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.

1. Employing People
In a Startup

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. 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. Main employment options
Employment Definition & Overview
options
Full-time Permanently employed in the business; usually working over
30 hours per week. Full package of benefits & employment
rights protected by law
Part-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 under
workers contract from an employment agency
Consultants & Individuals and businesses external to the business which
advisers provide specific services and advice. E.g. accountants,
lawyers, marketing specialists

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. Full-time employment (2)
Advantages Disadvantages
Maximises the output from each employee – Cost – the main disadvantage for a
particularly if they work overtime start-up business. Entrepreneur has to
be sure that there is enough work to
Available full-time to handle peaks or justify the cost of a full-time employee
unexpected increases in workload
May work better with other employees, since Reduced flexibility in terms of adding
they are at work for longer (no guarantee skills or capacity – part-time
though!) employees provide more flexibility
Potentially better for customer service – Costly if there is a downturn in
customers are more likely to deal with the same business activity – full-time employees
people still need to be paid, even if there is
less for them to do
Easier to recruit people looking for the greater
security and higher rewards of full-time work
Better returns from training

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. Part-time employment (2)
Advantages Disadvantages
Lower costs: reduces the break-even point Potentially higher costs on training,
(lower overheads) induction
More flexible – part-timers can work Difficult to handle peaks in workload
overtime if there is sufficient work to do
Potentially more motivating & less stressful; Less opportunity for training and
can help retain good people promotion
Can recruit a wider range of skills for the Harder to communicate with
same total employment cost (e.g. part-time employees if they spend less time in
accountant + part-time designer) the business
Easier to recruit people who don’t want to,
or cannot, work full-time (e.g. mothers with
child care duties)

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. Temporary employment (2)
Advantages Disadvantages
Flexibility – temps give the entrepreneur Higher cost per hour; temps are often
better control over the cost of staff, charged out by an agency at a rate
bringing in more people when required that is more than the employee would
and releasing them when things get be paid if she/he was permanently
quiet employed by the business
Ideal for specific jobs, tasks and Temps less likely to know and
projects – e.g. installation of IT systems, understand the business, or to fit in
website design, relocation, handling with its culture. This might be a
customer calls after a promotional negative for customer service
campaign
Always the chance that a high quality Potentially less motivated and
temp can be persuaded to join the productive; less interested in career
business on a permanent basis – so progression (in the business)
employing temps is a low-cost and low-
risk way of recruiting people!

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. Consultants & advisers (2)
Advantages Disadvantages
Flexibility and lower costs - access Often expensive – but that it is the
specialist skills without having to cost of getting specialist advice!
employ someone on staff
Skills are provided for the business May not know or appreciate the
when 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 the
a start-up at relatively low cost business, since they don’t work
whilst the business establishes itself there
Over time, the adviser gets to know
the business well

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. 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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