Lower-cost alternatives to hiring permanent employees

When first starting a business, you may be working on your own. With start-ups often squeezed with small budgets, expanding from a solo operation and hiring your first employees can be tricky.

Start-ups and small businesses can find recruitment a challenge. From dedicating time to finding the right employee, to paying recruitment costs such as advertising job vacancies, the cost of hiring an employee is more than just their salary amount. Mixing in HR and accounting requirements, such as setting up payroll and a company pension means recruitment can be costly and time-consuming.

Fortunately, there are alternatives to finding permanent full-time staff that could help you in the short-term until you have more time, consistent clients and a steady cash flow to expand your workforce on a permanent basis.

From using part-time and temporary staff to outsourcing work to freelancers, some start-ups rely on hiring the skills of others on an as-needed basis. There are several advantages to looking for alternatives to permanent staff, especially in the early stages of a new business.

Temporary staff benefits

If finding permanent staff is too much of a challenge, temporary staff can be a convenient and efficient way to get help for your start-up, especially in the early stages of a new business. Using temporary staff doesn't necessarily mean using a workforce that isn't invested in your business - according to recruitment specialists Reed, 36% of managers started as temporary staff.

You can scale your workforce to meet customer demand

If your business is taking on a bigger, more demanding project or selling more on a seasonal basis, such as at Christmas, then sourcing temporary workers is a quick way to get more help at short notice. When requirements return to normal levels, such as after a peak customer sales period, you can reduce numbers of temporary staff.

You can hire staff quickly

Recruiting permanent staff can take a while. Temporary staff usually go through agencies, and it can be quick to bring them into the business and start working. This can remove the need for several interviews - staff are often interviewed by the agency before you see them - and you may not have to wait for new employees to serve notice periods with previous employers.

It's a great way to bring in specialist skills

Temporary staff can be skilled and qualified in specific areas that your start-up lacks. From consultants and copywriters to bookkeepers and delivery drivers, there are many skills you can bring in that leave you free to concentrate on building your business. They may also bring ideas and inspiration from other companies they've worked for previously that can help grow your business.

You can control costs

Employing permanent staff can cost a lot of money. Not only is there a salary to pay, but you may have to factor in overhead costs, too. Studies by BE Offices using ONS data show that the first year of employment can cost up to double an employee's salary. Overhead costs include equipment for the employee, national insurance and pension contributions (if applicable). Temporary staff such as freelancers may work from home, use their equipment, and pay their tax and national insurance.

Lower-cost options to hiring permanent employees

There are a variety of alternatives to permanent staff that can support your start-up's needs.

The below are examples only and you may wish to seek professional or specialist advice to determine whether making any changes to your workforce is suitable for your business.

Freelancers

Freelancers can be a good option for completing small or one-off projects.

Talented freelancers cover a range of specialisms - from building websites to providing accounting services. Dedicated freelance directories are available online that allow business owners to search for freelancers, read reviews about their work and see examples. While freelancers can be expensive, as they tend to charge a day or project rate, you may not need to pay overhead costs and training.

However, there are several things to consider when hiring a freelancer. As work can be unsupervised and remote, there is a risk that you may not get the productivity levels you need, and work quality may be variable. Ask for references and to see examples of work. It may be a good idea to meet a new freelancer first before committing them to a project or start them on a smaller project first to test them out.

Find out more about hiring consultants and freelancers.

Interns

An intern usually involves hiring a student or a trainee who works to gain experience in your business.

Some internships are unpaid or require a smaller wage than a permanent employee. An intern is beneficial for your business during peak times where more assistance is required. Interns tend to do the smaller jobs that you don't have time for. If the intern shows promise and your business grows, they could become a permanent employee.

While internships may not always require a wage to be paid, you will need to compensate the intern for their time, for example, by paying for their travel. As well as compensation, you will most likely need to train them for some aspects of the role.

Find out more about employment rights and pay for interns.

Apprenticeships

Apprenticeships are work-based training programmes to help the apprentice gain experience in their chosen industry.

Hiring apprenticeships can benefit the business as the apprentice seeks career experience. Apprentices can grow into permanent, fully trained employees once they have completed their apprenticeship. Government support and funding may be available to help with the cost of setting up and hiring an apprentice.

Unlike internships, hiring an apprentice requires paying a wage and providing the training, which may be costly for a start-up. Apprentices may lack work experience and require structured training, such as on-the-job and more formal training. The process of finding an apprentice can also be lengthy.

Find out more about employing an apprentice.

Seasonal and fixed-term employees

Depending on the industry you are in, hiring seasonal employees on a fixed-term contract may be an option.

They can be used during your business's peak times, such as catering and waiting staff during the Christmas period for a restaurant or to help with fruit picking and harvesting for agricultural firms. Hiring seasonal employees can help reduce payroll costs due to their shorter contracts, and some seasonal fixed-term employees may work part-time hours.

Seasonal employees, like permanent staff, may require training. This usually takes time and money and might not be feasible for a short time for smaller businesses. You may also experience seasonal employees who aren't as motivated and committed as permanent staff as they only work for a few months of the year.

Find out more about hiring employees on fixed-term contracts.

Existing staff

If your business takes on extra responsibilities, don't forget your existing permanent staff.

Training your existing staff may benefit the business and individual development. Your current employees may already know the industry more than a new employee would and may wish to grow within the company and seek more responsibilities and opportunities.

If new roles or tasks arise, train existing employees to tackle these while they're also able to fulfil their existing roles. Doing this may help motivate employees to stay on in the business and help your start-up grow.