47:4 Employees and benefits
Candy explores hiring and compensating employees.
It’s all over the news; countries are entering or on the brink of recession. We’ve teamed up with Candy Phelps to explore essential financial skills freelancers and agency owners should flex during these times.
In this episode, we discuss hiring, including when to hire, alternatives to full-time hiring, and preparing ahead to avoid stress.
- How do you know when you are ready for your first employee?
- What are the alternatives to hiring your first employee?
- What should you do before you hire?
- How much employees actually cost?
- How to hire good employees / hiring in this economy?
During the course of interviewing Candy, here are some of my key takeaways:
- The first sign that a business owner is ready for their first employee is when they are overwhelmed and unable to handle the workload alone.
- It is advisable to have at least some money in the bank or a large project booked before considering hiring an employee.
- Onboarding a new employee typically takes three to six months, depending on their level of experience in the industry.
- Alternatives to hiring a full-time employee include hiring a contractor or outsourcing certain tasks.
- It is important to plan ahead and avoid hiring out of desperation.
- Hiring family members as the first employees can be a difficult situation if things do not work out.
Connect with Candy
- 1 Day Works Website – click here
- Bizzy Creative Website – click here
- LinkedIn – click here
Lee: Welcome to Trailblazer FM. This is your host Mr. Lee Matthew Jackson. And again I am joined by the one, the only Candy. How are you today?
Candy: I’m doing great. It’s a sunny, beautiful day here in Wisconsin, so loving the fall weather.
Lee: I’m doing great too, and so is the aeroplane that I think is doing a loop the loop outside. So if anyone can hear that in the podcast audio, I sincerely apologize. But I’m pretty sure the pilot is having the time of their lives. I just feel sorry for any passengers that are on board. [laughter] So folks last week we had a look at business planning and projections. This week as your business grows, we wanna look at employees and benefits, and first of all. The first question that we’re just gonna hit you straight out of the gate with is how do you know when you’re ready for your first employee Candy?
Candy: Well, I feel like most people start to feel a little stressed and overwhelmed in their business when they just have way too much that one person can do. Especially ’cause we’re a service-based business owners. There’s a limit to our time. So the very first sign is that you’re just totally maxed out and you have probably more customers than you can handle in a reasonable manner, and maybe you’re starting to drop doing some of those marketing and sales activities that we’ve been talking about. So you’re probably feeling a little stressed and typically, your business is gonna need to have at least some money in the bank or a huge project booked before you’re gonna wanna consider hiring another person as an actual employee. There is usually a three-month onboarding when you get a new employee just… You’ll not believe how many things a person needs to learn that you just sort of take for granted in your business. Whether it’s how you store your files or all sorts of information about your clients that you know, but nobody else would know like how you bill them or how responsive you need to be with them.
Candy: So typically if somebody you’re hiring is say already has experience in the web design industry. Been doing something very similar. I like to plan on three months or so for onboarding them before they’re gonna be able to really take off and do their job. If you have an awesome person, it could be way less time than that. If you end up hiring somebody that’s out of the industry and you’re gonna have to train them about websites and your business? You need to plan on about six months of training and onboarding. So those things are things you need to consider before you go out and just put an ad on Craigslist that you’re hiring somebody. You need to have the time and the money to be able to take on a new person.
Lee: And please don’t make the mistake I made, which was hiring too late in the process. So I actually got to the point where I could pretty much no longer deliver the projects that I had booked in unless I got somebody in. Which meant I was making really poor decisions on who I hired just out of desperation, and essentially everything ended in a little bit of a train wreck. [laughter] So if you can plan ahead. Please do. Speaking of getting in that first employee. What are the alternatives to actually hiring a full-time person especially when you mention the amount of time that might be needed to onboard someone?
Candy: Well, I think I’ve been in the exact same situation Lee, where I waited too long and I was overwhelmed, and then I actually didn’t have time to train somebody or put in any time building operations and systems for the business. Everything was just in my head. And so the first people I hired were very… It was a reactive situation, and it was a very bad experience for them as employees for sure because it was… They didn’t get good training, they didn’t have good systems, and it was a bit of a crazy train. Luckily/unluckily, the first two people I hired were family members, which is on my list of things to not do. [laughter]
Candy: I hired my sister as the first employee I had, and she was amazing, but she was coming from UPS as an engineer. She had never built a website or didn’t have any marketing experience, so I spent a lot of time training her how to just build websites, and then I hired my Aunt Sally because she just needed some work, and it was like, “Oh well, maybe aunt Sally can do some social media posts or whatever.” And again, this was just not smart. It was not strategic hiring, so if you find yourself in that desperate situation, I recommend not hiring somebody ’cause getting an employee is a serious paperwork business, and it’s a different level of commitment.
Candy: So thinking about how you can get help without getting an employee might be a good option at the beginning, either to get contractors. So just finding other people who are doing web design or graphic design or whatever you need help with. You could consider getting a business partner so maybe you know another freelancer who is in a growth mode or maybe has the same kind of values as you. Merging businesses is a great idea. Also comes with a fair share of paperwork and a lot of commitment, but it’s an option that a lot of people I don’t think consider.
Candy: And then just looking at vendors like hiring an accountant or a virtual assistant or somebody else who can help you with project management or things that maybe are weighing you down, that aren’t necessarily the billable work. But other things with the administration of the business, and then automation. This is something that takes a fair amount of time to set up if you’re getting into Zapier or If This Then That. So it can take some time, but then once you have those things set up, you can really save a lot of that kind of tedious client onboarding, creating files, putting people into your accounting system.
Candy: All of those types of copying and pasting things that you might be doing or you might consider hiring a VA for, are things that you can automate with a lot of the amazing software out there, so these are all good things to do if you feel like you’re not quite ready for an employee or you just don’t have time to get out and really do a good job hiring and training somebody.
Lee: Automation for me has been an absolute lifesaver, especially for just capturing data and then putting it in the right place and getting tasks ready for me for the following day. I am the world’s worst at seeing something and thinking that I will remember to do something about it later. So automation saves [laughter] me from forgetting all of that stuff. Also though let’s throw into the mix a little bit of AI as well ’cause I’ve been exploring some of these tools to help you with your writing. So if writing is taking lots and lots of time. Especially say social media posts, then I’ve been actually relying on Jasper AI of all things. I feed it with the inputs on exactly what sort of outputs I want so I’m still kind of creating. But it’s given me some great ways of saying things or rephrasing things that’s actually taken a little bit of the brain power out of it and so speed up some of my processes as well for getting some of the social posts or some of the content created. So AI certainly may be worth looking at. Which is a little bit scary I know because we all remember terminator in the 80s. [laughter]
Candy: And it’s gonna put us all out of jobs which I’m fully aware of but yeah. Use it until none of us have any skills to contribute.
Lee: Just remember that Star Trek looks like an awesome world to live in, [laughter] so I’m kinda hoping that that’s the way we will go. [chuckle] So what should you do before you actually hire somebody?
Candy: So hiring is a big deal, it’s a lot bigger deal than just getting somebody off Fiverr to build a website for you. You really wanna make sure it’s a good fit and invest some time into getting the right person. Again, don’t hire your aunt just ’cause she emailed you saying she’s retiring and needs some work. There’s things that you might wanna do out of emotion, and typically you want to try to not be emotional when you’re hiring and really think strategically about it. But with that said, you also wanna do a gut check. So obviously you’re gonna be working closely with this person if it’s your first employee. You wanna have a good rapport with them, you wanna have some level of shared values and shared priorities.
Candy: So check your gut when you’re doing interviews and make sure the person feels like they’re gonna be a good fit and somebody you wanna spend a lot of time with. Make sure you’re doing a very clear job description. So this was something I mistakenly did when I first started. I sort of rounded up every task I could think of that I didn’t like doing and then put that as somebody’s job, [chuckle] and it was an impossibly long list of variety of tasks that had very different skill sets.
Candy: So I think it’s very common for people to do that, where they’re like “Well, I don’t like admin type stuff, but also I’m not so great at accounting, and then also maybe I need somebody to do sales.” Those are three different jobs, so don’t expect somebody to do three different jobs in 20 hours a week. You really need to be strategic about who the person is and what their skill sets are, and then trying to make sure they have maybe at least 20 hours of work a week of that type of work, so you’re not trying to train them on a million different things, you’re just not gonna get good performance if you’re spreading somebody too thin.
Candy: And then the other thing is just understanding the legal ramifications. The tax and accounting ramifications of getting an employee. It’s a lot more complicated than just hiring a 1099 contractor and looking into the human resource stuff I know in the States, there’s tons of human resource laws and things that you need to be pretty careful about with documenting people’s hiring and documenting if they’re having problems and things like that. Luckily, there’s a lot of vendors out there that can help you with that.
Candy: So accountants, there’s a lot of HR consultants, we hired one to help us build our employee handbook and things like that, that has been super, super helpful and way valuable in terms of even if you’re paying them a couple of hundred bucks an hour, these are the skills that you don’t have or knowledge you don’t have. So it’s worth getting help when you get somebody, and then just doing a little research on interviewing, if you haven’t been a hiring person in a past job, this might be an uncomfortable position for you, and for me it surely was. I was just treating somebody like we were out for coffee, being friends, and not actually trying to understand their skills and experience.
Candy: So just research, do some googling and find some blogs about how to interview people, what to look for, and then coming up with some kind of matrix of how you’re gonna determine who to hire, so you’re not just thinking, Well, I liked that person or that was the last person I talked to, so I’ll hire them. And then finally, just developing a hiring philosophy, this may be determining whether you have a lot of money or you have a lot of time, but you kinda wanna think about where you’re gonna find people, are you gonna be looking for the top talent and be ready to pay them with exciting benefits, or are you willing to take somebody with less experience and train them, these are all things that will determine where you’re advertising when you hire.
Lee: Absolutely, my favorite way to hire somebody is totally the training option, especially with having apprentices. It’s an apprenticeship scheme here in the UK, we’re actually actively looking for another apprentice ’cause we bring many through at the business. So these are usually 17, 18-year-olds who have just left school and are looking to train and develop a career, and we get to teach them programming or social media or management skills, account management skills, et cetera, and then they can grow and develop in the business, they then either fly the nest and go off and have great success in other businesses, or they stay with us, which is phenomenal.
Lee: So just being able to bring people in with no experience and train them up and really kinda bless them. And then in turn be blessed by them. However, I also recognize that you need to be in a position where there is already money coming in, you can invest the time into those people to train them, et cetera so yeah, there are definitely swings and roundabouts. For us when we’ve hired really great people as in really clever people on paper, they’ve unfortunately been kind of a little bit full of themselves [chuckle] and think that they know better than us, and then we’ve had some bad experiences that’s been with at least two designers that I can think in our history where they’ve come in, decided they know better than us and have been really, really difficult to work with. [chuckle]
Lee: Again, that was probably down to the interview techniques because I like you just did the whole, “Hey let’s be friends. Let’s have a coffee thing, you’re alright, you seem okay. You like Marvel like I do. You’re probably hired.” As opposed to really asking those searching questions, because I’m pretty sure some of the alarm bells would have rang or rung, whatever the right word is with those questions. Now we’ve got a really interesting question coming up right now, especially ’cause we’ve talked about training people who don’t have the experience. How much does an employee actually cost because it is a lot more than just their salary?
Candy: Yeah, I think that’s one of the hardest things to figure out when you’ve never had an employee, and when you start doing all that research about taxes and accounting and how you run payroll for folks, you’ll realize that there are a ton of payroll taxes, at least in the United States where you have to pay social security taxes. You have to pay something called FICA. There’s a bunch of things that the employer has to pay on behalf of every employee they have. And so whatever their hourly rate is, let’s say you pay him 25 bucks an hour. Then there’s another several dollars on top of that that the employer is paying, and that goes typically to the government.
Candy: So this number is very difficult to figure out until you actually run a payroll and see what that looks like. But I’ve read some things that you can basically take their salary and it’s a 1.3 or 1.5 factor. And a lot of that is dependent on how many benefits you’re offering them. So if you’re offering health care or if you’re offering vacation time or some kind of 401k. That number is probably gonna be closer to one and a half times their salary. If you’re not offering health care right away or other types of… Some people live in countries that have free health care, and lucky you.
Lee: We’re one of them.
Candy: But here we have to pay for our health care, but yeah, so factoring in 1.3 times what you’re actually gonna offer them is a good sort of rule of thumb to figure out how much you need to budget for having a new employee. And then think about things like training, if you’re gonna buy them a computer or other equipment, and then just generally unproductive time. So this is when you have an employee and if you’re guaranteeing them 40 hours a week or 20 hours a week or whatever it is, especially if they’re on a salary. There’s going to be times where you might not actually have a bunch of billable work for them to do, but you’re still paying them. So you need to factor all of those things in. A 1.3 or 1.5 factor is a good rule of thumb, and then you just have to kinda look back once you have a few months of data, then you can go back and see what it’s actually costing you.
Lee: Absolutely, with regards as well, to the time where people are essentially not doing anything, listen to the second episode of this season, because Candy does mention the magical billable hour equation, where not every single hour that we work is billable. Likewise for our employees either, so that actually affects what we end up charging the clients in the end, based on how many projects we can get in, et cetera. And also don’t do what I did when I first had employees and I saw them on Facebook, and I was rather cross. [laughter]
Lee: But then I realized it was my responsibility to actually ensure that they kept busy and that they understood the direction of the business, and we’re bought in and we’re finding things to do that were productive or that were useful during those times that we didn’t have the billable work. I’m very pleased to say nowadays, having continued to teach our team where we want to be, whenever there is that kind of space where there’s nothing to do, our team members are very often training themselves in things and then coming up with crazy new ideas and sharing them in what we have every single Monday, we have something we call the kettle, we don’t know why we call it the kettle, but it’s just a meeting on a Monday afternoon and people share ideas and thoughts, et cetera.
Lee: So that’s been a great way for us to make sure that that free time is kind of super productive.
Lee: Yeah, it’s pretty cool huh? So whenever I turn on the news, there is lots of doom and gloom about the economy, that there is a pending recession and all of that. Also here in the UK, there are currently more jobs available than there are potential employees, so it kind of becomes an employee’s market, they can get whatever job they want. How on earth would we be able to hire good employees in the current economy?
Candy: Yeah, I think you’re right. It’s an employee’s market out there, and I think in the States at least, there’s almost a labour movement that’s happening right now. Where COVID shook everything up. A lot of people left the market, whether they early retired or a lot of women had to take care of their children or parents, not just women. But a lot of people left the labour market, so then there’s these huge gaps of there’s lots of jobs and people really trying to get the same people to work for them.
Candy: And so employees are being able to negotiate better salaries, better flexibility, and as an employer, and especially a first-time employer, this can be kind of intimidating, but I do think we as creatives and working in the industry that we do are in a position where people want to work for us because it’s a fun job, we get to create things, we get to work with customers, and it’s not like we’re running a coal mine you know what I mean? You have to pay people a lot of money to work in the coal mine because it sucks, [chuckle] but working at a creative agency is fun, and so really playing up that culture, playing up the joy that you get from creating things.
Candy: I’ve never interviewed an employee who didn’t say they wanted to be more creative in their job, even if they were hired for an admin position, people wanna be creative. So making sure when you write your job descriptions that you’re using that creativity to write job descriptions that are more interesting sounding than maybe what the other higher paying jobs are out there, and really working on that culture and making sure you’re finding people who have the same values as you.
Candy: I’ve gotten many people who have worked for us saying they just cared about the same things that we cared about, so we actually put our core values right into the job description, and we’ve recruited a lot of people because of that kind of culture piece, and they wanna work for somebody who’s a good person and who is doing good work in the world. So don’t underestimate the power of the things that don’t cost money, which are who you are as a person, or who you are as an agency, and building up that culture. And then just making sure that you’re kind of keeping the pulse on what people want. So there was a while there where everyone was saying Millennials wanted flexibility, and there’s this push for the four-day work week.
Candy: That’s definitely something in our industry you could pull off is having a four-day work week if that seems to be what people are interested in. I’ve also heard that the next generation Gen Z. It cares more about money than flexibility. So it depends where you’re recruiting and what generation, whether they want stability or flexibility or just a big fat paycheck, but just trying to keep abreast of what’s going on and who the people are who are interviewing, and what they want is one way to just kind of shift your hiring process around the people that you’re trying to get, and then making sure you have a process, so making sure you’re advertising, you’re not gonna just be able to get the best talent by putting in a free ad on Craigslist or whatever.
Candy: Tapping into universities or colleges, tapping into more diverse markets. So something that we always did back in the day which is horrible. It’s just kind of the nepotism thing where we looked around and was like, “Who needs a job? There’s somebody I know.” And I don’t believe that that’s a good way to run a business. So I think if you can focus on more diverse websites that you’re putting ads out on and trying to recruit outside of your own self and outside of your own network. You’ll be able to find people who are both a good fit and also just gonna help you grow as a business in ways that maybe you couldn’t if you were just looking around the people like you.
Lee: Absolutely, and when you said Gen Z, I instantly wanted to work out what Gen I was. So I’ll make sure I put a link in the show notes so you can work out where you stand. [laughter] Are you a Boomer? Are you Gen X? Are you a Millennial? Or are you a Z? Do you know what you are Candy?
Candy: Well, 1980 was when I was born, so we’re straddling depending on which website you look I’m either a Millennial or a Gen Xer and it’s a very big debate among people who graduated with me.
Lee: Well I’ve decided I’m a millennial. I was born in ’82, although one website said I was Gen X because they think millennials starts in 1985. So I’m gonna choose [laughter] the other website. I don’t want to be Gen X, I want to be a millennial. It sounds cool.
Candy: Oh really? I was gonna say that I feel like the millennials get a lot of flak for being lazy or I don’t know, but I remember.
Lee: Oh I’ve changed my mind instantly.
Candy: All the Boomers were talking about Millennials. Yeah, so I’m a proud Gen Xer but it just depends.
Lee: Well. I will research and I will make a decision on how I identify with regards to my generation. Also coming out of what you said as well, we’re often encouraged aren’t we to showcase what goes on behind the scenes in our agency to attract clients? That’s a great way. It’s a great source of content as well for social media, but what we forget is that also it attracts potential employees. When you were talking I popped onto a website, it’s dubsado.com, and this is an online CRM System/Business Management System for creatives. It’s something I used years ago, and I grew out of it and use of their products now.
Lee: But what always struck me about them was the team and how happy they all seemed and how family-orientated they were, and they shared a lot of pictures of what they were up to and I always thought, and still think to this day, “I’d love to work in their office. It looks awesome.” So that is a really good example. I’ll pop a link in the show notes folks dubsado.com. Check out their about page, their YouTube channel. They’ve grown a lot since then, so I don’t know if they do quite so much of it. But back then when it was a young product and I was watching these videos and seeing them on social media really made me wanna work with them and I would have taken a pay cut just to go and hang out with those guys ’cause they look like legends. [chuckle]
Lee: So we’re coming to the end of the show and we’re finishing each one of these episodes with that one small thing. We may not be necessarily ready to hire straight away, so what can we do at least to start getting our minds in that place?
Candy: Well. My first thought is going to your time-tracking app, I hope by now you’re all time tracking, and if you’re not, then start time tracking and come back to this episode in a month or two. But looking back through your time tracking app and see how you’re actually, spending your time will help you understand not only what tasks you might wanna hire out or find a position for, but how many hours you can actually support for that person because sometimes when you are doing something, especially if you don’t like it that much, you might feel like you’re spending a lot of time on sales or accounting or something like that and it actually only adds up to a few hours a month. So you wanna make sure you’re not basing those decisions off of how you feel about the task and what you’re actually doing and whether or not you could support a full-time person or a part-time person, or whether you should just start looking at vendors or other options.
Lee: So folks, that is a wrap for this episode with regards to the cost of employees and how much it costs to run an agency, I wanna give a quick shout-out to season 38 Episode 4 there will be a link in the show notes on how much it costs to run a web agency. This is an episode I did quite a while ago now, but the information is still relatively useful, and it helps you understand how much it might cost to run a five-person agency, at least in the UK, but the line items in there, I think are pretty darn useful. So go ahead and check out the show notes. Once you are in the show notes be sure to comment what was your biggest takeaway, and then if you are not subscribed to this podcast, please make sure you are, because Candy and I are returning for one more episode as we discuss the success reality check. You really wanna hear this one. So we’ll see you there. All that’s left for us to say is Ta-ta and Cheerio.