As your small business grows, it’s likely that you’ll need some help. Whether it’s someone with a skill you don’t have or someone to help out with all the admin you no longer have time for.
But hiring your first employee is a big step, and it’s not always the right one for some small businesses. If you’re trying to decide between hiring someone full-time or getting help from contractors and freelancers, here are the pros and cons of hiring employees for your small business.
Already sure you want to hire your first employee? Then check out what you need to know to get it right.
Pros of hiring employees for your small business:
1. Employee loyalty
Hired employees are likely to feel a much bigger sense of loyalty to your small business than freelancers might. You’ve show trust in them by hiring them and providing them with the benefits of full-time employment.
Therefore, they’re more likely to stick with your business and support you as the company grows. Unlike freelancers who can end their contract at any time, employees won’t find it so easy to leave – and hopefully, they won’t want to leave!
2. Better cash flow
Hiring an employee can also help with your small business cash flow. Although hiring someone might seem like a big expense, at least you know exactly what you’ll be paying someone, and when you’ll be paying them.
This means you can plan your accounts better, and put away money when times are good so you always know you can cover their salary. With contractors and freelancers, the amount you pay them can vary hugely, meaning it’s more difficult to pre-plan how much salary is required.
3. They’re always available
Another benefit of hiring employees for your small business is that they’re always available (within working hours, of course!). Freelancers may be busy working on other projects and won’t have time to complete something for you last minute.
But employees are there to work solely on your business, so if something comes up at short notice they will be able to help out. This also makes it much easier for you to take holidays, as someone will be there to look after things while you’re away.
4. You only need to train them once
Once you have trained an employee, you won’t need to do training again. They’ll know your small business and your processes inside out, and will also be able to help train future employees.
With contractors and freelancers – especially ones who come on short-term to assist with one particular project – you will need to repeat training every time you work with someone new.
5. They’ll be a great brand ambassador
Another great benefit of hiring an employee for your small business is that they’ll become a brand ambassador for you. Unlike freelancers who may support your business but are ultimately trying to promote themselves, an employee will be great at promoting your small business.
It’s in their interest to see your business grow and develop. Working with you every day will soon mean they’re as passionate about your small business as you are!
Cons of hiring employees for your small business:
1. You have to provide employee benefits
Although the salary for an employee might initially seem lower than what you’re paying a contractor, don’t forget about all the added extras. With employees, you’ll need to pay tax and pay into their pension, and you may even have to provide other benefits like health insurance.
You’ll also need to cover things like sick pay, holiday pay and maternity pay. There are certain things you have to provide as a legal minimum, but to keep employees happy and create a great working environment, you may need to supply additional benefits to make the position more attractive to potential employees.
2. You have to make sure you choose the right person
While the idea of hiring an employee is great, it’s not always so easy to find the right person in practice. Not only do you have to find the person with the right skills for the job, but you also have to find someone who’ll fit in with you and the business.
This can sometimes take months, with lots of meetings and interviews taking up your precious time. Hiring the wrong person can be a huge mistake, and it’s not as easy to let a full-time employee go as it is a freelancer.
3. Less flexibility
When you’re working with freelancers or contractors, you still have a lot of flexibility in your small business. You can hire people for just a few days (or even hours!) to get help with the specific thing you need. If your business changes direction, you can easily hire a different freelancer who is better suited.
But with an employee you’re tied down a lot more – you can’t get rid of them when there’s a lull in business, and you can’t suddenly change their job title because you need help with a different area of the business.
4. You have to manage them
Another potential negative of hiring an employee is the fact that you’ll have to manage them. You are now responsible for ensuring they’re doing good work, getting the relevant training they need, managing their time well and representing your business in the best possible way.
Not all small business owners are adept at managing others, but it’s necessary when you hire your first employee.
5. You have to provide supplies and equipment
The vast majority of freelancers and contractors work from their own offices and use their own equipment. But if you’re hiring an employee for your small business, you’ll have to provide everything they need.
This might mean leaving your home office behind and hiring an office big enough for two people, or purchasing a laptop for them to work on. All this can add up and make hiring a new employee very expensive.
As you can see there are both pros and cons to hiring employees for your small business. If your aim is to grow the business into a big team, it might be time to bite the bullet and hire your first employee.
If your plan is to keep your small business as a “one-man band”, you might prefer to seek help from a freelancer as and when you need it instead.
To read more about this topic, have a look at these:
Why Your Staff Should Be Part of Your Marketing Strategy
Should You Work From Home or Get an Office for Your Small Business?
Hiring an Employee – What You Need to Know to Get it Right First Time
Edinburgh’s Best Co-Working Offices for Small Businesses