Forming a new startup and taking it from inception to a fully formed company is a big undertaking. A key part of any startup’s success is knowing that it’s just as important to work on your business as it is to work in your business. That’s the difference between the strategic, planning, and organizational side versus the day-to-day operations.
The fun parts of building a startup – creating a new product or service, doing market research, and perfecting a prototype – can’t happen without the most foundational, albeit sometimes more dry, parts of the business, like HR.
A functioning HR strategy is essential for both the company and the employees in the present and the future. It establishes important procedures, policies, and perspectives and gives the business a framework with which to grow.
If you’re in the development stages of a new startup, here’s what you need to know about creating your HR department from the ground up and a checklist that can guide the way.
What HR Functions Does a Startup Need?
Every company needs HR. But what each company needs from its HR department may change depending on how developed and established the company is, the kind of business it is, how many employees work there, etc.
For a startup, HR should provide the basic foundational and organizational management needed to scale both people-wise and market-wise. This includes establishing official processes and documentation for the company, defining and nurturing a company culture, managing employee success and satisfaction, evaluating performance, and mitigating risk.
What Does HR Do in a Startup?
HR in a startup should hit the ground running from the first day on, as a lot of foundational work needs to happen to set the business up for success. While each of these roles and tasks may look a bit different from startup to startup, these are the main responsibilities that a human resources department should take on in a new startup.
Clarify Your HR Compliance
HR processes are subject to employment law, which varies from country to country. It’s vital to keep on top of requirements such as health insurance, minimum wages, time tracking, workplace safety, union laws, and data security – especially if your business is subject to audits. Doing so will keep you business above board and help you avoid the monetary fines, legal problems, and reputational risk that come with HR compliance breaches.
Develop a Hiring Plan and Process
When starting out with limited resources, it’s all the more important to ensure that you hire in the right areas. You’ll need an HR budget to inform your staffing strategy, making sure you don’t overhire or become understaffed in important teams. In developing a hiring plan, you’ll identify which roles are needed, define how you’ll recruit the right people, and assign responsibilities for evaluating candidates.
You can then establish a repeatable and consistent hiring process that you can follow to find and interview potential candidates. Only once you’ve got these processes in place will you be ready to write your job descriptions and advertise your open roles.
Set Up an Onboarding Process
Piggybacking off the hiring process, HR teams should also develop a repeatable onboarding process for new employees, including things like orientation, documentation, and progress tracking. Using HR software to send out automated onboarding workflows can be a great way to save time and ensure consistency. At the same time, an applicant tracking system can ease the workload on your HR managers.
A critical, more technical aspect of human resource management for a startup should be classifying personnel into the proper categories, including employees, contractors, full-time, part-time, exempt, and non-exempt. This is one HR task that helps you comply with the applicable employment laws in case of an audit.
Establish Payroll and Benefits Providers
While benefits and perks may not be something every startup offers, it can be an excellent way to attract top talent. Very early on, you’ll have to determine your startup’s pay structure to make sure that you’re not overpaying or underpaying your staff. Finding a payroll provider can also minimize internal workload and ensure continuity as things begin to scale and change with the business.
An employee handbook contains important company documentation for new starters and established employees alike. It should contain a description of your company’s core values, company policies, such as rules and guidelines for remote work, an overview of employee development plans, absence management processes, and your code of conduct.
Why Do You Need HR Policies?
HR policies serve multiple purposes within an early-stage business, from making the job better for employees to helping the company avoid risk. While most people immediately think of HR when it comes to hiring and firing, the department serves a much broader organizational purpose.
HR is essential because it creates plans, company policies, systems, and processes to handle immediate business needs while mitigating long-term risk within the work environment, increasing retention, and improving employee engagement.
Immediate needs often include hiring new employees, payroll and management, and developing company culture around your core values. As businesses grow and scale, they naturally assume more risk, but HR can help minimize this risk by creating watertight employment contracts and keeping a close eye on all things related to employees or the organizational structure.
HR is also important because it improves the overall employee experience. This comes from a repeatable hiring and onboarding process, established company culture and detailed handbook, and being a soundboard to hear employee complaints, questions, and recommendations.
On a more zoomed-in level, good HR makes employees more productive because they feel valued and cared for. This, in turn, boosts the company’s reputation and helps you continue to attract top talent.
What Are the 7 Major HR Activities?
We’ve discussed the importance of HR’s roles in a startup, but within these roles are seven major activities that HR is responsible for in the early days of business development.
If you’re getting your business off of the ground, here’s a startup HR checklist of seven items to be sure to incorporate into the department to ensure everything is off to a good start.
1. Organizational Design for Startups
As a small business startup, you won’t need a fully fleshed-out organizational structure in place before you start hiring anyone or are truly open for business. Still, a basic company document outlining the business structure will help you as you eventually scale and have to think about things like outsourcing, employee planning, or even succession plans down the line.
Don’t fall into the very easy trap of relying on a disorganized HR system or focusing only on the short term. With strategic moves at the beginning, you can set yourself up for success. This foundational structure document will designate a clear path you’ll be able to follow as you grow.
2. Recruitment and Onboarding
Before you bring on employees, you need to know how you’re going to do just that. Everything from recruiting – whether online through LinkedIn, at college job fairs, or simply by posting new openings on job boards – to interviewing, making hiring decisions, and onboarding is critical before even your first hire.
Be sure to have an offer letter template ready, relevant agreements and clauses such as non-compete and confidentiality, and equity paperwork. You’ll also need to gather essential employee data such as social security numbers and addresses for your own HR purposes.
3. HR Compliance, Health, and Safety
Traditional HR is most concerned with maintaining compliance with all health, safety, and employer regulations. You’re responsible for following local and federal labor laws, tax codes, and health/safety requirements and keeping up-to-date documentation for all of it.
First of all, check the regulations in every country and region your startup operates in. In the US, for instance, you’ll need to ensure compliance with the Occupational Safety and Health Act (OSHA). While in the UK, you’ll be subject to the Health and Safety at Work Act (HSWA).
While regulations differ, health and safety requirements typically require you to have an emergency action plan, safe working surfaces, first aid supplies, and sufficient exit routes.
Other key areas of HR compliance include workplace harassment policies, equal employment opportunity policies, and immigration laws.
4. Startup Compensation and Benefits
Attracting talent and incentivizing them to stay is key in a new business if you want the best of the best to join your business. Typically, the best way to do that is with competitive employee benefits and compensation packages.
New hires will want to know their salary structure (base and commission, salary, hourly, etc.) and will expect competitive payment rates within the industry. They’ll also want an attractive policy for holidays, vacation, flexible work, and sick days, as well as healthcare and retirement benefits for them and their families.
In addition to all of this, you should also have an HR plan in place to process payroll regularly, so new hires know when and how they can expect their payments.
5. Employee Relations
Outside of paperwork and the more traditional, technical aspects of HR, the department’s most important role is managing the relationship with employees and ensuring employee satisfaction.
When an employee has a grievance (and yes, this is likely to happen in almost any business), you should have a management system or policy in place that will help you make the right decisions. A policy that outlines acceptable business conduct is a good basic guide. Then, you’ll need to formalize a system for gathering this feedback and documenting it, as well as addressing issues as they arise.
This makes it much easier to respond appropriately if issues arise, but it also protects your company from liability.
6. Training, Development, and Performance Management
Training and development aren’t as central in the beginning stages of a startup as they are later on, and performance issues may be few and far between with such a small team. But starting to strategize about these HR components at an early stage will make it easier as time goes on and your business begins to take shape.
By the time your first business anniversary rolls around, you should be ready to go with OKRs and performance review metrics that you’ll use to measure each employee’s time with the company. Ideally, you should also have the means to increase their pay if their performance review merits it.
As far as training and development goes, start thinking about how you could help your employees grow their skills and progress in the company. Trade shows, conferences, and online training are all excellent ideas to consider for later training and development.
7. Use a Human Resource Information System (HRIS)
Managing all of these aspects of an HR department adds up quickly. While you can certainly try to manage it all independently, using a human resources information system (HRIS), like flair, is the easiest way to streamline all of your tasks and keep everything in one place.
Our HR software will relieve you of tedious tasks and help retrieve precious time in order to focus on more important matters at hand.
With this one system, you can automate basic admin tasks, recruit and onboard new employees, track time, process payroll, and manage company-wide benefits with ease. Today, you can find tons of cloud-based options that offer more flexible access and security that moves where you move, which is great for remote startups.
Before selecting your HRIS, first identify which needs you would like your system to fulfill, what systems you already have in place, and what data you need to keep track of. Then, keep these considerations in mind as you search.
Key Tips for Developing an HR Department
As you can see, a lot more goes into HR than hiring and firing. It involves these seven tasks (and then some). While it’s easy to get intimidated when it’s all laid out before you, take it step-by-step and start with the most immediate and essential needs first.
Use these key tips as you develop your HR department to ensure you’re doing it right, leading to a productive and satisfied workforce and company:
Put Culture First
The truth is that a business is nothing without its workers. If workers aren’t happy and don’t feel valued, they won’t be productive or motivated to do their best. Creating a supportive and healthy company culture is the lifeblood of a successful startup.
Know Your Company Values and Ethics
If you don’t know what you stand for, how can you expect employees to follow suit? Know your company values and ethics, and outline them clearly.
Make Learning and Development Central
Everyone wants to feel like they have a future with a company, so make growth and progress central to your company culture.
Keep It Simple
Don’t overcomplicate things with unnecessary policies you don’t really need where you’re currently at. Keep it simple and assess, add, and edit as needed.
Focus on People Over Processes
It’s easy to get bogged down by the specifics and processes that HR departments use to manage the company and employees – but don’t forget about the people that make up the very business.
HR is what keeps a startup on track with all the technical, employment, and compliance aspects as it grows and develops into a thriving business.
Because flair comes with many self-service features, even startups with one-person HR teams can use it to manage their core HR processes. For example, employees request absences by themselves, and all requests are sent to the appropriate manager for approval. You can set up workflows to automate the onboarding process. And you can create candidate evaluation templates to help you grow in those vital early stages.
If you want to see how our HR software can help you get your startup off the ground, book a free demo today.
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In a tech-driven world, the future of HR is about finding new and innovative ways to balance the needs of the business with the needs of employees. Ensure your organization is ready to thrive by exploring the trends shaping the way we work.