Recruiting & Training Employees

The challenge of employing people in a small business At some stage, a start-up entrepreneur will need to consider taking on staff For many – a risky move Staff costs can quickly become a significant part of the fixed costs of a business Adding staff adds to the business overheads But - employing the right staff can help a start-up grow more quickly and frees the entrepreneur to do more important tasks What choices should an entrepreneur consider when it comes to employing staff?

Employing people – in context Most small businesses are “one- man bands” – they don’t employ anyone else! 3.3 million businesses in the UK have no staff Start-up entrepreneurs often “multi-task” in the early days since the business cannot afford other staff Choosing a first employee is one of the most difficult (and risky) tasks faced by an entrepreneur

Main employment options Employment options Definition & Overview Full-timePermanently employed in the business; usually working over 30 hours per week. Full package of benefits & employment rights protected by law Part-timeWorks less than 30 hours per week; employed under a permanent contract of employment. Package of benefits likely to pro-rated based on hours; more limited employment. Temporary workers Employed for specific periods and/or tasks, often under contract from an employment agency Consultants & advisers Individuals and businesses external to the business which provide specific services and advice. E.g. accountants, lawyers, marketing specialists

Full-time employment (1) Full-time means fully-committed to the business A big commitment for a start-up Contract of employment sets out rights of employee The start-up needs to ensure that there is enough work for full-time employees – each new employee adds to fixed costs + makes break-even harder

Full-time employees + / - AdvantagesDisadvantages Maximises the output from each employee – particularly if they work overtime Cost – the main disadvantage for a start-up business. Entrepreneur has to be sure that there is enough work to justify the cost of a full-time employee Available full-time to handle peaks or unexpected increases in workload May work better with other employees, since they are at work for longer (no guarantee though!) Reduced flexibility in terms of adding skills or capacity – part-time employees provide more flexibility Potentially better for customer service – customers are more likely to deal with the same people Costly if there is a downturn in business activity – full-time employees still need to be paid, even if there is less for them to do Easier to recruit people looking for the greater security and higher rewards of full-time work Better returns from training

Part-time employment (1) 25% of people work part-time in the UK Various methods of part-time – including those described as “flexible working” Reduced risk for a start-up (lower cost) Opens up a wider pool of potential recruits (e.g. women with child care responsibilities)

Part-time employment + / - AdvantagesDisadvantages Lower fixed costsPotentially higher costs on training, induction More flexible – part-timers can work overtime if there is sufficient work to do Difficult to handle peaks in workload Potentially more motivating & less stressful; can help retain good people Less opportunity for training and promotion Can recruit a wider range of skills for the same total employment cost (e.g. part-time accountant + part-time designer) Harder to communicate with employees if they spend less time in the business Easier to recruit people who don’t want to, or cannot, work full-time (e.g. mothers with child care duties)

Temporary employment (1) Staff hired on short-term contracts (e.g. by week, month) Useful for resourcing specific projects (e.g. website development) or filling gaps caused by illness or other absence Not directly employed by the start-up – “temps” are normally employed by an agency

Temporary employment (2) AdvantagesDisadvantages Flexibility – temps give the entrepreneur better control over costs; bring in people when required and release when quiet Higher cost per hour; temps are often charged out by an agency at a high rate per hour or day Ideal for specific jobs and projects – e.g. installation of IT systems, website design Temps less likely to know and understand the business, or to fit in with its culture – could damage customer service High quality temp might be persuaded to join the business on a permanent basis – so employing temps is a low- cost and low-risk way of recruiting people! Potentially less motivated and productive; less interested in career progression (in the business)

Consultants & advisers (1) Some skills are best provided by specialists: e.g. – Legal – Accounting & payroll – IT systems Generally paid per project or by the hour/day Some funded by government (e.g. BusinessLink) Think of them as specialist suppliers

Consultants & advisers (2) AdvantagesDisadvantages Flexibility and lower costs - access specialist skills without having to employ someone on staff Often expensive – but that it is the cost of getting specialist advice! Skills are provided for the business when needed May not know or appreciate the culture of the business (most consultants try hard to understand their client’s business though) Possible to get specialist advice for a start-up at relatively low cost whilst the business establishes itself Potentially less committed to the business, since they don’t work there Over time, the adviser gets to know the business well

Flexible working Attractive option for many start-ups Flexible working covers any kind of flexibility in terms of time (e.g. part-time work, shift work) and location (e.g. home-working) and includes the following: –Part-time working –Flexi-time - employees choose the hours they work outside a standard set of hours set by the employer –Job sharing - two workers share a full-time job (i.e. two part-timers) –Term time working - normal permanent contract, but the employee can take unpaid time off in school holidays –Zero-hours contracts - workers work only the hours they are needed

The Recruitment Process

Stages of Recruitment Process Preparation – Identify what jobs need filling and what role and specification of job is Finding possible candidates – Various methods (e.g. advertising) to encourage potential candidates to apply for job Selection – Interviews and other selection processes to choose best person for job – Completing employment contract Induction – Introduce selected candidate to business

Job Description and Specification Job description – Detailed explanation of roles and responsibilities of post advertised – Most applicants will ask for this before applying for job – Refers to post available rather than person Job specification – Drawn up by business – Sets out qualifications, skills, experience and personal attributes a successful candidate should possess – Vital tool in assessing suitability of job applicants – Refers to person rather than post

What is training? How a business tries to improve the knowledge, skills and attitudes of employees to enable them to do their jobs better

Three main types of training Induction – When employees first join – Get up and running / meet colleagues On-the-job – Training whilst still working – Usually done alongside colleagues – Demonstration / instruction / coaching – Cost-effective – widely used by small businesses Off-the-job – Employee away from place of work – Training courses, sell-study etc – Often related to a qualification – Small business owners often complain about the costs

Benefits of training to a business Better productivity Higher quality More flexibility through better skills Less supervision required Improved motivation Easier to hold on to good staff

Why businesses need training To support new employees (induction) Maintain efficiency and minimise waste Deliver the desired standard of customer service and satisfaction To handle change (e.g. new technology) Address changes in legislation Support employee progression and promotion

What training can’t solve Poor management (although management training might help!) Poor job design Ineffective or inefficient equipment Poor production organisation Bad recruitment (i.e. the wrong people!)

Keep up-to-date with business stories, resources, quizzes and worksheets for your business course. Click the logo!