Employing a new member of staff can be a scary thought for any employer even the most experienced ones. Will that person fit in with the team, can they do the job, what will they cost me.

It depends on what type of job you are trying to fill as to how strict you need to make the interview process.

A lower paid non responsible role might be at minimum wage whereas a manager or professionally experienced person might be at a much higher salary so you need to make changes as far as getting the right candidates to apply. Be clear from the outset what it is that you want. Do you need a full time or part time person, is the job permanent or casual.

Put together a job specification which will list all of the jobs and responsibilities the person has. Do they need specific qualifications to do the job.

A person specification this is where you are looking at the personality of the person, the experience that is required, what type of specific jobs are they essentially needed to be experienced in, to get a chance of an interview.

Grade every candidate with a score depending on how they fit with your specification above, it’s a little more time consuming but will quickly discard candidates who don’t fit your requirements.

The interview make a list of questions you need to ask and try and encourage the person in front of you to open up and talk about their experience. This will allow you a small insight into their personality.

If this is a role for an experienced or technical job, then give them a test as well as a person to person interview. I tend to do a test at the end of the interview when the candidate is all relaxed. They are more likely to be calm when you are in discussion with them.

Check references always, don’t take anyone on face value, and if you have other members of staff introduce the person at the interview. Other employees feedback is always helpful as at the end of the day they need to fit in with your already established team.

Give them a contract of employment this is required by law, even a casual member of staff is entitled to holiday pay.

An employee is controlled by the terms of their contract with you. You can allocate them any job that is within the remit of their employment.

They tend to be cheaper than a subcontractor but you are responsible for handing over their income tax and national insurance contributions. Plus Employers NI which is currently 13.8% above the lower rate earnings.

They are entitled to holiday pay

Entitled to pension under the new scheme automatic enrollment

There is more chance of loyalty from an employee as you are providing them with their main work

Outsourcing A Subcontractor

This can be useful if you only have a need for a small pocket of time for a particular project or contract. As you are not offering a permanent role.

They tend to be slightly more expensive than an employee as they are responsible for their own income tax and national insurance.

You can expect them to be able to do the task in hand as they are likely to be experienced in that particular field you are employing them for.

You do not control what they do, but should expect a reasonable level of professionalism and expertise.

They are not entitled to holiday pay or sick leave or pension.

They are likely to be working for other people so other than a commitment in a contract you might be waiting for work to be done.

Recruiting someone in this capacity should like employment be done on the basis that they will fit in with the team and that they can do the job effectively. They are not entitled to redundancy payment

This blog is intended for information purposes only, you may have your own suggestions.  Use this a guide only

Original Post 05-05-2014 | Updated 09.01.2026

When you are running a business whether a new company or a well established one, getting the costing of your products or services costed correctly is crucial to your success.

Service Companies

Creating the Sales price.

Your main component of cost is going to be heavily on labour. You’re going to have to make sure that not only have you covered your labour cost, ie Cost plus employers NI. Contribution to overheads plus that all important profit.

A service company needs to have a mechanism for keeping track of those labour costs versus quoting for a job, at the fingertips at all times. The easiest and simplest route to finding this out is to keep timesheets, or cost the time of every element of each procedure. You always compare the timesheet for a particular job, ie the project, versus the original sales price. This will give you an average hourly rate of the job as a whole. You very importantly need to know the average hourly cost of your overheads. Basing this on the number of hours you have available as a maximum for every member of staff.

Ie You have two members of staff, each work 40 hours per week for 5 days work. As a yearly average that’s 4,160 hours at your disposal or 347 hours per month. Your overhead for example is £2,000 per month which equates to £5.76 per hour. A cost of this nature would be labour cost per hour, plus £5.76 overhead plus % profit.

Every business and industry is different, and you’re dictated quite a lot of the time by market rates, or competitors. By knowing your average overheads and labour costs, you will know the price you cant go below or face making a loss.

Hotels have this down to a fine art. They are mainly in the services industry again heavily focused on labour costs. When you have booked your room for the night. They will know ahead of time, the number of rooms they have, the cost of an empty room, and the cost of a full room. They will have broken down in their costing mechanism

The length of time to make a bed!

Cost of cleaning the room, length of time for each room!

Cost of washing the bedding/ towels!

Cost of the tea/coffee facilities!

Heating and lighting for each room!

Your breakfast cost!

Plus a contribution to fixed overheads, and % profit

Whether your service business is hourly project based or procedure based, you need to know the cost of each element.

Manufacturing and product based sales

Again as above you are dictated to by market rates, you might be a low volume business that can charge a premium fee for your product ie Apple Iphone.   Or a high volume business that charges sales at lower margins of profit but has to sell a lot of them. Ie Walkers selling crisps

When costing a product you need first know

Cost of the materials for the product!

Labour time to make it!

Cost of energy to make the product!

The more volume you make the cheaper it should be per product as you will become more automated in your processes plus you are likely to have more negotiation power with supplier costs. You need to build in a little slack as no-one or machine can work at 100% capacity all of the time. You do need to track efficiencies and always look at how you can make things better and demonstrate you are always trying to reduce inefficiencies. This is usually where profit can go down, if a business does not look to always improve its offering.

Supermarkets have just done this in the last 18 months, by offering the self checkout facility, they’ve saved both wages cost, time and rates bills.

The main thing to realise that this is not a static job to do, as you grow and develop or change your product offering you will need to keep monitoring these costs, or you could end up working twice as hard, for a lower gain.

Always be one step ahead.

This blog is intended for information only, you may have other suggestions of your own.  Please treat this as a guide only.