If you’re a start-up business looking to hire employees, you’ll need to consider how much money is enough to keep your staff happy without your business suffering. To stop you skimping out or overspending, here are some ways to budget for your staff and ensure they get the most suitable rate.
Know how much you can spare
Consider how much you need to comfortably live on and if you will need to make any cuts. You will need to be making enough money from your clients to cover the cost of your staff’s wages, plus compulsory insurance schemes such as employer liability and vehicle insurance if they are planning to drive. You’ll also have to account for any training and any wastage that may occur as a result of that (if it’s a restaurant you may need to prepare practice dishes resulting in wasted food, if it’s a professional electrician business you may have to pay for health and safety courses).
If after all this you still can’t afford to pay your staff minimum wage, you should reassess your business plan before making the decision to hire employees. Taking on a financial advisor or accountant temporarily may be necessary in order to budget this.
Commission or salary?
Next you’ll have to decide what kind of contract to give your staff. For businesses in which payment is not always guaranteed from week to week, commission pay may be more appropriate. In some sales jobs this can be a great incentive to make those big sales. However many employees may be put off by the uncertainty of not always being paid. Salary-based pay works best when you have a regular enough income to always assure payment to your staff. Failing to be able to provide for your staff could get you into a lot of trouble, so make sure you have that regular income to fall back on.
Account for age and experience
For young employees, the minimum wage bracket varies. This ranges from £3.40 for apprentices to £7.20 for those 25 and older. For businesses wanting to take on staff cheaply, apprenticeships are popular choice. However, apprentices are limited to what work they can legally do, and may still have to do their apprenticeship alongside a college course, so don’t look at them as a full-time solution.
It’s important to also account for experience. If you’re hiring an assistant manager, they should be getting more than your average worker. When advertising for experienced workers, make sure you’re charging more than the starting rate to ensure they don’t choose another business over yours.
Compare other businesses
A great way to gage the going rate is to find out what other businesses are charging. Job sites are a good indicator of this, as you can see what other employers are charging. For an even better pointer, you may wish to pay for a salary benchmarking and comparison survey. This involves paying a professional to review similar businesses to your own and find out exactly what they are paying their staff. From here you can set your own rate and know that you aren’t being too tight-fisted or over generous.
Incentives and bonuses
On top of regular pay you may want to provide extra incentives to keep staff happy. The most popular form of incentive is to offer bonuses to staff that perform well. This could include setting a yearly target that the whole team must aspire to or individual targets. Of course, make sure that these targets are realistic so that staff want to achieve them and don’t alter the goalposts halfway through the year – find a target and stick with it to keep people motivated (keep it on a big board or continuously talk about it weekly meetings).
Another incentive is to offer your staff stakes in the company. John Lewis is the most famous company to have pulled this off, but you don’t have to be retail giant like them – small business can offer shares too.
You can also offer other incentives such as free dental care, childcare vouchers, a company car or free lunches. Christmas parties and social events can also be provided to improve morale. These are some of the best incentives as they don’t just offer workers money but offer experiences. Such benefits are often known as employment packages. It is important to realise that these are affected by tax and NIC implications (another thing you may want to ask a financial advisor or accountant about).