To many consumers, chatter about the holiday season may seem slightly out of place in September, but for many small business owners across the United States, the crisp fall air carries the promise of increased sales, but not without a cost.
While many businesses do experience a steady increase in customers and sales between now and the new year, that growth is often preceded by operational costs. Purchasing the right amount of inventory; amping up marketing up efforts; and, of course, attracting, interviewing, onboarding, and paying seasonal workers can be hard on the bottom line. Unfortunately, a good holiday season often hinges on those expenses.
So, what do you do if you need to hire employees – and meet all the other holiday financial obligations – but your budget is a bit thin? How can you afford seasonal workers for the holiday rush?
Determine how many employees need
You know you need seasonal workers, but how many do you really need? To answer this question, you’ll need to take a few things into consideration: historical need, expected performance, current employee expectations, and legal requirements.
How many employees did you hire last year and did what, if any, challenges did you face? Did you have just the right number of workers? Were you overstaffed or understaffed? The answers to these questions should help you determine just how much money you need to free up for holiday pay.
However, it’s also important to consider the needs and expectations of existing employees. Can they work overtime, or are they expecting it? Keep in mind that there are laws (American Care Act) that govern the relationship between hours worked and health care, and though many seasonal employees fall outside the bounds of these rules, it’s important to know how it will impact your year-round employees (and your legal obligations) should they move to thirty or more hours a week.
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Don’t forget about hidden costs
Yes, you’ll need to make payroll requirements, but when it comes to affording seasonal employees, there are other factors you’ll need to consider. Attracting, interviewing, onboarding, and training seasonal employees can also take up a fair share of your budget, so before you commit to a specific amount, you’ll need to account for all the hidden costs associated with seasonal work.
The good news is that you may have a little more wiggle room with these costs than you do with things like payroll. For example, you may be able to attract employees through social media or employee referrals as opposed to paying an agency or taking out additional space.
Encourage the return of past seasonal employees
That said, all employees – permanent and seasonal – should be properly onboarded but hiring seasonal workers from the year prior can help you cut down on some of the costs (and stress) of finding, interviewing, and training new employees. It’s likely you’ll still need to give these employees an orientation refresher, but you can potentially save time and money by eliminating long training or onboarding programs, which often requires members of management or full-time staff to put in additional hours.
Consider temporarily financing payroll
Sometimes it’s simply impossible to unlock extra funds to pay seasonal workers, particularly earlier in the season when sales aren’t up but your operational costs are. If that’s the case, you may want to consider financing your payroll using one of these primary borrowing options:
- Business Line of Credit: A business line of credit can be useful any time you experience temporary cash flow problems, and seasonal employment is no exception. This particular type of lending is revolving, which means you use what you need (up to your credit limit), pay it off, and then use it again. You’re only required to pay interest on what’s used, and you can tap into your credit in the future, should you need it. It’s a good safety net for brief yet financially challenging times.
- Short-term Loans: If you’re looking for a single lump sum to finance payroll, then you may want to consider a short-term loan, which are loans extended for a relatively short period of time, typically no longer than 18 months. In some cases, the interest on short-term loans can be high, so be sure to calculate the total impact of this type of lending opportunity and make sure you can pay it back on time, if not early.
Eligibility for lines of credit and short-term loans is largely dependent on your time in business and credit history, so if you don’t have great credit or haven’t been in business very long, then you may find it difficult to secure either, or if you do, you may find that you have a high interest rate. If you don’t know what your business credit score is or don’t know what options are best for your business, you can find them both out at Nav.
The good news is that even if your interest rate is high, as long as you can pay it off fairly quickly, it’s still can be a valid way to pay for the much-needed seasonal staff. If you’re considering financing your payroll, the best place to start is with the Small Business Association (SBA), which provides a variety of lending opportunities to small businesses.
I know – that’s not exactly the most helpful bit of knowledge when you’re up against the Q4 clock, but it’s worth mentioning, even if it’s only useful for the following season. As you close the books on one year and enter the new one, take time to include seasonal employment and payroll in your holiday recon discussions. Once you’ve crunched the numbers and have a solid picture of your needs, you can begin to strategize about how you’ll meet those requirements for the year to come.
The holiday season may be a time for increasing sales and promising revenue growth, but sometimes that means facing growing operational costs in the days and weeks prior. If you’re concerned about paying seasonal workers, you’re not alone. Fortunately, for those who can’t meet the immediate financial needs that come with seasonal employment, short-term loans and lines of credit can offer relief from this particulate holiday stressor.
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