How To Know When To Hire Employees For Your Small Business

Understanding when to hire new employees for your small business is just as important as knowing how to hire them. In general, a hiring decision depends on how financially feasible it is for your business. However, whether you should hire a new employee depends on a variety of factors, including your business’s employee needs, your hiring experience, the talent pool, and the pain points in your business’s operations.

This guide explains everything you need to know about when to hire new employees and what you need to consider before making a final decision about growing your business’s team.

Let’s dive in.

How Do You Know When To Hire Employees? The Quick Answer

Knowing when to hire employees can help support sustainable business growth. You should hire employees for your business when you have the funds to cover employment costs, your business’s service or product quality is falling, your current employees are struggling, or you’re looking to grow your business.

The Pros & Cons Of Hiring New Employees

How To Tell When To Hire Employees

There are a few ways to tell when to hire employees, including a workload that outpaces your business’s current output capacity, falling service or product quality, and inefficient use of resources.

Keep reading for an in-depth breakdown of how to know when to hire more employees for your small business.

Your Business Can Afford To Hire A New Employee

When it comes to hiring employees, your business’s budget is the deciding factor. As the cost of hiring an employee will significantly impact your business’s bottom line, you’ll need to ensure that you have the funds to support paying a new employee.

It’s best to speak with your business’s accountant before making a final move. If you are your business’s accountant, you’ll need to review your business’s reserve funds and annual revenue forecast. Run these numbers against the annual wages you plan to pay a new employee to determine whether your business can afford to pay a new employee.

If your business doesn’t have the funds to support payroll taxes, benefits, and related hiring costs, you might consider hiring a freelancer instead. Freelancers are responsible for covering their own payroll taxes. Additionally, your business can save on benefits costs by hiring an employee rather than a freelancer.

Your Business’s Customer Service Or Product Quality Is Falling

If you are currently turning away new business, failing to maintain quality customer service, or experiencing a drop in product quality, it may be time to hire a new employee.

These issues are generally caused by too few employees handling a large workload.

If you and your team are overburdened by work responsibilities and certain tasks are falling to the wayside, it’s a sure sign that your business could use another pair of hands to help out.

Your Employees Aren’t Using Their Skills Efficiently

While it’s normal for employees to handle a variety of tasks, including those that may not be directly related to their role, it’s a problem when your team’s tech manager is spending their day fielding customer inquiries. Or perhaps you have a cashier who’s always away from the kiosk arranging displays and tracking inventory.

Hiring an employee can help your team stay focused on work that best utilizes their skills, as the new employee can take on the responsibilities that draw your other employees away from their vital work.

4 Questions To Ask Before Hiring A New Employee

If you’ve decided that your business should hire a new employee, there are some important factors to consider before making a final decision.

If you take the time to consider essentials, such as whether hiring a freelancer or W-2 employee is the best option for your business, you can save time and money and make the best hiring decision for your business.

Here are the four questions to ask before hiring a new employee.

Is Hiring In A Post-Pandemic & Inflation Economy A Bad Idea?

With the current 8.6% inflation rate and a changing employment market, it’s natural to have some reservations about hiring a new employee.

Hiring new employees is costly enough without factoring in the rising compensation costs that businesses take on. Worse yet, when compensation costs are adjusted for inflation, they have actually gone down by 3.3% in a year-over-year comparison.

Many larger businesses can simply increase pay and benefits to entice workers. Unfortunately, small businesses with limited payroll budgets have trouble increasing pay rates and improving employee benefits packages.

If your small business isn’t able to significantly increase pay or benefits, it’s worth focusing on keeping current staff satisfied and prioritizing sustainable growth.

Childcare stipends, health insurance coverage, and flexible work schedules are among some of the best employee benefits your business can offer.

The Bottom Line On When To Hire Employees

Businesses with the required funds in their payroll budget should hire employees whenever they need another individual to take on responsibilities.

For small businesses, hiring a new employee isn’t just a drop in the bucket; it’s often a substantial financial investment that can result in impressive business growth…or your business could lose valuable time and resources.

Hiring is always a risk, regardless of external factors, such as inflation or the pandemic. When considering those factors, taking as much time as needed to fill your business’s open roles with the best individuals for the job is essential.

If you’re ready to take the next step to grow your business, check out our guide to hiring your first employee for a step-by-step explanation of the recruiting and hiring process for small businesses.

FAQs About When To Hire Employees