A client recently asked me about the cost of employing some help in his business.
The client had done some research into hiring an adult apprentice and was aware of the government offered assistance of $1000 per month towards training. They also wanted to know how much work there would be in setting up the payroll side of things as well as the costs involved with KiwiSaver, PAYE and all the other employment requirements that go along with becoming an employer.
If you can find a suitable employee, there are employment subsidies available - Apprenticeship Boost as well as Flexi-Wage. There are requirements & limitations for each subsidy so I've included the links to the details of each to help you decide what might suit your business needs best.
In a small business, it's vital to find the right person for the job - this may seem logical but it's important not to fit the job around a person which may result in you ending up being a disappointed or unhappy employer. Working in a small business may not suit everyone - it's quite different from working in a larger organisation. And let's face it - you sometimes end up spending more time with your team than you do with your partner or family! (Speaking from personal experience employing friends & acquaintances over the last few years ).
This is a great question and isn't often considered when considering getting help in your business. Here are some items to consider:
- There is a handy little calculator provided by business.govt.nz which I typically use to work out the total cost. You enter the wages or salary information, as well as the "hidden costs" such as KiwiSaver, job ads, immigration fees, tools & equipment such as vehicles, mobile phones, tablets, etc.
- Position Description - sometimes you can Google & find something online that's similar. I often start with Careers.govt.nz. And then just customize it for your business needs. If you're one of our bookkeeping clients, we can also help with refining what is needed for your job since we have knowledge of your business and the pain points you are trying to relieve.
- Employment Contract - whether it's for an employee or a subcontractor, you need to have this in place when you offer the job. There is a free online Employment Agreement Builder provided by business.govt.nz. The real cost of a DIY employment agreement is often only discovered when the employment relationship is tested. Since the challenges presented by the pandemic in 2020, I now refer my clients to an HR Specialist who will provide you with the latest employment-related guidance tailored to your industry.
- Health & Safety - as an employer, you need to keep your team safe. It's also a requirement to work on many sites these days. I refer my clients to an H&S Specialist who will provide you with a quote. You may already have this in place for yourself so I recommend a review of your current H & S to ensure it works for your employees or contractors too.
- Payroll software subscription - we will work with you to provide a recommendation on the best payroll system to support your business needs. We're certified partners with Xero Payroll and PayHero and have practical hands-on experience working with several other payroll systems too.
- Payroll setup - this is a one-off cost for setting up your chosen payroll software ready for your first payday and includes adding all required employee and/or contractor information as well as payroll items such as hourly rates, salaries, KiwiSaver, allowances and any other deductions.
- Payroll processing - this is an ongoing monthly cost & includes accurately recording and paying leave entitlements, employer deductions and electronically sending payslips and payroll reports. We also file all required IRD Payroll information after every payday.
- We can also offer solutions to enable:
- Online payments for Payroll
- Online payments for employment taxes including PAYE & KiwiSaver.
Employee or Contractor?
Some of these costs will apply to both employees & contractors. Some costs can be minimised for contractors if they send you invoices for payment - this removes the need for payroll software & payroll service costs. Contractors can also be a risk to your business for a variety of reasons - poor workmanship, time or availability constraints, etc. Personally, I've had both employees & contractors and the real difference is the person themselves - hence my comment about getting the right person to join your team.
And it's not all about the money you spend on employees or contractors, there are also many benefits to having extra help in small businesses.
As my business coach says to me, what is the opportunity cost of having extra help? By this I mean, if you didn't have to be doing all or a large percentage of the work, what could you be doing to generate more income instead? Could you be responding to new customers or quoting for more work? What about marketing - taking photos, posting on social media, or building/updating your website? Or creating a new income stream from e-commerce or a new product/service? The benefits could also include well-being & mental health such as time off, exercise, hobbies, sporting activities, family - it's whatever is most valuable to you.
Let me know if you would like to discuss any of these ideas, costs or benefits in greater detail. I'd love to hear about your experience of growing your small business and expanding your team - the good, bad & the ugly.