Advice and tips for entrepreneurs

1. Planning is key before recruitment

Before hiring your first or next employee, take time to plan. Consider why the role is needed and what kind of competence you are looking for. A clear job description makes recruitment easier and reduces the risk of a poor hire.

It is also important to evaluate the total cost of employment. Gross salary alone does not tell the whole story – employer contributions such as pension and insurance costs must also be included. These can increase total costs by approximately 30–50% depending on the industry. It is advisable to calculate this together with a business advisor.

• Book a meeting with a business advisor

A good rule of thumb for SMEs is to ensure that the employee generates more value than they cost. For example, a sales employee should ideally bring in around twice their monthly salary in value.

2. Contracts and ground rules form the foundation

The employment contract is the cornerstone of being an employer. While verbal agreements are legally possible, a written contract is practically essential. It protects both parties and reduces misunderstandings.

The contract should include:

• job duties and responsibilities
• salary and payment terms
• working hours
• possible probation period
• duration of employment

It is also important to document workplace practices such as remote work, sick leave, and use of equipment. Clear ground rules from the start help prevent future issues.

3. Legal obligations must be handled correctly

Once a company has even one employee, several legal obligations apply:

• Salary and reporting: Salaries must be paid on time and each payment must include a payslip. Salary data must be reported to the Incomes Register and employer contributions paid to the tax authorities.
• Insurance: The employer must arrange: earnings-related pension insurance (TyEL), accident and occupational disease insurance, unemployment insurance, and group life insurance (often based on collective agreements).
• Working hours and holidays: Working hours legislation regulates working time, overtime, and rest periods. The Annual Holidays Act governs holiday accrual and pay.
• Occupational safety: The employer is responsible for employee safety and health. This includes risk assessment, onboarding, and ensuring safe working conditions. Occupational healthcare is also mandatory.

4. Good leadership is a competitive advantage

In SMEs, employer–employee relationships are often more personal than in large organizations – which can be a strength if used well.

A good employer:

• communicates openly
• gives feedback and listens
• ensures proper onboarding
• supports skill development

Engaged employees are a valuable asset. Investing in wellbeing reduces turnover and improves productivity.

5. Changes and new legislation

Employers should actively follow changes in working life. For example, the Cooperation Act reformed in 2025 eased obligations for SMEs – formal change negotiations mainly apply to companies with at least 50 employees. However, continuous dialogue with staff remains important even in smaller companies.

Additionally, the EU Pay Transparency Directive will introduce new requirements for salary transparency in the coming years, so it is wise to prepare in advance.

6. Be prepared for challenges

Being an employer also involves difficult situations:

• underperformance
• absences
• workplace conflicts
• termination of employment

In these situations, documentation, fairness, and knowledge of legislation are essential. Clear policies and proactive practices help prevent problems.

7. Being an employer is an investment

Although hiring increases costs and administrative work, it is ultimately an investment in business growth. Done correctly, it frees up the entrepreneur’s time, increases revenue, and enables development.

A successful employer:

• manages legal obligations carefully
• leads people, not just tasks
• continuously develops their operations

For SME entrepreneurs, being an employer is a combination of law, economics, and leadership. The key is to get the basics right: a clear employment contract, correct salary management, and effective day-to-day leadership. When these are in place, employer practices become a competitive advantage.

• Book a meeting with a business advisor
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