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How Can Small Firms Manage – And Pay For – More Staff?

By June 20, 2014 No Comments
Co-operatives Inspire Staff Loyalty And Build Businesses For The Long-Term

Job application Nothing shouts the fact that a business feels confident more than the desire to take on staff. And that is just what many SMEs in Britain are expecting to do this year, as part of broader plans for expansion, spurred by new Government incentives to hire, as well as greater optimism for the months ahead.

Small firms are five times more likely to take on employees than their larger peers, according to the Chartered Institute of Personnel and Development (CIPD). And enterprises in the West Midlands and the East of England are the most keen to increase their headcount, research from the Federation of Small Businesses suggests. Overall, two out of three small companies in the UK plan to grow in the next 12 months, and these SMEs realise that they need more people to achieve their ambitions.

It’s a welcome development, and one that has been encouraged in part by the introduction of the Government’s Employment Allowance in April, which gave 1.25 million businesses and charities a £2,000 saving on their National Insurance (NI) bill. About 450,000 firms are reckoned to have been taken out of paying the employment-related tax altogether, with companies able to employ four adults or ten 18-20-year olds on the National Minimum Wage without the extra financial burden of NI costs.

But other SMEs are still intimidated by the money required to take on new workers. There’s the expense of salaries to take into account, plus any benefits offered. Not all businesses will be exempt from National Insurance contributions under the new rules, so these often have to be factored in. As soon as a company hires its first employee it needs employers’ liability insurance. Then, there are the less obvious things to pay for, such as training, IT equipment and software licences, plus the bigger workplace often needed to accommodate extra bodies. It all adds up, and some bosses balk at the prospect of such a large bill to take one someone new.

However, it’s a Catch 22. Without sufficient people working in a business, growth will always be limited. But many small companies feel they can ill afford the expense of hiring new employees. Of course, if you get the balance right, higher staff numbers will boost productivity, and your new hires will soon pay for themselves, as well as bringing the business a decent profit besides. Here at Boost Capital we see this with the SMEs we help in similar situations. Sometimes they come to us because they need money for the upfront costs associated with hiring new workers, and want a short-term loan to cover initial costs. Others sometimes need cashflow for the salaries of existing staff when various expenses have taken their toll on company finances. Almost all recognise that these employees are essential to the success and future growth of their enterprise.

There are several things to consider when deciding how you’ll afford a new member of staff. How much should you pay, and can you compete on salary with your larger rivals? If not, it doesn’t necessarily mean that you won’t attract the best talent. Think about what else you can offer a new recruit that bigger firms may not. Could your benefits package be adjusted to be more attractive? Is flexible working a possibility? Might you even offer a hard-working employee equity in the company in lieu of extra pay? You have a variety of options available to you, and the advantage over bigger companies of being able to operate more flexibly, making changes swiftly where they cannot.

Another point that is of great importance to small businesses when expanding their workforce is how to retain culture and values. The CIPD points out that SMEs that expand quickly can be in danger of forgetting their aim, and then can lose sight of the business’s goals. The workplace experts offer some tips on how to retain your company’s purpose even when growing quickly and taking on new staff:

  • Look out for the ‘tipping point’ when employees stop understanding the culture of the business or cease to work in accordance with its values. Often this happens when the business owner finds that he or she no longer has face-to-face contact with most workers on a daily basis. When this occurs, it’s time to put proper management structures in place, along with more formal communication methods, to ensure that everyone knows how and why things should be done.
  • Articulate what the business’s values are in a mission statement, so that all new members of staff can read and understand them even if the founder or management team can’t relay them directly. But be careful not to write meaningless platitudes. This document should represent what your enterprise is about and for, and it should help staff understand what these values mean to them in day-to-day practice.
  • Think about what your business really is, what sets it apart, and how you can get your staff excited about this. Most companies are about more than simply making profit, but you must be able to identify what these magic ingredients are. Are you very innovative as a firm, and is this something that could instill pride in your workers? Do you provide particularly great customer service? Once you’ve identified what these value-added qualities are you need to embed them into the business culture, and keep these values consistent over time.
  • When the business gets to a certain size, introduce more formal ways of communicating to be confident that all workers are getting the right message, and still feel plugged in to the decision makers. Let people know what progress the business is making, and the part they’ve played in its success. Newsletters and off-site meetings might be another way to relay important information to those concerned.
  • You need people in an SME who live and breathe the culture to keep values alive throughout the organisation. At the beginning, this is likely to be the founder, but when firms start to grow other people should embody what the business is all about. Typically, there are three categories: the boss, managers, and customer-facing staff. It is essential to lead by example because only if employees can see that those at the top of the business are true to its values, will they be, too.

Things don’t stay the same in a business, as in life. It’s wise to embrace change as a good sign that your company is developing. There are bound to be growing pains in this process, but the rewards can also be great. Taking the leap into the unknown and bringing on new staff can be very worthwhile, but be careful to retain your enterprise’s core purpose and culture. Don’t let neglect dilute your SME’s values along the way. And, then, with the winning team on board, the future should look very bright for you, the team, and your business.
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