Can You Afford to Hire a New Employee?

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Can You Afford to Hire a New Employee?


Portrait of businesswoman sitting at office desk and thinking the solution while working late in front of a computer.

If your company has more work than it can manage, you and your employees become stressed out by trying to stay on top of everything. This is usually a sign that you need to hire a new employee. However, it’s better to avoid waiting until you’re drowning in work to hire a new employee. Regardless of where you’re at, you must always determine whether or not your company can afford to hire a new employee. Hiring when you can’t afford to will only add to your stress or hurt your business.

What You Need to Factor in Besides Salary

The cost of a new employee is more than the salary you’ll be paying him/her. You must include the costs of employee benefits, perks, training, equipment and supplies, and payroll taxes. The recruitment process takes time and money. Depending on how you plan onĀ recruiting, it will either take more time or more money.

Posting ads on job sites yourself is a bigger time investment because you will have to sort through the resumes on your own. You may also struggle to find the right fit for the job this way. Another recruitment method that saves you time and attracts more qualified applicants is paying a recruitment company to find a good selection of potential employees for your business. If you’re willing to consider both methods of recruiting, then perform two calculations for comparison.

Perks are a category some business owners forget to factor in when evaluating the cost of hiring a new employee. Write down the employee perks you offer, such as free food and drinks, seasonal events, and team building activities. Then, calculate how much it would cost to include one more employee.

Equipment and supplies are another commonly forgotten category when business owners estimate how much a new hire will cost. Pens and paper seem like a minuscule expense but they are still a cost, and they add up over the year.

Compare the Cost of Hiring a New Employee to Projected Business Profit

After you know how much a new employee will cost, you must estimate your sales for the next 12 months, project how much revenue a new employee will generate for the company, and analyze your profit margin. You need to have a good idea of how much money your company will earn to know whether or not you have the funds to support a new hire. Remember to be conservative with your sales forecast. If you’re too optimistic, then hiring a new employee based on over-optimism could be a bad decision.

What to Do If the Estimated Expense of Hiring is Too High?

Look into alternatives such as hiring a part-time employee, temporary employee, or a freelancer if you’ve determined that you can’t afford a new hire at this point in time. You might be able to afford a part-time employee. If that’s still too much of an expense, then you can still pay freelancers to help with your workload.


Hiring a new employee is not a task you should do rashly. You must take the time to calculate how much a new employee will cost your company and analyze your company’s projected future profits for the next 12 months. Think about whether or not an employee will pay off after the year, and more importantly, if your company can handle the initial expense of taking on the new employee. Remember that a new employee takes time to adjust to the company and may not have a noticeable impact on your bottom line the first few months.

Contact us for a business consultation on hiring a new employee and what the best course of action would be for your company.


By | 2016-05-20T08:33:38-07:00 May 20th, 2016|Blog, Business Advice, Hiring, New employees|Comments Off on Can You Afford to Hire a New Employee?

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