Employing People in a Startup

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Many new businesses or start-don’t recruit people until the enterprise has become reasonably well established. Others need to recruit people before trading can begin. This presentation looks at the basic employment options for a new business and some of the employment challenges facing an entrepreneur.

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Employing People in a Startup

  1. 1. Employing People In a Startup
  2. 2. Introduction• At some stage, a start-up entrepreneur will need to consider taking on staff• Staff costs can quickly become a significant part of the fixed costs of a business• Employing the right staff can help a start-up grow more quickly and free the entrepreneur to do more important tasks• What choices should an entrepreneur consider when it comes to employing staff?
  3. 3. 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
  4. 4. Main employment optionsEmployment Definition & OverviewoptionsFull-time Permanently employed in the business; usually working over 30 hours per week. Full package of benefits & employment rights protected by lawPart-time Works 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 Employed for specific periods and/or tasks, often underworkers contract from an employment agencyConsultants & Individuals and businesses external to the business whichadvisers provide specific services and advice. E.g. accountants, lawyers, marketing specialists
  5. 5. Full-time employment (1)• Full-time means fully-committed to the business (doesn’t work for anyone else)• A big commitment for a start-up• Contract of employment sets out rights• The start-up needs to ensure that there is enough work for full-time employees – each new employee increases the break-even output
  6. 6. Full-time employment (2)Advantages DisadvantagesMaximises the output from each employee – Cost – the main disadvantage for aparticularly if they work overtime start-up business. Entrepreneur has to be sure that there is enough work toAvailable full-time to handle peaks or justify the cost of a full-time employeeunexpected increases in workloadMay work better with other employees, since Reduced flexibility in terms of addingthey are at work for longer (no guarantee skills or capacity – part-timethough!) employees provide more flexibilityPotentially better for customer service – Costly if there is a downturn incustomers are more likely to deal with the same business activity – full-time employeespeople still need to be paid, even if there is less for them to doEasier to recruit people looking for the greatersecurity and higher rewards of full-time workBetter returns from training
  7. 7. 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)
  8. 8. Part-time employment (2)Advantages DisadvantagesLower costs: reduces the break-even point Potentially higher costs on training,(lower overheads) inductionMore flexible – part-timers can work Difficult to handle peaks in workloadovertime if there is sufficient work to doPotentially more motivating & less stressful; Less opportunity for training andcan help retain good people promotionCan recruit a wider range of skills for the Harder to communicate withsame total employment cost (e.g. part-time employees if they spend less time inaccountant + part-time designer) the businessEasier to recruit people who don’t want to,or cannot, work full-time (e.g. mothers withchild care duties)
  9. 9. 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
  10. 10. Temporary employment (2)Advantages DisadvantagesFlexibility – temps give the entrepreneur Higher cost per hour; temps are oftenbetter control over the cost of staff, charged out by an agency at a ratebringing in more people when required that is more than the employee wouldand releasing them when things get be paid if she/he was permanentlyquiet employed by the businessIdeal for specific jobs, tasks and Temps less likely to know andprojects – e.g. installation of IT systems, understand the business, or to fit inwebsite design, relocation, handling with its culture. This might be acustomer calls after a promotional negative for customer servicecampaignAlways the chance that a high quality Potentially less motivated andtemp can be persuaded to join the productive; less interested in careerbusiness on a permanent basis – so progression (in the business)employing temps is a low-cost and low-risk way of recruiting people!
  11. 11. 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• Sometimes funded by government• Think of them as specialist suppliers
  12. 12. Consultants & advisers (2)Advantages DisadvantagesFlexibility and lower costs - access Often expensive – but that it is thespecialist skills without having to cost of getting specialist advice!employ someone on staffSkills are provided for the business May not know or appreciate thewhen needed culture of the business (most consultants try hard to understand their client’s business though)Possible to get specialist advice for Potentially less committed to thea start-up at relatively low cost business, since they don’t workwhilst the business establishes itself thereOver time, the adviser gets to knowthe business well
  13. 13. Flexible working (1)• 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:
  14. 14. Flexible working methods• 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
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