Implications of Hiring a Staff in Small Business

Hiring a staff has some implications on your small business.

Hiring a staff is more than just having somebody working for or with you. I have mentioned that most of your business decisions have their own implications. Knowing the implications that are involved will help you to have a rethink of whether you are set to hiring a staff or not.

Financial Implication

It is assumed that your decision to hire a staff is as a result of growth in your business. But the level of growth should be able to justify the additional hand you are bringing in. By your projection, if the growth in sustainable, then there may be justification for the new employee. But if the growth is just seasonal, it may be advisable to hire a freelancer or part time staff to assist you during this period. By this, your overheads will be variable. Once you hire a permanent staff, the cost is no longer variable, it becomes a fixed cost which you have to pay whether there is business or not. Inability to control fixed costs can easily run down a business.  Another way of reducing your fixed personnel cost is by making certain percentage of your staff salary a function of performance (i.e. on commission basis). This can easily be achieved if your staff is a sales personnel. Making a certain part of the staff salary variable will not only reduce your fixed cost, it can also lead to growth of your revenue as the staff can be geared towards enhanced productivity for better reward. But it is important that you keep to your promises if the staff meets the set targets. Changing your words after the targets have been met can be demoralizing.

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Tax Implication

As an entrepreneur, one of the things you need to be abreast of is taxation. You should know the different types of tax and how each affects your business. When you hire a staff, it is your responsibility to collect a tax form from the State Internal Revenue Service on behalf of the staff. The completed tax form will be returned to the Tax Office. It is your responsibility to withhold tax from your employee’s salary based on Pay As You Earn (PAYE) system under the Personal Income Tax Act and remit the same to the Tax office every month.  Failure to comply can lead to penalty.

Legal Implication

Hiring a staff is a sort of legal agreement between you and your staff. As in all contract, failure to keep part of your responsibilities may lead to prosecution. Whether during the interview or in the employment letter, you should be careful that you don’t make any promises that you can’t keep. You have to be sure of your ability to pay the benefits you offered your employee as failure to keep to your word may cause unpleasant situation. You should be careful in your wordings in the employment letter. If you don’t know how to draft employment letter, you can employ the service of a professional.

Also, your staff has his own rights and responsibilities. You should try to respect them. The fact that somebody is working in your company does not warrant any maltreatment. The best way to avoid disputes between you and your staff is to properly define his roles and responsibilities. It will be proper if you can separate your private tasks from business tasks and your staff will respect you for that. It is worth mentioning that sexual abuse should be totally avoided. This may not only erode you of your personal dignity, it can wreck your business very quickly.

Also as an employer, you should familiarise yourself with Labour Law and other legislation such as minimum wage.

Read Also: Home Based Business Guide – Work From Home

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