Business mentor: Explore every option before hiring workers

Q: I need to expand my business but am worried about the consequences of employing someone. My business is too small to cope with redundancy pay if sales drop, for instance. Family and friends have helped out, but this is no longer working.

A: Philip Kotze, B.Proc, of AdviceWise People, replies:

There are two issues here: hiring, and managing workload. By separating these two, you can put the uncertainty where it belongs - with the hiring.

With few exceptions, hiring people is the most expensive buying decision that small business owners will make. How much time would you spend on buying equipment worth $28,000? Remember that that is only the first year's pay.

There are no shortcuts, and no exceptions. First you have to prepare a job (or position) description and then you have to test applicants against that as objectively as possible.

A good, step-by-step guide to employing staff is an essential tool for small businesses that cannot afford recruiters. Look for simplicity - if it looks complicated, it probably is.

The Appeal Court has confirmed that employers can lay off staff if trading activity has dropped and that they do not need to pay compensation for such redundancies. It is best to include clauses in employment agreements confirming that business activity influences staffing needs, that hours of work may be reduced or redundancies declared after discussion with employees and that there is no redundancy compensation.

Once you have decided, be consistent, because you cannot pay redundancy compensation in some cases but not in others.

You can appoint casuals for irregular work, or permanent part-timers. You could even try the employee out on trial, for say three months - despite the widespread, incorrect, belief that this is illegal. But during this period you must give feedback on their performance, so that they can improve.

Finally, be sure to have a good, if simple, employment agreement.

* Philip Kotze is chief executive at AdviceWise People, an employment law and employment management firm working with small to medium businesses.

Ph: 0800-692-384

Advice Wise

* Send Mentor questions to: ellen_read@nzherald.co.nz. Answers will be provided by Business in the Community's Business Mentor Programme.