Funding new staff before the revenue arrives

Hiring is a growth goal with an awkward shape. The cost starts on day one, but the payback creeps in over weeks or months as the new person learns the job, builds relationships and starts producing. Funding that shape well means looking at the ramp-up gap and mixing pieces to cover it — not borrowing a year’s wages and hoping.

What does a new hire actually cost?

The salary on the job ad is the headline. The real cost of an employee in New Zealand includes:

• Gross wages, paid through payday filing with PAYE deducted.
• Employer KiwiSaver contributions. Inland Revenue states the lowest employer contribution rate is 3.5% of the employee’s gross salary or wages, unless the employee is on a temporary rate reduction.
• Annual holidays. All employees become entitled to four weeks of paid annual holidays after 12 months of continuous employment, and holiday pay needs to be budgeted from the start.
• ACC levies. Employers pay work levies, invoiced annually with a provisional estimate and an adjustment for the previous year.
• Kit and onboarding — a laptop, tools, a vehicle, uniforms, software seats, training.
• Recruitment — advertising, agency fees or simply your own time.

Add these up for the first six months and compare them with the revenue the hire will realistically produce in that time. The difference is your ramp-up gap.

How do you size the ramp-up gap?

Sketch it month by month. Illustrative only:

Month	Cost of the hire	Extra revenue they bring	Gap that month
1	$7,500	$0	$7,500
2	$6,800	$2,000	$4,800
3	$6,800	$4,500	$2,300
4	$6,800	$6,500	$300
5	$6,800	$8,000	–$1,200

In this example the cumulative gap peaks at about $15,000 around month four, then starts shrinking. That’s the number to fund — not the $80,000-odd annual cost. Our page on sizing a funding gap shows the same method for any goal.

Which pieces can fund a new hire?

Make the work fund the worker

If the hire is there because you’ve won more work, the clients behind that work can carry part of the cost. Ask for a deposit or a mobilisation payment on new projects, move to milestone billing, or invoice monthly in advance for retainers. The customer deposits page covers how to frame it.

Turn their invoices into cash sooner

Where the hire produces work billed to other businesses on 20th-of-the-month or 30-day terms, invoice funding can advance most of each invoice when it’s issued. The new person’s output starts paying their wages weeks earlier.

Owner cash for the first month

The first month — recruitment, kit, a full wage with little output — is often best funded from the business’s own cash, as long as you keep a buffer for GST, PAYE and the next round of bills.

A small facility for the rest

A line of credit or short unsecured facility can cover the middle months of the ramp-up. Sized to the peak gap and repaid as the hire becomes productive, it’s a tidy fit. If you’d like a real person to check whether that piece makes sense, start a short enquiry.

What mistakes do owners make when funding a hire?

• Borrowing the annual cost. You pay for money you don’t need, and the repayments run long after the hire is paying their way.
• Ignoring the next PAYE and KiwiSaver deadlines. Employer deductions go to Inland Revenue on a set schedule. A wage loan that leaves you short for PAYE has just moved the problem.
• Hiring to fix a cash problem. If cash is tight because debtors pay late or margins are thin, an extra wage makes it worse. Fix collections first.
• No plan B. If the hire doesn’t work out, how will you repay? Keep the facility small enough that the existing business could carry it.

Illustrative mix: a Waikato electrical contractor adds an apprentice and a sparky

Illustrative only; no real business.

An electrical contractor in Hamilton wins a run of commercial fit-out work and needs two more people. Six-month ramp-up cost: about $70,000.

• Mobilisation payments of 10% on two new contracts: $18,000.
• Invoice funding on monthly progress claims to the main contractor shortens the wait for about $25,000 of cash.
• Owner cash covers recruitment and tools: $8,000.
• A small line of credit covers the remaining gap of around $19,000 through months two to four.

The result is a hire funded mostly by the work it creates, with a modest facility smoothing the dip.

When is a loan the right piece for hiring?

Finance fits when the extra revenue is real and close — signed contracts, a waiting list, an order book — and when the ramp-up period is short and predictable. It fits less well for speculative hires, where there’s no clear work yet. Run your plan through the repayment load test before committing.

Ready to fund the ramp-up?

Once deposits, invoice timing and your own cash are lined up, the remaining gap is usually smaller than you expected. If finance is still the right piece, tell us about the hire and the gap. There’s no credit check when you start, your enquiry isn’t passed around a crowd of lenders, and a real person calls you to talk it through. Please be accurate on the form — the hire’s cost, the work it’s tied to and your current turnover help us suggest the right route first time.