Hidden costs to end-of-the-year hiring

Guest blogger, Lindsey Paho, a writer at Professional Intern  is back for another visit.  This month her post focuses on the pros and cons of end of year hiring.

For the small business owner, timing of when to bring on new employees can have a significant impact for the bottom line. While it’s stirring to have the type of growth that necessitates hiring, bringing on a new hire at the wrong time of the year can make for a very costly error. Perhaps the worst time for hiring is at the end of the year when an accumulation of factors stack the deck against the employer who takes on additional workers.

While large companies and corporations have the luxury of paying individuals or firms to keep abreast of business legislation and tax law, the workhorse of the U.S. economy, small—businesses—have to rely on principles and senior management to share the load of keeping up to date with these practices. You may seriously think about tax and intangible benefits, of funding key employee tuition for an online MBA program to accommodate working schedules and business needs of staying current on the latest business matters.

Financial hits

Probably the most obvious, though the most financially-significant reasons to think twice before late-November or December hiring are the issues involving taxes and benefits. You don’t have to be a finance-major to learn about these tips, but a targeted course for decision makers might be a good idea.

Unemployment Taxes

Federal (6.2% of the first $7 thousand) and State (for example, Indiana collects 4.2% of the first $9,500) are collected annually. Hiring someone in November means that you not only pay that amount for that year, but at the turn of the year, you roll over and pay again. That’s a big hit at a time most companies aren’t all that flush with income, save retailers.
401k Enrollment issues
Companies that have 120 or more employees enrolled in a 401k program must be audited. If your company happens to be close but not over that number, holding off hiring that 120th employee until after the first of the year can save your company many thousands of dollars in unnecessary auditing fees.

Production efficiency

While seasonal help for retailers are the exception, most companies experience extraordinary circumstances towards the year’s end. Even bringing on college interns, though little or no costs may be involved, production issues make onboarding at this time less than ideal.

Holiday distractions

Black Friday, company parties – no small cost even at $20-40/employee – and family events can’t help but affect productivity. Waiting until the seasonal distractions pass just makes sense for holding off hiring.
Training support availability
Vacations, retirements and transfers can spike during this time and while this doesn’t mean that the work ends, employees often wear more hats than normal to make things run smoothly. What tends to suffer is the time normally used to conduct detailed onboarding activities, both formal and informal. For a new hire, be they management or someone hired at the end of a final semester, expecting them to correctly understand both the job and the culture is not only bad planning, but it’s not fair to the new employee.

Planning

Input scarcity: One final note about year-end hiring. Whether or not your fiscal year begins in October, July or January, planning for personnel issues should be avoided during the last couple of weeks in November and the whole month of December. For reasons already discussed, those who may have critical input regarding department needs, newly identified qualification concerns or production requirements may not be able to participate as fully as they would at other times of the year.

Knowing these points ahead of time can help the small business owner avoid costly pitfalls associated with end-of-the-year hiring obstacles. Being proactive by building into your business plan the means to have management stay current through education is another point that shouldn’t be lost in the immediacy of steering clear of snags.

Lindsey Paho lives near Chicago. She divides her time among work, writing and family life. She writes on behalf of Colorado Technical University and has a keen interest in small business blogging and social media.