Developing your business can mean reaching new innovations within your industry and expanding upon the services you provide. But, these checkpoints can be difficult to achieve without investing in your employees and hiring new people with skills that can help your business expand its knowledge into new areas.
Below, the OutRise team have broken down whether you, as a business, should consider further investing in your current employees and/or hiring new people and whether you can afford it.
Should I increase my employee’s salaries?
There are many different aspects you can consider when deciding whether to increase your employee’s pay:
- Are your employees outperforming your expectations?
- Do they show potential for the future of your business?
- Are their skills critical to your business and its operations?
If your employees are performing in a way that is above their position or role, it shows that they can handle more responsibility within your business. This is a great asset to have within any type of company and their dedication should be rewarded and their role could be expanded to fit their strengths and match their remuneration to the value for your business.
Finding your way in a new business can be a challenge for some employees, but with the correct environment and encouragement, key skills can develop and confidence can grow exponentially. Take into consideration what your business could look like in the future if it held onto your current employees. How much have they changed and grown since they started? How much is that potential worth to you and your business?
Every employer relies on its employees in order to operate, they are the heart of any business. The collective skills that your team has or will eventually develop, will be incredibly important to your business, your clients and your customers. Consider how your company would cope without them, or just one employee. Will your services be high quality? Will your clients stick around without the expertise of an ex-employee?
Keeping the employees you have can be made so much easier if you can link their value to appropriate remuneration levels.
Can I afford to increase salaries?
Unfortunately, increasing salaries doesn’t just depend on employee performance or skill. Your business should consider whether you can afford to increase salaries. And if so, how much can your business afford?
The answer to their questions will depend on:
- Business growth rate: If your business is continuing to grow, this may mean that more responsibility is required of your employees in order to maintain the same rate of growth.
- Annual profit: How much is your business making in terms of profit each year? How much of a pay increase is appropriate for your business’s size and financial performance?
- Contributions: When increasing your employee’s pay, you will have to consider how this will affect national insurance contributions and pension contributions. These are both additional costs to your business.
- Other areas of your business: Before increasing salaries, think about whether that money could be used in other areas of your company. This could be new equipment, higher quality materials, or even training your employees in new areas of your industry. If these areas have a good potential of increasing your business’s performance and service quality, it could, in turn, increase your profits. This will put you in a better position to then reward your employees by increasing their salaries.
Consulting with an accountancy firm can help you figure out what you can afford and how much an increase in employee salary will affect your finances. Reach out to the OutRise team if you are considering increasing your employee’s pay:
Or use our free financial tool below:
Should your business hire new employees?
There are many benefits to employing new people:
- New employees could have greater knowledge and experience within your industry
- Current employees can learn from your new employee’s experience
The workload can be distributed, meaning less pressure on your employees as a whole (don’t forget that there will be a period of embedment)
- Your business can take on more work, without the worry of not meeting your client’s expectations and diluting service levels
Like with increasing salaries, there are a few things you should keep in mind when considering employing more people:
Consider why you feel you need more employees. Is there more demand from your clients? Do you need to find people with different sets of skills compared to your current employees?
What you want to achieve as a business is a great aspect to think about when deciding whether to increase your workforce. Break down how new employees could affect your business and how they could contribute to your company’s future growth.
Costs and Budget
Hiring new people can be expensive and it’s a good idea to take a look at your current financials, as well as how much a new employee will cost your business and affect your future profitability. Below are a few examples of additional costs you need to consider:
- Recruitment (through an agency or advertising campaign)
- Employee training process
- Employee salary (and optional yearly bonuses)
- National insurance contributions
- Pension contributions
- Extra travel costs
Below is a financial tool that will show you how much your current team costs, with the option of adding in new team members, providing for bonuses and considering additional costs. Have a play around!