September: the cost of making a first hire

Dear members,

September brought a useful kind of progress: not a finished answer, but better evidence about what it takes for a small business to take on its first employee. That question is the heart of our Team Council work. It is also a practical test of whether public systems make formal hiring possible for the smallest employers.

Across Reseated, the month included two important steps. On 8 September, the Fair Play Council’s FP-001 issue passed its pattern test. On 24 September, consultation on the Cashflow Council’s CF-001 draft closed, with 362 comments received. These are different problems, but the process is the same: look for a pattern across reports, draft a response, invite scrutiny, and let members decide what to do next.

For Team Council, the clearest new public step was our 14 September open letter to payroll and accounting providers on one-stop registration. On 22 September, we also submitted further evidence on small-employer hiring costs. These documents build on the Council’s earlier letters to the OECD, the ILO and the European Commission. They ask a straightforward question: can a person who is trying to hire one worker understand and complete the necessary steps without navigating a maze of separate registrations and unpredictable costs?

The numbers behind the work

As of 27 September, Reseated had 1,609 members in 49 countries. Members had filed 4,925 reports from 50 countries. Team Council had 107 members in 38 countries and 155 reports from 41 countries. The difference between the countries represented by members and those represented in reports is worth noting: evidence travels beyond the places where members are currently seated.

The median amount at stake in Team Council reports was approximately US$3,890. That is not an abstract policy number for a small employer. It can be money that would otherwise go toward wages, equipment, or the cash reserve that keeps a new hire’s job secure while the business finds its footing.

Reports covered businesses of different sizes: 38% came from people working alone, 42% from businesses with two to nine team members, 16% from businesses with 10 to 49, and 4% from businesses with 50 to 249. Canada had 24 reports, the United States 20, Germany 12, Italy 11, the United Kingdom 8, Mexico 7, India 6 and Brazil 5. Thirty-three Team Council reports were filed in the last 30 days. The picture is not confined to one country or one stage of growth.

The wider context matters. The ILO estimates that micro, small and medium-sized enterprises account for about 70% of employment worldwide, and that roughly 80% operate in the informal economy.¹ Those figures do not tell us why any one business remains informal. Our reports help us examine one part of the question: whether the cost and complexity of a first hire make formal employment harder to begin.

One member’s experience

One anonymized Team Council report described a small employer preparing to move from working alone to hiring a first employee. The owner had already worked out the role and the wage. What remained uncertain was the full cost and sequence of obligations: which registration came first, what contributions would be due, and whether the amounts would change once payroll began. The report put the amount at stake near the Council’s overall median. The difficulty was not reluctance to employ someone. It was being unable to make a confident commitment until the rules and total cost were clear.

That distinction matters. A request for simpler rules is not a request to avoid responsibilities to workers. It is a request to make those responsibilities legible before a small employer makes a promise they must keep. Predictability can help a business hire formally and help a worker know what protections and contributions apply.

What we are learning

First, the “first hire” is a distinct policy moment. A business that has never run payroll does not experience an employment system in the same way as a larger employer with staff who handle compliance. A process that is manageable at scale can be a serious barrier at the beginning.

Second, the burden is not only the amount paid. Members report uncertainty about how to calculate the cost, when different steps must happen, and where to find a reliable answer. That is why our proposed direction combines phased social contributions for a business’s first ten hires with one-stop payroll registration and more predictable rules. Each element responds to a different part of the problem; none should be treated as a substitute for clear obligations or worker protections.

Third, the evidence is still at an early stage. Team Council is at two of the five pattern-test stages needed before a draft can move forward. We should not present an early signal as a final finding. The cost diary and employment-cost comparison are ways to test whether reports point to a consistent pattern and to identify where national systems differ.

What comes next

There is no Team Council adoption vote to announce this month. Our next work is to keep testing the evidence, compare the experience of businesses at different sizes, and make sure that a proposed fix reflects both employer costs and the importance of formal worker protections.

• On 13 October, the planned consultation on FP-001 is due to open and run through 12 November.
• On 20 October, the timeline sets the planned pattern-test milestone for Trade Council’s TR-001.
• From 26 October to 9 November, the Assembly is scheduled to vote on the Cashflow Council’s CF-001 draft.
• The Secretariat’s third-quarter and First Eight Months reports are also expected in October.

For Team Council members, please keep sending evidence that separates the different parts of the hiring decision: the amount, the steps, the timing, and the point at which uncertainty makes you pause. A short, specific report is more useful than a general statement that hiring is difficult. Please do not include confidential worker information or details that identify your business unless you have chosen to make them public.

Thank you to Amina in Toronto, Luca in Milan, Priya in Bengaluru, and Marta in Warsaw for contributing to the Council’s work this month. Thank you as well to everyone who filed reports, reviewed earlier letters, and helped make the evidence more precise. This work depends on members being willing to describe what happens in practice, even when the answer is complicated.

Notes and sources

Sources

1. International Labour Organization: Micro, small and medium-sized enterprises