Edition #39: Uncontrolled Hiring and Salary Inflation—When Payroll Becomes a Financial Time Bomb

Introduction

I’m pleased to welcome you to Edition #39.

The business isn’t growing, but the payroll keeps expanding.

A new manager joins—no budget discussion, no financial planning. Another role is created—not because it’s needed but because “we know the guy, and he’d be great.” Then comes the big one—the CEO’s friend or relative, hired on an inflated salary that throws the entire payroll structure off balance.

You see it happening. You warn about the financial strain. But they don’t listen.

Until the cash flow dries up. Until salaries become late. Until you are the one expected to fix a payroll that was never sustainable in the first place.

Today, I’ll show you how to bring financial discipline to hiring decisions, control salary inflation, and stop payroll from becoming the reason the business collapses. Because if finance doesn’t lead the hiring conversation, emotions and bad decisions will.

The Problem

In structured companies, hiring is based on need, budget, and return on investment (ROI).

In unstructured SMEs? It’s based on emotions, relationships, and pressure.

• A new senior role is created—not because the business needs it but because “it looks good to have.”
• A key hire is brought in—not at market rate, but at an inflated salary because “we have to secure them.”
• Relatives and close friends join—not based on merit, but because “we have to help them.”

Then, when salaries start weighing down cash flow, finance gets blamed for saying there’s no money.

But here’s the thing—this isn’t a payroll problem. It’s a leadership problem. And if finance doesn’t step in, the business will run out of money before leadership runs out of people to hire.

A Story

Meet Chika, an FBP at a growing tech SME in Lagos.

The company started small, lean, and profitable. But as it grew, something changed.

The CEO hired an old friend for a senior role—at twice the market rate. Another department brought in “urgent” hires without checking the financial impact. Payroll grew by 40% in a year, while revenue barely moved.

Chika raised concerns: “We can’t sustain this without cutting costs elsewhere.”

No one listened.

Then, six months later, cash flow hit a breaking point. Salaries were delayed. Panic set in. The same leadership that ignored her warnings now asked, “Finance, what do we do?”

Chika didn’t wait for another crisis. She built a hiring cost framework that tied every new role to revenue impact. She created salary bands to stop inflated pay. And most importantly, she made sure no hire was approved without finance reviewing long-term affordability.

Within a year, payroll was controlled, hiring was strategic, and the company wasn’t just surviving—it was scaling sustainably.

Chika didn’t just fix payroll—she changed the way leadership thought about hiring.

Ajibola’s Tips

1. Tie Every Hire to a Business Impact Assessment

If a role doesn’t generate revenue, improve efficiency, or reduce costs, it shouldn’t exist.

Action Tip: Before approving a new hire, ask:

• What problem does this role solve?
• What financial value will this role add?
• Can we afford this role for the next 12 months without struggling?

If leadership can’t answer these questions, it’s not the right hire.

2. Implement Salary Bands—Stop Inflated Pay

Overpaying one person breaks the entire payroll structure. If finance doesn’t regulate salaries, emotions will.

Action Tip: Introduce salary bands—clear pay ranges for each level. If leadership wants to exceed the band, make them justify it with financial projections.

3. Introduce a Hiring Freeze When Payroll Exceeds 40% of Revenue

Payroll shouldn’t eat up all the cash. If it does, hiring needs to stop.

Action Tip: Set a payroll-to-revenue ratio (e.g., max 40%). If payroll crosses this, enforce a hiring freeze until revenue catches up.

4. Make Finance a Gatekeeper in Every Hiring Decision

If finance is left out of hiring conversations, expect disaster. Insert yourself into the process before hires are finalized.

Action Tip: Require a finance sign-off before any hiring approval. If leadership resists, start by reviewing one department’s hiring first, then expand company-wide.

5. Track Payroll Growth Against Revenue—And Share It Monthly

Leaders don’t see payroll risk because they aren’t tracking the trend. Show them.

Action Tip: Send a monthly payroll report that compares salary growth to revenue growth. If payroll is increasing faster than revenue, call it out before it’s too late.

Hiring without financial discipline isn’t growth—it’s a slow-motion collapse. The best companies don’t hire because they can. They hire because they should.

Grow With Us

Struggling with uncontrolled hiring in your SME? Our mentorship program helps FBPs take control of payroll decisions, influence hiring strategy, and stop salary inflation before it ruins the business. Join us and take control of the numbers before they take control of you. Send a DM!

Conclusion

A bloated payroll isn’t a sign of success—it’s a financial red flag.

If leadership doesn’t see it, finance has to make them see it.

I know you are concerned that you may not have the power to influence anything, but you do. If you have been putting my tips to use, you must have gained some influence by now in the company's hiring practices.

Besides, when something goes wrong, you will be called to fix it. So, it's better to do something than to do nothing.

Because when a business spends more than it earns, it’s not hiring—it’s sinking.

And you? You’re the one holding the lifeline.

Cheers, Ajibola