Seeing your business begin to grow is an exciting time for any owner. Your customer pool is expanding, your profit numbers are going up, and you’re beginning to wonder if it’s time to hire some new employees. Whether it’s your first, your second, or your twentieth hire, bringing in the right people and helping them achieve their highest potential takes careful consideration.
A successful new hire will increase your profitability
From your head of sales to your administrative staff and every other role in the business, each of your employees will be adding to something called your Labor Productivity. This is the amount of economic output per labor hour you produce, which is a confusing way of saying how much work you’re getting done.
A new hire can increase your Labour Productivity by doing valuable work themselves OR by freeing up you and your other employees to do more billable work. When it comes to deciding which roles take priority in the hiring process, we recommend breaking it down like this:
- Think of all the roles that will exist in your business a few years from now and put them in a chart
- Fill in your name for all the roles you are currently doing
- Rank order the roles you want to hire for (one method is to list out the pay rates for these positions and hire the lowest pay rate first).
- Write procedures for that lower-impact role, so someone can come in and do a quality job.
By following these steps, you’ll have a better understanding of which roles would be most valuable to fill and the impact to your Labour Productivity they’ll provide.
A happy workforce is a more productive workforce
You want to curate a positive environment in your business because you genuinely care about your employees and their well being. This is amazing, but did you know there are also tangible benefits to building a culture of care?
A culture of care is exactly what it sounds like: caring for your employees is a priority, and it’s built into everything you do. Working to keep your employees happy doesn’t just increase talent retention and reduce the cost of onboarding new hires (did you know replacing an employee can cost anywhere from 90% to 200% of their annual salary?); it also increases the productivity of your business.
When you care about your staff, they’ll care about your business. They’ll buy into the product or service they’re helping deliver, and understand why it’s important. Your onboarding procedures will teach them how to do their job, but your culture will make them want to do it, and do it exceptionally well.
Know the difference between an employee and a contractor to make the best decisions for your business
New business owners are often curious about the benefits of hiring contractors to do hourly work. You’re avoiding the costs of payroll tax and a regular salary, but what are you risking?
Contractors often charge more per hour than a salaried employee, so they might not be cheaper in the long run. In addition to this, miscategorizing employees as independent contractors is a big deal to the CRA. Even if it’s unintentional, you could face fines and penalties that end up destroying your business.
A full-time, salaried employee does entail a 7.66.5% payroll tax. But taxes, and payroll, are simply a reality of running a small business. Plus, a full-time employee embedded in the culture of care you’ve created could be more committed and thorough with the work they do for you.
An accountant, with a deep understanding of your business goals and a full picture of your finances, can help you decide between a contractor or an employee and ensure you’re categorizing everything correctly for the CRA. If you’d like more guidance on getting the most from your people plus four more essentials every business owner can master, download our free Financial Foundations guide here.
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