Many owners decide to hire because "everyone looks busy", without knowing whether the work really exceeds the team's capacity or whether a poor process is wasting people's time. They also tend to count only the salary, and find later that the first year cost far more than expected.
This guide uses hypothetical examples to show the method. Every figure in the examples is hypothetical, not a market price or a statutory rate.
The core answer
Hire when (1) measured workload has exceeded your team's capacity for several months in a row, (2) you have checked that the cause is not rework, duplication or steps you can remove, and (3) the extra revenue or gross profit the position brings, or the cost it removes, covers the total cost of the position, not just the salary.
In the hypothetical example, first-year total cost is about 1.6 times the annual salary. So before hiring, calculate the revenue you would need to add, compare the alternatives (fix the process, automate, hire part-time, hire for a project, outsource), and prepare the employment paperwork properly from the start.
1. Measure workload with numbers, not feelings
"Busy" cannot be measured. Collect at least 2-3 months of data on four things.
| Measure | How to collect | What it tells you |
|---|---|---|
| Volume × time per task | Count tasks per month, time a sample of each type | Real hours required |
| Backlog | Tasks overdue or queued at month end | If it keeps growing, workload truly exceeds capacity; if it rises and falls seasonally, you may not need a permanent hire |
| Overtime trend | Overtime hours per person per month | High every month is a signal; only at peaks is a different matter |
| Error and rework rate | Tasks redone, customer complaints | Hours lost to fixing, and whether the problem is people or process |
Hours needed = monthly volume × minutes per task ÷ 60, plus the rework hours.
2. Real capacity per person, not 100%
One employee does not spend every hour at work on productive tasks. Deduct meetings, messages, waiting for information, breaks, leave and support tasks. Many businesses start from about 65-80% of paid time as real capacity. Use that as a starting range only; the real figure depends on the work and you should measure it.
Hypothetical example. A team of 2, each with 160 hours a month, at 70% real capacity gives 112 hours each, 224 hours in total. Measured workload including rework is 280 hours a month. The gap is 56 hours a month, about half a person. That is not yet a clear reason for a full-time hire; fixing the process or hiring part-time may do.
3. Too few people, or a broken process?
| What you see | Usually points to | What to check before hiring |
|---|---|---|
| Backlog grows every month even without rework, and people are at full capacity | Too few people | Compare hours needed with capacity as in section 2 |
| Work redone, frequent customer complaints | Process or training | Find where errors repeat, build a checklist |
| Work waits for approval or for the owner | Authority structure | Review the approval authority matrix |
| Duplicate work, data keyed in several places | Tools and systems | Remove double entry, use one system |
| Overload only in some months | Seasonality | Part-time, temporary overtime or outsourcing for the peak |
| A strong performer is overloaded while others have slack | Work allocation | Reassign work, cross-train |
| Frequent resignations | Pay, manager or workload | Ask why first; more people may not fix it |
A simple test: if you removed half the rework and duplicate work, would the workload still exceed capacity? If not, the problem is the process.
4. Total cost of one position
Count salary, the employer's social security contribution, bonus, benefits, equipment and software, recruitment, training, the manager's time for teaching and checking, and the early months before output is full. Social security contribution rates and caps can change by notification, so check with the Social Security Office or your accountant before a real calculation. The example below uses placeholder figures.
Hypothetical example. An administrative officer at a salary of THB 25,000 a month.
| Item (first year) | THB (hypothetical) |
|---|---|
| Salary 25,000 × 12 | 300,000 |
| Bonus, assumed 1 month | 25,000 |
| Employer social security contribution (assumed 1,000 × 12) | 12,000 |
| Benefits, e.g. group insurance, travel | 12,000 |
| Equipment, software, workspace | 20,000 |
| Recruitment | 15,000 |
| Training | 10,000 |
| Manager's time spent teaching | 60,000 |
| First 3 months at half output (75,000 × 50%) | 37,500 |
| First-year total | 491,500 |
The total is THB 491,500, about 1.64 times the annual salary of THB 300,000. In later years recruitment, training and the ramp-up fall away, but salary rises and severance entitlement builds with length of service if you ever have to end the employment.
5. How much revenue or gross profit is needed to pay off
If the position helps you sell or take on more work, use this formula.
Extra revenue needed = total annual cost of the position ÷ gross margin
Hypothetical example. Total cost THB 491,500.
- At a 30% gross margin you need extra revenue of 491,500 ÷ 0.30 = about THB 1,638,000 a year, or about THB 136,500 a month.
- At a 40% gross margin you need extra revenue of 491,500 ÷ 0.40 = about THB 1,229,000 a year.
Cautions:
- Use gross margin before deducting this position's pay, otherwise you count it twice.
- Count only revenue that exists because of this position, not revenue you would have had anyway.
- For a back-office role that earns no revenue directly, compare against costs it removes, such as overtime pay, losses from errors, or the owner's time returned.
- Estimate the payback period. If revenue arrives several months later than planned, you need cash to cover the gap.
For building this into a business plan and forecast, see business plan services.
6. Alternatives before adding a permanent employee
| Option | Suits when | Watch out for |
|---|---|---|
| Fix the process | Rework, duplication, waiting for approval | Someone must own the follow-up |
| Automate | Repetitive rule-based work such as documents and invoices | Setup and upkeep cost |
| Part-time | The gap is less than one person | Still an employee with legal rights |
| Fixed-term contract | Project or specific work that finishes on schedule | Limited use, see section 7 |
| Outsource | Specialist or periodic work | See in-house or outsource |
| Temporary overtime | A short peak | Hour limits and overtime pay apply; cannot run long term |
This guide does not repeat the in-house versus outsourcing decision, which is covered in the guide above, nor the detail on contract labour, which is in workers supplied by outside companies and subcontracted labour.
7. The legal side of hiring
- Put it in writing. Have an employment contract or written agreement stating position, duties, pay, working hours, probation period and key terms, as evidence for both sides.
- Probation and notice. Ending an employment with no fixed term is governed by section 17, which sets the advance-notice rule. Always check the terms against the facts before dismissing.
- Severance after 120 days. Section 118 gives an employee who has worked continuously for 120 days or more and is dismissed the right to severance by length of service. Probation does not take the employee outside this rule. See severance pay on termination.
- Fixed-term contracts. The severance exception for fixed-term employment is narrow: project work, specific work or seasonal work that must finish within the term. It is not a way to avoid hiring for ongoing work.
- Workers from outside companies. Section 11/1 treats the business operator as the employer of people supplied by another party to do work that forms part of its production or business, and requires it to see that they receive fair benefits and welfare without discrimination.
- Do not use a freelancer for what is really employee work. See long-term freelancer versus employee.
8. Common mistakes
- Counting only salary and forgetting social security, bonus, the manager's time and the ramp-up.
- Hiring when the real problem is rework, duplication or waiting for approval.
- Calculating with 100% capacity.
- Deciding from one peak month.
- Renewing short contracts for ongoing work in the hope of avoiding severance.
- Assuming probation means dismissal is always free of legal consequences.
- Using a freelancer or a contractor instead of hiring while directing the work like an employer.
- Setting no review criteria after hiring, so you never learn whether it paid off.
9. Decision checklist before hiring
- Collected volume, time per task, backlog, overtime and rework data for at least 2-3 months
- Calculated real capacity per person, not 100%
- Removed rework, duplication and unnecessary steps and the workload still exceeds capacity
- Calculated first-year total cost including social security, bonus, benefits, equipment, recruitment, training, manager time and ramp-up
- Calculated the extra revenue or gross profit needed and compared it with what is realistically expected
- Compared part-time, fixed-term, outsourcing and automation
- Prepared a written employment contract stating probation and key terms
- Set review criteria and dates, such as 90 days and 6 months
- Kept cash available in case revenue arrives later than planned
Further reading
- In-house or outsource: how an SME should decide — comparing doing it yourself with outsourcing
- Workers supplied by outside companies and subcontracted labour — section 11/1 and the company's liability
- Long-term freelancer versus employee — where the line falls
- Severance pay on termination — severance by length of service
- Monthly management meeting: which numbers to review — tracking headcount and workload
- Owner approves everything: delegation authority matrix — removing the approval bottleneck
Do not hire because everyone feels busy: measure the workload, check the process, calculate the total cost of the position against the revenue it needs to bring, and put the employment paperwork in order from day one.
We help draft employment contracts, work rules and other HR documents, review probation and fixed-term terms, and review business plans that involve growing the team. For an initial consultation, call +66 92 254 2045 or send us the details. See also HR documents and business plan.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.
