Seven signs it is time to hire your first employee.
The right time to hire your first employee is when there is consistent work you are turning away or doing badly, the cost of a hire is covered by the revenue or time it frees up and you can describe the role in a few clear outcomes. If you can tick all three, the risk of waiting is usually bigger than the risk of hiring. This guide covers the signals, the real costs and how to prepare so your first hire goes well.
Seven signs it is time to hire
- You are turning work away, or delaying it so long that customers notice.
- You spend most of your week on tasks someone else could do, eg admin, scheduling or routine delivery, instead of selling or improving the business.
- Quality is slipping because there are not enough hours in the day.
- The same gap keeps costing you money, eg slow follow-up on leads or invoices sent late.
- Demand has been steady for three to six months, not just one busy spell.
- You have the cash to cover several months of the full cost before the hire pays for itself.
- You can describe the role in a few outcomes, not a vague "help with everything".
Signs it is not time yet
- Busy periods are short and seasonal. Freelancers or casual staff may suit better.
- You cannot explain what the person would do in their first month.
- The work could be fixed with better tools or processes.
- Cash flow could not cover the cost if a big customer paid late.
What does a first employee really cost?
Salary is only part of it. Budget for:
- Salary or wages
- Employer contributions, eg superannuation in Australia, workplace pension and National Insurance in the UK or payroll taxes in the US
- Workers' compensation or employer's liability insurance where required
- Equipment, software licences and any workspace
- Recruitment costs, eg job ads
- Your time to recruit, onboard and train them, often the biggest cost of all
Rules and rates differ by country and change regularly, so check official government guidance or talk to your accountant before you commit.
Employee, contractor or casual?
A contractor or freelancer can be a good first step when the work is project-based or uncertain. An employee makes more sense when the work is ongoing, you need to direct how and when it is done and you want someone to grow with the business. Misclassifying an employee as a contractor can lead to penalties, so check your local rules.
How to prepare for your first hire
- Register as an employer where your country requires it, and set up payroll.
- Write down the role's outcomes for the first six months.
- Set the pay range by checking similar roles in your area.
- Create a simple careers page on your website. It is where candidates check you out, and where people can find you when you are not advertising. See what to put on a small business careers page.
- Plan the first week, including equipment, logins and real work they can finish.
Start building your talent pool before you hire
The hardest part of a first hire is often finding good candidates at the moment you need them. If you set up a careers page with a "join our talent community" option now, people who like what you do can sign up before you have a role, and you will have a head start when you do. Read more in what is a talent community?
Spacewalk's careers page software gives you a branded careers page with a built-in talent community from £10 (US$13, A$19) a month billed yearly. It goes live on your own website in about 10 minutes, with a 14-day free trial and no credit card. When you are ready to hire, follow our step-by-step guide on how to hire employees for a small business.
Frequently asked questions
When should a small business hire its first employee?
When demand has been steady for several months, you are turning work away or neglecting higher-value tasks and you can afford several months of the full employment cost before the hire pays for itself.
How much does it cost to hire your first employee?
Expect the total cost to be well above the salary once you add employer contributions, insurance, equipment, recruitment and training time. Check your country's employer obligations or ask your accountant for an accurate figure.
Should my first hire be a contractor or an employee?
A contractor suits project-based or uncertain work. An employee suits ongoing work that you need to direct. Check local rules, because misclassification can lead to penalties.
What should a small business's first hire be?
Usually the role that frees the owner for the highest-value work, often admin, operations or delivery, so the owner can focus on sales and growth.