Before we get into this article, let’s start off by knowing what an employee is. An employee is someone who works for an organisation under a control of employment in return for a salary or wage. An entrepreneur starting up a business will most likely carry out all the day-to-day activities needed to keep the business going. However, when the firm starts to expand, the entrepreneur will have to work harder and longer hours which may lead to stress and poor decision making. At this point, the entrepreneur will have to eventually employ new staff.
Factors to Consider
Recruitment can be an expensive process, and has to be considered in relation to the wider objectives of the firm. Therefore, before spending time and money hiring staff, there are a number of factors to think about.
The business should start by identifying what skills, qualities and experience are required in order to allow it to continue to operate successfully. This will require a clear understanding of the exact nature of the firm’s product and the market in which it operates. A detailed analysis of the marketplace usually forms a major part of a firm’s business plan.
The next step would be to pinpoint current skill strengths and weaknesses, so that gaps in expertise can be filled. For example, trying to get books to balance without the financial skills required to do so can use up a lot of time. This could be spent more profitably promoting products, dealing with customers and managing suppliers.
Another factor to consider is the length of time that workers are likely to be needed. For instance, additional staff may be taken on in order to respond to an increasing workload. Is this increase likely to be temporary or permanent? How many extra hours of work will be needed each week? Once a business has developed a clear understanding of its workforce needs, it will be in position to choose from a number of employment options.
There are four main options a firm may wish to consider when employing people:
– Temporary contracts
– Permanent contracts
Part-time vs Full-time Employees
Jobs are classified as being part-time if the contracted period of work equal to or less than 30 hours per week. 25% of workers in the UK are currently employed on a part-time basis. Employing part-time rather than full-time employees can offer a business a number of benefits:
- More cost effective – It is a more efficient way of meeting labour requirements and will keep costs down when there is no need for full-time cover.
- Increases workforce flexibility – it allows firms to cater for predictable fluctuations in demand.
- Improve quality and productivity of workforce – It may attract more applications for job vacancies, including women with small children. The option of working part-time may also lead to a more motivated workforce, reduced absenteeism and labour turnover.
On the other hand, relying to much on part-time employees may mean additional induction, training and administration costs for a firm. It may also lead to a decrease in communication, if staff see very little of each other, making it difficult to coordinate activities.
Temporary vs Permanent Employees
A temporary employee is employed for a limited period of time by a business.
Such workers are often hired on fixed-term contracts. Employment is terminated one the contract expires and no notice is required from the employer, although the contract can be ended sooner if either side does give notice. The advantages of employing staff on a temporary basis includes the following.
- A more flexible workforce to cope with changes in demand over certain periods of time – For example, a retailer might choose to recruit sales assistants on a temporary basis to help deal with increased demand and maintain customer service standards over the Christmas sales period.
- Temporary workers can be used to cover for permanent employees – For instance, during maternity/paternity leave or secondment to another area of the business.
- Fixed-term contracts allows even small businesses to gain access to highly specialised skills – This could include IT or marketing, without having to bear the costs of having permanently hire what are likely to be expensive employees.
However, commitment from temporary employees will be a lot lower than permanent employees.
Taking on extra workers is one of the hardest decisions that an entrepreneur is likely to face. This point in the firm’s development when the individual is forced to admit that s/he can’t do anything. There may also be a reluctance to hand over some control to others – people who may have different opinions and challenge the way the business is run. Employing someone with strongly opposing views is likely to lead to conflict and, unless everyone is heading in the same direction, the business will not move forward. However, a successful firm requires a range of skills and experience. Refusing to bring in additional support and expertise can seriously damage the potential of the business to continue to survive and thrive.
Contract of employment – a legal document setting out the terms and conditions of an individual’s job. These include the responsibilities of the employee, rates of pay, working hours, holiday entitlement, etc.
Employment agency – an organisation that supplies workers with particular skills, on a short-or long-term basis, to other businesses, in return for a fee.
Employment tribunal – an informal courtroom where legal disputes between employees and employers are settled.
Full-time employees – staff who are under contract to work the normal basic full-time hours of a business.
National Minimum Wage – the lowest hourly wage rate that an employer can legally pay to an employee.
Part-time employees – staff who are contracted to work for anything less than what is considered the normal basic full-time hours of a business.
Permanent employees – workers with a contract of employment with a business that is open-ended (i.e. there is no time given at which the contract is due to end).
Temporary employees – employees on fixed-term contracts of employment, either for a predetermined time or until a specific task or set tasks is completed.