Managing people

Hiring the right team

Hiring your first employee can seem like a big commitment. But it’s a reflection that your business is growing, so it’s generally good news. Here are some tips on taking the leap – and taking on your first employee.

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How to decide if it’s the right time

If you’re having trouble making a decision about whether or not to take on staff, there are some questions you should ask yourself.

Am I missing out on opportunities?

In other words, are you missing out on potential business because you’re not employing someone? If so, how much are those missed opportunities costing you? Could hiring someone increase your productivity and therefore your earning power?

Am I overstressed?

It’s normal to work long hours when you’re getting your business off the ground, but burning the candle at both ends isn’t sustainable in the long run.

Take a look at your work-life balance and examine how you’re feeling on a day-to-day basis. Are you spending most of your days feeling harassed, overwhelmed, and stretched? Are you getting enough sleep? Do you have time to yourself, and time to spend with your loved ones?  

Am I making the best use of my time?

If you’re feeling frustrated because you’re spending too much time on other tasks and you can’t concentrate on what you’re really good at, it’s probably a good indicator that you need someone to take over those tasks.

For example, if your main strength is sales, it doesn’t pay for you to do routine administrative tasks. Why not pay someone to do the work for you and spend your time developing new business – while generating much more money in that same hour.

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Banish those doubts

When people hesitate to employ staff, it’s often down to two things: 

  • The amount of administration involved
  • The fear of hiring the wrong person.

It certainly takes work to bring an employee on board, and the paperwork can be daunting. Issues such as compliance, PAYE, payroll tasks, KiwiSaver, and the various kinds of leave and employment agreements can feel like it’s more trouble than it’s worth. 

Meanwhile, hiring the wrong person can lead to issues, such as how to handle it if the employee turns out to be unsuitable and the possibility of personal grievances. 

These are all reasonable worries. But they shouldn’t be reasons to decide not to hire staff. 

If you’ve asked yourself these questions and your answers all point to the benefits of taking someone on, put your mind at ease by getting help. Use some of the resources below.

Business colleagues

Talk to people you know who’ve hired staff and take on their advice. It’s a gift to be able to learn from others’ mistakes.

Your local Chamber of Commerce

Becoming a member means you’ve got access to a wide range of support, including recruitment services and employment guidelines.

Employers and Manufacturers Association (EMA)

The EMA provides guides and sample forms on employment relations, as well as networking support and advice.

Inland Revenue

Inland Revenue is an important resource for employers. Their website's section for employers has useful advice. It’s a good one to bookmark and keep coming back to.

Staff training and development for staff retention

Andrea Stevenson, Director of Human Resources at Baker Tilly Staples Rodway, shares her top staff retention tips, how to best onboard new staff, how to use the skill/will matrix to grow your staff and the difference between coaching and mentoring. 

Working out a break-even point

A useful next step is to work out how much extra business an employee would need to bring in to pay for themselves.

If you’re a service business

Service businesses are generally only as productive as the people who work in them. For example, if you run a house cleaning company, your annual income depends on how many houses you and your team are able to clean over a year.

To ensure you break-even, you may need to calculate a charge-out rate for your employees. For example, if you charge an employee's time at $80 an hour and pay them a salary of $50,000 a year, they’ll need to work 625 chargeable hours a year ($50,000 divided by $80) just to recover the cost of their salary – without taking overhead costs or profit margin into account.

If you think there's not enough work to generate those chargeable hours, you may want to reconsider. 

If you sell products

Calculate a break-even point for your employee using your gross profit percentage.

For example, if you intend to pay a retail assistant $54,000 a year and your gross profit percentage is 30%, then you must sell an extra $180,000 in the year just to cover the employee's salary ($54,000 divided by 30%).

Break-even point calculation

Find out more about how to calculate your break-even point.

Deciding on the right type of employee

Once you’ve made the decision to hire an employee, the next step is to determine the type of employment that best suits your business. These are the most common options.

Full-time employee

Most jobseekers will be looking for a full-time role to support themselves and their families, so you might get a wider range of people applying if the job is full time. 

And because they’re working in your business day in, day out, they’re potentially more likely to be loyal and to have a vested interest in your business’ future. 

Part-time employee

This is a good option if you know work is on the increase, but not quite enough to justify a full-time position. Part-time hours can be a great option for people with children or other responsibilities, so this arrangement is often a win-win.

Fixed term

This works well for projects, as you know what your costs will be and when they’ll stop.

There are specific requirements for fixed-term roles, so it’s a good idea to chat to an employment expert to make sure your fixed-term contract has the right wording. You can also use's Employment Agreement Builder.

Contractor or subcontractor

Contractors are also good for project work, and can be more appropriate than fixed term if you have ongoing needs that change from week to week.

Employing a contractor, rather than an employee, can be helpful to track costs, as you’ll only be paying for the hours they work. However, you need to be sure of what really defines a contractor. Inland Revenue has an ‘Am I an employer?’ guide on their website to help you check.

Changes to the Fair Trading Act could affect your contracts with independent contractors and other businesses. Watch our webinar recording on these changes.

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