Is your Business Ready to Take on Employees?


If we cast a casual eye over the hugely popular BBC Two program, Dragons’ Den, you could be forgiven for thinking that launching a business start-up has never been easier. Even allowing for the fact that an estimated 50% of all proposed deals from series’ one to 11 did not complete once filming had finished, an impressive total of £5.8 million has still been invested through the show since its inception in 2005.

See also: 5 Things Worth Investing in to Improve Your Online Business

With funding more readily available and high-end technology increasingly accessible, there is clearly an opportunity for ambitious entrepreneurs to monetise their business ideas. There remain other challenges that lie ahead for those who wish to sustain their success and build a progressive brand, however, with the task of expanding a venture that has outgrown its existing resources providing a prominent example.

Growing your Business Venture: Are you Ready to Employ Staff Members?

If you have started out as a sole-trader, you may well reach a point where you are working at full capacity while maximising your financial and corporeal resources. At this point, it is only natural to consider restructuring your business as a limited company, so that you can take on employees and increase your workload. This represents a significant step, however, as it will scale your venture drastically and increase its cost base at a considerable rate. So before you take the plunge and decide to take on employees, you will need to determine whether this is right for your business.

Consider the Cost vs. Profit Equation

The first and most important consideration to undertake is whether or not you can afford to hire members of staff. This is a deceptively complex decision to make, as the additional turnover you can generate through increasing your workload will not necessarily translate into 100% profit. In fact, it can even trigger a loss if the total cost base of hiring employees becomes unmanageable. The cost base in question is significant, as it extends beyond an annual salary and also includes provisions for liability insurance, healthcare, pension contributions and holidays (the latter requiring paid leave where your employees will be unable to generate additional income). Once you have calculated the precise cost base of taking on individual employees and multiplied this accordingly, you can deduct this from proposed revenue growth and determine whether or not it is viable.

Is the Company Compliant with National Employment Standards?

Regardless of where your business is registered in the world, it will have to comply with a stringent set of employment standards. This regulates everything from the minimum wage that you can pay employees to the maximum amount of hours that they are allowed to work each week, and a failure to comply with one or more rules could see your company targeted by lawsuits. Businesses operating within the UK market and similar western countries also have to contend with equal opportunity employment laws, which prevent business owners from discriminating on the basis of gender, race or disability. This is governed by the Access to Work government scheme, which is deployed in Britain and presented in detail on the Allied Mobility website. You should familiarise yourself with these and general employment law guidelines before making a fixed-term commitment.

Are you Aware of your Duties as an Employer?

With your cost base calculated and an overview of all relevant employment law, you may feel well placed to make a decision. It is also important to understand your direct duty as an employer, especially in terms of taxation and creating a safe working environment. In terms of the former, each potential employee must provide you with a national insurance number, in addition to presenting a P45 from their previous employer (or completing a P46 if this document is missing). You will also need to calculate and withhold payroll reductions from their salary, and these tasks require a carefully managed infrastructure if they are to be completed successfully. The threat of workplace injury and hazardous materials such as asbestos also underline the need for a safe and compliant working environment, so as a starting point visit the website of the national regulatory body, the HSE (Health and Safety Executive) to create a foundation of knowledge.

See also: How Can Your Small Business Translate Turnover Into Profit?

As we can see, expanding your business to employ additional members of staff requires considerable investment and a great deal of knowledge across multiple sectors. Without calculating cost bases or understanding your unique requirements as an employer, it is impossible to make an informed decision that drives your business forward and can turn increased revenues into profit.