When is the right time to hire?

So, you’ve been running a one-man show for some time now, while enjoying the thrill of establishing your startup. And now that your business is growing steadily, you face a challenging decision – is this the right time to hire your first employee?

Making an expansion decision can be tough and even confusing. Employing staff too soon can have a costly effect in terms of cash flow problems that can easily drown your business. On the other hand, delaying your decision can result in missed opportunities, either in terms of capitalising on a growing market or expanding your business.

Are you ready for a new employee?

Identifying the right moment to hire, therefore, is the key differentiator between a failed startup and a successful business. But how would you know whether the time is right or not?

Here are some key indications that you may be ready to take the plunge:

1. You have your hands full: You have been multitasking, taking care of everything from sales to marketing to social, but you have now reached a point where you can’t handle everything on your own. You may be struggling with your workload, turning down customers, failing to follow up on potential leads or finding that the quality of your services is suffering: if any of these sound familiar then it’s time to hire some help or risk losing revenue.

A recent study by MENA Research Partners found that the GCC region has the potential for 156% growth in the next five years.

And there’s plenty of incentive to take this positive step if you’re ready: a recent study by MENA Research Partners found that the GCC region has the potential for 156% growth in the next five years. This is something you can’t afford to not be a part of.

2. You are meeting your goals: You have a steady cash flow and can even turn some profits, and you are meeting all your short-term goals. If your startup is moving just the way you planned, then by all means, work on bringing in people who can support you on your journey to meeting your future goals. But please don’t rush the process – after all, at this stage you should be thinking along the lines of meeting your long-term goals. According to a National Business Research Institute survey, 43% of respondents cited the need to fill positions quickly as the reason bad hires were made.

3. Your business is stable and growing: For you to transition from a business owner to a boss, it is imperative that your startup has a strong financial foundation and is generating steady cash flow. Hiring staff comes with a critical monthly expenditure – their monthly salary. So, before scaling your team, make sure you are generating enough cash to cover their salary alongside your other overhead expenses.

What does your business need?

Remember – making the decision to bring someone in is only the beginning of the process: you have to think about exactly what you need as a company.

It’s also essential that you find just the right person (or people). As a young company with limited cash flow, hiring the wrong employee can potentially break you. According to a survey by CB Insights, having the wrong team in place accounted for 23% of startup failures.

With this in mind, these are some of the steps you could take to get you thinking along the right lines: 

1. Assess your requirements: Consider what skills your company really needs – is it sales that you are struggling to manage, or social media? Do you need an extra set of technical hands or someone who could bring in a little ‘oomph’ to the business? Identify that gap, and then search for the employee to fill it. For the sake of efficiency, try to use a laser focus when it comes to writing your job specification. For example, if what you need is a Javascript developer, don’t just advertise for a ‘developer’.

2. How many people? When a business starts growing, it can be really tempting to think about hiring and expanding. Many startups often get embroiled in the illusion of ‘the bigger the better’, and make the mistake of hiring without a plan. But if you look at the stats, startups that succeed run lean. Case in point, Instagram – a smartphone app that was being run by only 13 people when it was bought by Facebook for USD 1bn.

3. Consider freelancers and fans: Figure out what type of employee your business needs – a partner or staff? Intern or freelancer? Remote or permanent? If you’re not sure, one of the best ways to avoid the costly mistake of bringing in the wrong person is to hire freelancers until you are sure of your financial situation.

Or what about hiring your fans? This might seem a bit eccentric, but consider this – your fans are already in love with your product / service and can prove to be a great source for generating word-of-mouth publicity. They will be familiar with your product, will have a higher sense of ownership and will work from a customer’s perspective to help generate the right kind of buzz around your product. 

After all, your first hire needs to be passionate about your business and in sync with your core company values. Someone who believes in your goals and is enthusiastic enough to go beyond their set job description.

4. Key trait – Find someone flexible: As a startup, your business will go through a lot of changes, restructuring and experiments, before you find your balance. To sustain your growth during this period, you need someone who is flexible and supportive; someone who can adjust as well as grow along with your company. Ever ready to learn from failures, your ideal candidate should be someone who is comfortable with change and is capable of implementing new processes without requiring a great deal of hand-holding. 

Be clear on employment laws

So you’ve now decided it’s the right time to take on an employee and you’ve narrowed it down to some likely candidates. You have your business licences and permits in place and you are paying proper taxes. Your bookkeeping is in order, IP is protected and you follow your country’s security laws.

Well, all that is great – but what about the legalities related to hiring?

According to a report by MAGNiTT, a Dubai-based website aimed at entrepreneurs and investors, the UAE leads MENA as home to 42% of its startups. This means the Middle East is a booming market when it comes to job creation and hiring. Home to many MNCs, places like Abu Dhabi and Dubai see a huge influx of people from various nationalities working and thriving here.

But hiring someone isn’t as simple as offering them money and expecting them to turn up at your door for work. The nature of your business, the country of your setup and its employment laws – all this and more govern the employee-employer relationship. It’s crucial that you understand the nuances of the UAE’s employment laws and are set up for hiring in the country.

Hiring someone isn’t as simple as offering them money and expecting them to turn up at your door for work.

Whilst there is a lot of ground that is covered under employment laws, such as contracts, working hours, probation period, medical care, etc, there are certain core legal musts that you need to be aware of:

1. Visa requirements: If you decide to hire a foreign national, their right to reside and work in the UAE will be directly related to you as their employer. You will have to sponsor their work visa and obtain a residency permit by filing the required paperwork with either the Ministry of Human Resources and Emiratization, also known as the MHRE (previously the Ministry of Labour) or the Department of Naturalization and Residency. Such employment permits have a validity of three years, subject to renewals for the same period. However, if your business operates within a free zone, then you will have to liaise with the relevant free zone authority to initiate the work permit and residence visa process.

2. Employment contract: An employment contract is a binding agreement between the employee and your company. It will essentially detail things like designation, date of joining, working hours, terms of employment, nature of the contract (Limited or Unlimited) as well as other additional benefits. However, the terms and conditions of this contract are governed entirely by the UAE labour law. Depending on the operation of your business, the contract is then signed and registered with either the Ministry of Labour or the free zone authorities.

3. Safety measures: The UAE Federal Labour Law specifies certain provisions for employee safety and healthcare, stipulated under Article 91 to Article 101. The provisions of the law dictate that every employer should provide his employee with medical care up to standards determined by the labour ministry. Apart from that, there should also be protection against occupational hazards at work, clearly displayed instructions regarding fire prevention, on-site availability of first aid kit, as well as a clean and hygienic working environment.

In short, hiring your first employee is a major step for any startup. Never expand just for the sake of expansion – do it for the right reasons and make sure you are well-versed in all the legal requirements. If you’re not confident about the latter, it’s worth taking expert counsel to steer you through your country of operation’s employment laws.

Setting up your own business has never been easier. Virtuzone takes care of it all so you can focus on what matters – building your business. For more information about company formation in the UAE mainland or free zones, please call us on +971 4 457 8200, send an email to info@vz.ae, or click here.

About the author: Neil Petch, Chairman at Virtugroup
About the author: Neil Petch, Chairman at Virtugroup

With a history of business successes, Neil Petch is well known in the UAE and beyond as a visionary entrepreneur with a passion for helping others establish and grow their own businesses. Neil founded Virtuzone in 2009 and quickly established it as the region’s leading company formation expert, before launching Virtugroup, a holding company that has a wider mandate of supporting startups from establishment; to successful market entry; and all the way through to exit.