As your business grows you’ll need help to manage the work that’s coming through. For most SMEs their first hire is an administrator, this is normally down to a knee jerk reaction. You need a new recruit to allow the business to scale up and it seems like the best person to help would be an administrator. They’d take over your client work, emails, and some other tasks too. Sounds like the perfect solution but it’s actually an expensive and unstable solution for a small business.
Let me explain.
The Problem with Recruiting
An SME wanting a new hire will first go to either a recruitment agency or post an ad on one of many job sites. Depending which route they take could cost between 20% and 30% of the advertised salary (which would currently average £5k) or around £200 to £500 for a jobsite ad. That’s an immediate cost to the business, already their new hire has to generate £5k ROI minimum.
Then take into account ENIC (Employers National Insurance Contributions), which currently stands at 12% for the average full time employee. A touch over £2k a year.
Don’t forget pensions auto-enrollment too! This means an employer must pay a minimum of 1% of an employees annual salary towards pension. Which rises to 3% by April 2019! That’s an estimated cost of £276 which could rise to £828 by 2019.
Okay, so once the you’ve found an employee you need to give them training. This is time that you’ll have to spend getting them used to the systems, your company processes, creating training manuals and ensuring the continuous development of their skillset. Based on a company with a TO of £100k you’re looking at £4,608 for the year. This is based on the value of the business owners time which will be spent training the staff.
You’re also going to need office space so your new hire can get on with their work. With the cost of leasing being so high, most companies choose to use a serviced office. At an average of £1k a month for a single person office you’re looking at £12k investment in a serviced office. Don’t forget you’ll need Employers and Public Liability Insurance too!
Once you’ve got an office sorted you’ll need to provide equipment to your new staff. That’ll include their computer and accessories, licences to software for work, desk, and of course a chair. This will come to around £3,750 for a new starter.
That’s not really the end of costs to the business either. When you hire a single staff member into an SME there’s an issue with holidays, sick, mat/pat leave, resignation, and more. Consider this, you get to the office on Monday morning and you’ve got a busy day. When you get there, there’s a message on the answering machine from your staff member. They’re ill and can’t come in today. How would you manage your day? Drop everything to cover the work? How long could you do that for?
The same goes for holidays too. How are you going to cover a weeks holiday? You could hire a temp at around £500 a week, but then you’d need to train them up on everything. You could cover the week yourself, but then you’re not growing the business. this is why it’s best to employ two people rather than one. This will help to balance the risk involved in recruitment as it’s unlikely that they’ll both be off at the same time. Unlikely – but not impossible!
According to a 2017 study the average staff turnover rate for admin in 2017 was 3.1%. You’re not guaranteed that your new hire will stay. If they left, could you afford the costs of recruiting someone to replace them? How far would it set your business back?
So let’s just tally up the cost so far:
- Recruitment – £5,000
- ENIC – £2,220
- Pension – £276
- Training – £4,608
- Office – £12,000
- Equipment – £3,750
- Temp Holiday Cover – £2,800
Total – £39,154
Before you’ve even paid this new hire you’re looking at spending £39,154, meaning for a new hire on £18,500 you want to be looking more at £57,654!
So that’s why recruitment is an expensive and unstable option for growing businesses. You’ll be happy to hear though that by introducing big business practices into your business before hiring you could save yourself thousands of pounds.
The first step you need to take is to get an analysis of your business processes and systems. This analysis is the most important step to take before hiring your new staff member as it ensures that when they come into your business they’ll be able to concentrate on their actual goals rather than doing tasks that should be automated.
It’s likely that the analysis will focus on your day to day, the minutia that you autopilot through and would normally forget about, identifying the time vampires that keep you from growing the business, and importantly it’ll identify areas where costs can be saved by reducing the number of systems in use.
Once you’ve had your analysis and gone ahead with the implementation you need to take account now of what you need from a new hire. Do you still need a full timer or would a part timer suffice? As a part of this new analysis about the needs for your staff member you should consider outsourcing.
Outsourcing is the single best way to ensure your business is going to have a steady and reliable workforce behind it whilst also providing scalability. It is important to understand I’m talking about professional outsourcing, not outsourcing to the likes of Fiverr. When looking for a professional outsourcing company you should ensure that they employ all their staff and that their staff work from a central office too.
I only know of one company who works like this, they’re called Best Business Enablers and are the go to company for professional outsourcing services. I’m a big advocate of outsourcing to BBE. One reason, scalability. Sure, right now you ‘need’ a single staff member, what happens when you get busier? With BBE, give your account manager a call, let them know you need to scale up and boom, done, you’ve just scaled up your support. No long, costly or time sucking recruitment process to get tangled up in. Just a single call will scale your business.
Of course this is flexible scalability with the bonus of a whole team who’s trained on your work. Let’s say your BBE account manager takes their annual leave, they’ll do a full handover to another (in-house) team member so that your work stays covered to the high standard you expect whilst they’re away. It’s scalable, flexible and professional support for all businesses.
Not to mention that outsourcing to BBE will mean you no longer have to pay pensions, ENIC, a salary, PLI, training, bonuses, for equipment, and totally swerve all the headaches associated with traditional recruitment. It’s a no brainer, but! To keep costs down, you first need to get your professional analysis done. That’ll ensure the when you outsource your work the processes will be highly productive which should help to reduce the cost. Outsourcing is also much faster to set up than it is to recruit someone, meaning you can be up and running with outsourcing before you’d have started interviews in a general recruitment process.
So, it’s likely that a combination of automation and outsourcing will save you money now and in the long term as well as reducing your need to hire staff. Now that’s not to say that you won’t hire staff. You may make the decision to simply upgrade your systems and processes but still hire staff. That’s totally fine too! Remember your first step is to get a professional analysis done of your business, listen to the findings and take account of the proposal and make sure to implement exactly what the plan shows. This’ll ensure you get the results that have been designed and expected from the project.
It’s also important to point out that a mix of automation and outsourcing is also much more attainable for business who might ‘need’ staff but can’t afford a basic salary. Due to the lower monthly cost it’s a great solution for any business looking for more time so they can get the right cashflow to scale.
Recruitment vs automation is a big topic and you’ve probably got a ton of questions about how this can help your business. Get in touch and we’ll set up to talk through your questions and find the best solution for your company.