4. Taking on Staff
How do you know when you're ready to take on staff in your new business? Are you ever actually “ready” to take such a step? That's the basis of this episode, as our assembled panel of experts and business owners offer you their own tips and advice for taking on staff.
Whether you're a sole trader who needs an extra pair of hands for a few months, or the owner of a limited company looking to employ several people, the process is fairly similar across the board.
There's also the danger of putting off hiring staff because you don't think anyone can do the job as well as you. That might be true, but is this approach sustainable in the long term? What happens if you fall ill, or want to take a two week holiday abroad?
On this episode you'll hear from recruitment consultant Patricia McGuire, content marketing guru Chris Marr, photographer Julie Christie, employment law specialist Alison Colley, accountant Gordon Howes, and financial planner Pete Matthew.
There's a couple of excellent books on this subject that are worth checking out. The first is a classic called The E-Myth Revisited (Why most small businesses don't work, and what to do about it) by Michael E. Gerber. This one is primarily aimed at small business owners who are trying to do everything themselves.
The second is Virtual Freedom by Chris Ducker. Again it deals with the problem of trying to do it all yourself, but this one is a guide to hiring and managing virtual staff, rather than on-site employees.
It becomes very apparent that you can't do everything and that's another piece of advice. Don't be a superhero. You cannot do everything.
I’m Colin Gray, and this is UK Business Startup, where this time, we’re talking people. Do you remember that quote from Chris Marr last time around?
Chris Marr: You need to pick out a time in the day where you are spending an hour or so working on your business. You need to have a plan for that. What are you doing every day to build your business?
This is one of the biggest mistakes new businesses make. They forget to think big. They forget to make time for planning, for strategy, for figuring out how to make the business a success. Instead, they just keep doing what they’re good at. The gardener keeps gardening, the programmer keeps programming, and the baker just bakes! The problem is, that’s not building a business. That’s building a job. And it’s a really terrible job at that. It relies on you to run, it relies on your time, so when you’re not baking, you’re not earning. That means no breaks, no holidays, no time to get sick! And it means no time to bring in more customers or grow a business. That’s what Chris from the Content Marketing Academy was talking about.
So, what’s the way out? Well, building a business that doesn’t just rely on you. That’s what. And that means staff. So, this is where it can get really scary.
Julie Christie: I have two employees. I didn't necessarily feel ready to do it. I just knew I had to do it. For two months, I couldn't afford it. I definitely took a hit because I was training her and I was sitting beside her all the time and we weren't taking on more work. Within two months, she was paying for herself. It was a very, very scary move to make but it was the right move and it allowed me to work on the business. I no longer was having to phone clients, go back and forth with anyone, design albums. All the admin was taken away from me so I was able to then do more shoots and more marketing to get more shoots.
That’s the bit that surprises most new business owners. The admin. There’s so much to do, from logging receipts, to paying tax, to handling bills. And that’s just the general stuff. There’s bound to be tonnes specific to your industry too. So, this is where a lot of people start, as you heard there from Julie Christie, the founder of TeaBreakTog.com. She’s still doing some of the main work – photography in her case – but he’s using the time that’s been freed up to do the marketing too. As Chris mentioned at the start, and even more in the last episode, that’s your big job as the founder. Marketing and growing your business. You can still do a bit of the technical work, but you need to find time for the high level stuff. Generally, that means staff.
So, how does it work when you’re starting out? Let’s look at Bill the gardener again.
Patricia McGuire: As a sole trader, Bill can take on a temporary member of staff. Certainly, Bill could advertise and take someone on just for a seasonal period of time so he could offer a seasonal contract to them which would be fixed, which means there's no obligation to keep them on after that or he could give something like a zero hour contract just to see how things go. If things work out well, he can tell the employee that he will increase the hours.
That’s the way in for a lot of people who start out working for themselves. They take someone on for the busy periods. No long term commitments, just getting a bit of help when it’s needed. It is a great way to build confidence and learn a few of the processes. And it gets you used to managing people – something most of us aren’t used to! So, once you make the decision, what’s our responsibility here with the tax office?
Chris Marr: He needs to inform the Inland Revenue that he's going to become an employer before he engages anyone. He will register for PAYE as an employer. He will receive his employer's PAYE reference as well as his Accounts Office reference.
This is easy enough, and it’s the same for a limited company. In fact limited companies tend to do this right off the bat! Either they’ll be taking on staff right away, like a café, or you want to get paid as the founder. Either way its’ really easy to register on the HMRC website – honestly, quick as anything.
Pete Matthew: One thing it's really important now is you've got to report to HM Revenue and Customs now when you pay your employees. You need to pay your employees on a certain day and that will need to be reported to the Revenue on that day, and any tax and national insurance due to the Revenue will need to be paid at the same time. That's called real-time information.
Okay, this might sound a bit complicated, but don’t worry, there’s technology out there to help. Remember on episode 2 when Pete was talking about managing your finances?
Pete Matthew: There are, again, software systems usually very often a part of the general accounting software systems that you can buy and they will do all that for you, so you'll need to register with the Revenue as an employer so that you can submit your real-time information, your payroll information as you go.
Both Pete and I have mentioned it before, but FreeAgent, is the one I’ve used in the past. It handles both invoicing and payroll, working out all of that stuff around tax and national insurance. There are plenty of other apps out there that can do it too. So, don’t let this part put you off – help exists!
Talking of which…
Julie Christie: When I decided to hire Fiona, I spoke an HR consultant who talked me through everything. He also put together a contract of employment and all the paperwork that we had to have in place and he advised me on insurance issues and things like that as well. That was all taken care of and then my bookkeeper, she took on payroll as well as keeping the books. It wasn't too bad at all and has been worth that's weight in gold.
We talked about bookkeeping and accountants in the finance episode, and Julie highlights it here. They can take on payroll for you, handling all of the fiddly work. And contracts – that’s a tricky one, and well worth getting some help with. You’ll find HR consultants all over the country, and you could get contracts and handbooks made up for just a few hundred pounds. In most cases, as Julie says, it’s worth every penny.
Ok, we’ve dealt with the prep. Everything you need to do to get set up as an employer. That’s a bit dry, but the next bit’s more exciting – that’s actually having them on board, getting the help, the input, the expertise they offer. Saying that, before we get too excited, I guess we need to think about what they want in return…
Pete Matthew: Paying staff isn't massively different whether you're in a limited company or you're sole trader. They are your employee and so you have certain responsibilities. A key one, of course, is paying them. They're not going to work for you very long if you don't pay, so that's a drain on cash flow. That needs to be planned in, always a good idea to have two or three months cash flow in reserve if at all possible, so you know you've got at least two or three months' worth of payroll that you can pay your staff so you're never sort of going right to the wire.
This ties into those questions at the start of the episode. When do you know you’re ready to take someone on? As Pete says, money plays a part. If the work dried up tomorrow, how long could you pay them for? Now, don’t let this scare you – it’s planning for the worst case. And with the help of someone else, it’s even less likely to happen than it is right now. You’ll be freed right up to search for more work after all. But, it’s worth a think. Next, what about frequency?
Pete Matthew: I would err towards paying people monthly for the simple reason that most people pay things out on a monthly basis. They're paying house and car insurance and other things on a monthly basis. It can be easier for your employees to budget on a monthly basis. Having said that, I have been paying on a weekly or fortnightly basis since I was at university and part-time at McDonald's. It's a long time ago. Some people may prefer it. I think the world is increasingly moving towards monthly though. It just seems more logical to me.
This depends a lot on industry too – the leisure industry always tends to pay weekly, but the finance industry doesn’t, for example. This isn’t a big deal, just choose what’s right for you. And then? All that’s left now, is finding the staff themselves!
Alison Colley: If Amy is looking to take on staff, there are various routes that she could take. She could take the traditional route of putting an advert in the newspaper but in my experience with my clients, that can be quite expensive and quite a timely process. Another way of looking for staff would be to use somebody specific like an agency, somebody who she can trust to make those initial findings for her and to try and find the right member of staff, so do the initial interviews and things.
From experience, vetting and interviewing takes a long long time… Agencies charge a fair bit for this, but sometimes it’s worth it…
Alison Colley: The other way of doing it is to look within her circle, within her network, see if there's somebody who she trusts and likes who might be looking for work. I find that way with my clients who were taking on their first member of staff, this is normally how they find them rather than going down the traditional advertising route because it would be quite daunting to bring someone into your new business especially when you've worked so hard on it, so finding someone that you trust and know in the first instance is probably a good way of finding staff.
Interviews can only tell you so much, so that personal connection can make a big difference in finding someone you trust. AND someone who’s right for the business. You’re going to have to live with these people, day in day out, so personality matters.
Pete Matthew: These are not just payroll numbers after all. They are people and they come with issues to deal with, things like needing to take time off to go to hospital appointments and emergency, things which might happen to him for family reasons, in inverted commas, that you've got to sort of be able to cope with these things.
And that’s when things get complicated. Because real people ARE complicated. But here’s how Pete thinks about it.
Pete Matthew: Certainly, a key thing for me here in my practice is culture. We obviously need people who are competent. They need to be able to do the job but I would rather have somebody who I need to train but who fits in well with me and what I'm building here rather than have someone who is superbly competent but is a bit of a pain to work with.
Company culture is huge, and it’s all your job at the start. You’re the founder, you set the tone. Small companies always have a culture based on the founder’s personality, their values. As Pete says, the plan is to find people that fit that culture, and for you to reinforce it every day. If you live and breathe the values of your company, then that’s infectious. It improves the morale, the productivity and the work that everyone does.
Now, there’s one last option I want to go through, before we’re done. Just incase it still seems too daunting. There is an easier way, and we’ve already alluded to it…
Virtual assistance – that means working with people OUTSIDE of your business to do the work of an employee. Julie mentioned earlier that her bookkeeper does payroll for her – that’s a virtual assistant. The bookkeeper isn’t employed by Julie, but she does work for the company. Work that needs done on a regular basis.
So, How would that work with Amy, our café owner, for example?
Alison Colley: This is certainly something that Amy should be thinking about for things like her marketing and social media whether she goes to somebody using a service like Upwork who provide virtual assistance or whether she goes for someone more local, would be down to her to decide. Certainly, with virtual assistance, you can give them a try without having to commit anything in the long term. You can try a couple of people and see how it works out. I would say that it would be better for a small business to try and do it virtually for those sorts of things initially than taking on an employee and having the additional costs and expense of things like PAYE and national insurance.
Great advice there from Alison Colley whose an Employment Law Specialist over at alisoncolley.co.uk. Whether they’re in the UK or abroad, working with a VA gives you a tonne of experience in managing tasks and staff. And that’s without a lot of the HR or admin headaches. I know a lot of new businesses that used virtual assistants to grow to a certain point and then they’ve graduated to in-house staff. It lets you get that work off your hands without worrying about long term commitment. Of course, the downside is that they might not be as bought into your business as an employee. And managing staff at a distance can be tricky. But, for most people, especially sole traders or really small companies, it can be a stepping stone to much bigger things.
So, are you ready to take someone on? Are you Set for that leap?
Patricia McGuire: I think you know when you're ready to take on staff. It becomes very apparent that you can't do everything and that's another piece of advice. Don't be a superhero. You cannot do everything, but there are worries, obviously. How are you going to pay them? How are they going to settle into your business? How are they going to reflect your business? But actually, you know when the time is right. You know when the money is right. You just have to do it. If your business is going to grow, you have to employ other people to help you grow it.
This was episode 4 of UK business startup. You can find links to everything we’ve mentioned on the show at the Startup website at podhost.me/startup/. Thanks too to all of our contributors, and you can find out more about what they do at the same place.
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Thanks again for listening and we’ll see you next time!
Whether you’re looking to create a company with staff and premises, or just make some additional income as a freelancer in your spare time, this is the show for you.
In each episode we’re going to dive into the nuts and bolts of a particular topic, breaking things down into bite sized and easy to understand chunks.
We’ve enlisted the help of some trusted accountants, financial advisers, marketers, authors, and fellow business owners to bring a tonne of experience and advise to the table. And pulling everything together is the host, our very own Colin Gray.
In season one, we’re going to be giving you an introduction to planning, starting, and growing your business. We’ll then take a break before moving into season two where we’ll cover one of these topics in-depth.
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