Chapter 10: Employing People

Reasons for Employing People:

• Big businesses cannot carry out ALL THE TASKS necessary to provide the finished product or service. As a business grows, to meet demand - á Nº of staff employed.
• Most businesses require SPECIALIST EXPERTISE in production of goods and services, marketing, managing finance - employ appropriate people for the job.
• Some businesses are SEASONAL. Demand varies e.g. A Christmas gift shop (winter) or strawberry growers (Summer). A business must meet demand during peak season by employing additional staff.
• A start-up business that wants to EXPAND will need to consider outsourcing (recruiting workers from a third party), training existing staff or taking on new staff.

Types of employment used in small businesses:

 

1. Permanent Employees
- Full time/part time
- Open-ended employment + Extensive obligations

2. Temporary or fixed-term contract employees
- Employment contract
- Predetermined time OR until a specific task is completed.

Employees on zero hour contracts
- On-call
- Not obliged to offer work (business)
- Not responsible for accepting any work (worker)

Employment agency staff
- Workers have contracts with employment agency that supply them. A firm hires them for an agreed time from the employment agency.

Self-employed freelancers, consultants and contractors
This gives the business the minimum of employer obligations

Permanent or Temporary Employees

Permanent staff are those needed throughout the year and whose services are necessary to the continued running of the business. They tend to be more motivated than temporary staff, who have less loyalty to the business.

Temporary Staff are those needed to meet seasonal demand, to complete a particular task or to cover for situations such as maternity leave, staff illness or holidays.

Full-time or Part-time Employees

Full-time jobs could include being a machine operator in a factory or a telephonist.

Advantages of full-time workers:

• Available for more hours
• Likely to be more loyal than part-time staff
• More workers want full-time work
• Recruitment and administration costs are lower, relatively.

Part-time jobs could include a cleaner who is only required a few hours each morning or evening, so he may have a permanent post but one that is part time.

Advantages of part-time workers:

 

Job-sharing

 

This is where two or more people share the responsibilities, pay and benefits of a full-time job in proportion to the hours they work.

This may be an invaluable way of retaining staff who can no longer work full time and may otherwise wish to leave.

 

External Consultants, Contractors and advisors

In addition to employees, a business might hire the services of consultants, contractors and advisors.
As these people will be self-employed or belong to a separate company, this is a useful way of taking advantage of extra skills and labour without incurring unnecessary costs.

e.g. A design consultant might be hired to advise the business on particular aspects of packaging design, working with the business for a few weeks only.

e.g. An outside IT contractor might be hired to build a business website

e.g. Advisors, such as Business Link and Prince's Trust mentors, provide their services free to start-up businesses.

Drawbacks of employing people

1. Cost of employing people
- Have to pay the worker's actual wage and salary as well as other costs i.e. NICs, possible pension contributions, extensive admin costs
- TIME = Spent ensuring payment systems (inc. tax deductions and NICs) are organised effectively.

2. Meeting the range of employment legislation requirements
- Burden as small businesses lack specialist knowledge of employment laws.
- No human resources dep. to advise
- Example of employment legislation: Minimum wage, working time requirements, equal pay.
- Working environment must be safe and secure (meeting the requirements of the health and safety legislation)

3. Managing Staff
- Leading and managing staff effectively to ensure staff are well motivated and performing their jobs well.
- The entrepreneur in a start-up business may not have the skills to manage employees.

4. Employee Absence
- Start-ups --> Employ few people --> Absence of 1 employee --> Significant negative :( impact on business.