How to Hire Your First Employee – Expert Tips

Hiring employees, if done correctly, can be one of the most leveraged ways to grow your business and increase profits.

Finding, onboarding and training new employees can take time – especially if you’re new to hiring.

It’s a mistake to leave it until you’re flat-out in your business to make your first hire, as you may be tempted to hire quickly without proper thought and planning.

What Role Do You Need Filled?

It can be hard to decide what role needs filling when you’re looking to hire your first employee.

Some ideas to consider:

Roles that can start bringing in revenue quickly
Roles that you don’t enjoy doing yourself
Roles that can be done better or faster by someone else
Roles that can be performed at a lower cost to the business by someone else than if you yourself were to continue doing them

One example

If you can charge out your time at $160 per hour for some tasks, it doesn’t make sense for you to be doing other tasks that you can only charge out to your clients at $60 per hour.

Another example

If you can attend networking events and sell $2,000 worth of monthly recurring services to even just 1 new client, it doesn’t make sense for you to be at your computer performing tasks that you’re charging out to clients at $60 per hour.

In both of these scenarios, the tasks you’re doing that are worth $60 per hour can be completed by an employee that you’re paying much less per hour to do.

Plan for the Cost

If you don’t already know, find out which Award your new employee will fall under. In Australia, we have Awards that stipulate minimum wages for particular roles and particular industries.

Start by looking for an Award that covers your Industry. If you can’t find the relevant wage rate for the role there, look at the more Awards that cover multiple industries (eg Clerks Private Sector Award for administration roles).

If you aren’t able to work this out yourself, consult a human resources specialists.

Once you know the rate you’re going to pay your new employee, calculate the approximate monthly cost to your business, as well as the approximate annual cost.

A simple formula

Hourly gross rate x hours per week x weeks in the month

Add on superannuation of 11.5%*

Add on 5% for additional costs

Equals the approximate total monthly cost

This simple formula doesn’t take into consideration the exact additional expenses (such as but not limited to workcover insurance, allowances, annual leave loading, gifts and staff amenities). It’s a quick-start formula to get a simple plan in place and give you the confidence to make your first hire.

How Much Do You Need To Have Saved?

In a perfect world, you would have your new employee’s annual wage saved and put aside.

But if you’re about to hire your first employee, you’re probably not in a position to have that much money saved ahead of time – you need that first employee to get you that increase in revenue to start with.

Rather than a hard-and-fast rule of how much money you should have set aside (for example 3 months or 12 months worth of wages), consider the particular role that you’re employing for.

How quickly will your new employee be able to bring in new revenue?

For example, are they a physiotherapist that will be seeing their own clients by their 2^nd week in employment? And the clients are paying on the same day?

This is a very cashflow positive situation to be in.

You may have extra income in the bank before you’ve even had to pay your new employee’s wage.

This may mean you only need 2 month’s worth of wages saved before hiring.

Compare this to our second scenario.

You’re hiring a new conveyancer who will take 1 month to be completely onboarded and trained in your operations. The revenue from their first settlement won’t come in for another 6 weeks from them beginning to work on the file.

This is a cashflow negative situation to be in.

This may mean you want 4 month’s worth of wages saved before hiring.

So you can see you’ll need more money saved up in advance to cover the cost of the employee in the second scenario, compared to the first scenario.

Other things to consider:

Are profits strong at the moment?
Are you expecting good cashflow?
If your income typically fluctuates throughout the year, are you heading into a slow time of the year sales-wise, or are you heading into a strong time of the year sales-wise?

You may find that you don’t need as much saved upfront as you initially thought.

You need to think about what makes sense for YOUR business and for the specific ROLE.

Often it’s a fear mindset that stops you from hiring your first employee. It’s easier to tell yourself you can’t afford it than it is to take the leap.

Remember that hiring an employee isn’t just saving you from doing 5 hours of work a day – it’s saving you from doing those 5 hours of work day PLUS adding to your bottom line because your 5 hours are now spent on higher income generating activities.

Done correctly, hiring is a form of LEVERAGE.

LEVERAGE is the key to growing your business smartly.

About us:

Festival Bookkeeping are a team of Xero advisers and bookkeepers located in Adelaide, South Australia. We help busy business owners and their teams Australia-wide. You can contact us on 0421 501 887 or sarina@festivalbookkeeping.com.au

Learn more about our bookkeeping services here: https://festivalbookkeeping.com.au/services/xero-bookkeeping-packages/

Looking for more helpful articles about bookkeeping and accounting? Try https://festivalbookkeeping.com.au/minimum-wages-in-australia/ and https://festivalbookkeeping.com.au/help-i-think-ive-underpaid-my-employees/

Read what our happy clients have to say here: https://festivalbookkeeping.com.au/testimonials/

General super guarantee rate in Australia 1 July 2024-30 June 2025

This article should not be taken as legal or tax advice and you should consult with your financial professionals about your unique financial situation before acting on anything discussed in these articles. These articles are intended to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.