea of whether the new hire is affordable for your business. Keep in mind another key consideration: managing your cash flow to ensure you have enough money to cover all your business expenses.
Cash flow problems are a common concern for small businesses. While you might have enough money in your accounts receivables to cover a new employee’s salary, you could end up short on cash depending on the payment schedules you have with clients.
Hiring a new employee is about growing your business. Growth is good in the long run, but it often means leaving your business short on cash while you wait for the larger profits to come in. While you train your new employee, make sure you set aside enough money every month to deal with unforeseen difficulties.
Small Business Hiring Grants
Depending on the financial state of your business, you may be eligible for government assistance in the form of non-repayable hiring grants, which are designed to create more jobs. Your business could qualify for $20,000 or more in grant money. For example, the Online Exporter’s Fund Hiring Program can assist in hiring an export manager, while Human Resources and Skill Development Canada offers financial support when hiring graduates as interns. Each program allows applicants to submit their information online.
Since employees are expensive, make sure you calculate the costs of hiring and try to score grant money before deciding whether a new hire is the right call for you.