HR for Startups: Everything You Need to Know

You’ve thought through your business model. You’ve mapped out development phases and release calendars. 

But have you given the same level of thought to planning out your workforce? 

People are the lifeblood of any company, and when you’re a small team, they matter that much more. If you want to turn your vision into a reality, you have to hire top talent and create a work environment that gets the best out of each employee. 

Too often, startup founders look at human resources management and the hiring process as an afterthought. But if you want to go from a game-changing idea to scalable, repeatable business success, you need to strategize for your workforce.

Best HR strategy for startups

It’s important to think about HR processes early on. A good HR strategy includes forecasting your team’s growth, budgeting for compensation, and laying the foundation for a thriving and productive company culture.

In particular, your HR policies define and help implement:

• Your employee retention strategy

• Performance management

• Organizational structure

• Recruitment and hiring processes

• Employee surveys and feedback

• Employee training

• Employer compliance

• Company culture

• Compensation

• Workers’ benefits

For startups, you don’t need an entire department of people dedicated to HR, but you should have at least one person. It’s also valuable to bring on someone with HR expertise, instead of assigning HR tasks to another role. 

Erin Campbell, VP of HR at staffing agency Altis Recruitment, explains that startup founders should not skimp on their people management. “An HR adviser can help attract the right talent, structure the interview process, and negotiate offers with a view to long-term retention.”

If you don’t have the resources to hire a full-time HR manager, you may want to consider hiring a consultant to help you build a basic hiring strategy and ensure that you’re complying with federal employer requirements.

Best HR practices for startups: 6 steps

1. Sort out legal compliance and essential documents

When you first start hiring employees, you need to think about compliance with federal employment laws. In terms of HR strategy, employer compliance is your bare minimum stage. 

Specifically, you should get familiar with the following federal guidelines:

• Fair Labor Standards Act (FLSA)

• Affordable Care Act (ACA) 

• Equal Employment Opportunity (EEO)

It’s important to visit your state’s Department of Labor website to see if there are local and regional regulations that you need to follow. 

There are several essential documents you should have on file for anyone you hire, such as proof of eligibility to work in the US and your hiring contract. You may also want employees to sign non-disclosure agreements (NDAs) and ownership of work agreements. 

An NDA ensures that employees can’t take valuable information about your product or business model if they leave for another employer. An ownership of work agreement, on the other hand, ensures that you own the intellectual property (IP) that employees develop while they’re working for you. 

These documents are especially helpful for startup founders, and without them it can be more challenging to secure funds. Steven Fried, attorney and founder of legal compliance app OlyverApp, explains that “if the business doesn’t own the IP, it will be difficult to attract investors.”

The final set of essential documents are those the IRS requires for withholding taxes and running payroll.

2. Set up payroll

Once you’ve brought on team members, you need a way to pay them. You can choose between running a manual payroll or using software to automate the process. 

It’s a good idea to invest in payroll software early on, as it can drastically reduce the amount of time you spend processing paychecks. Plus, it automatically creates a digital audit trail. 

Expert tip: Choosing a payroll software for startups with HR management features keeps all of your people’s data in one place and allows for more seamless workforce scaling. Examples include software providers that have onboarding features or allow employees to request time off.

We’ll cover recommended HR platforms for startups later on.

3. Establish an HR department

Ultimately, figuring out the right time to create a dedicated HR team depends on factors like your financial resources and growth rate.

When you first build an HR team, it can be one person — as long as they bring in the necessary expertise and aren’t also serving another role. 

Kate Kandefer, co-founder of SEO platform SEOwind, suggests, “The sweet spot for bringing an HR expert onboard is when you’ve grown to around 20-30 people… [But] earlier may be appropriate if you plan to scale quickly.”

4. Forecast staffing needs

As your business begins to scale, it’s helpful to create a hiring forecast or team road map that aligns with your company’s fundraising plans and strategic goals. Ideally, you want to have three-month and six-month projections you can revisit and adjust. 

At a minimum, your forecast should include which roles you plan to hire and when, as well as a projected salary.

Having a well-defined hiring plan can help you avoid gaps in essential staffing and understand how much of your revenue or funds raised will need to be allocated to recruitment and compensation. 

Expert tip: Creating a benefits road map along with staffing forecasts is a proactive way to help ensure you remain a competitive employer.

5. Create a recruitment handbook

Defining your hiring process empowers you to create a better candidate experience, train new recruiters as you grow, and make talent acquisition repeatable and scalable.

You don’t need to over-engineer your recruitment handbook. It can be a living document that grows with you. At the least, start with a basic version that includes guidelines around:

• Advertising job openings: Where to post open roles, job description templates, job application templates, and boilerplate text to describe the company, culture, and perks

• Recruitment roles and responsibilities: Who screens applications, who communicates with them, and who has final decision-making power on hiring decisions

• Interview protocol: Interview length and format, whether to use technical tests, who should interview potential new hires (such as HR, managers, or peers), and a set of questions you ask every candidate to gauge compatibility with your workplace culture  

6. Employee onboarding and resources

A survey by Silk Road Technology found that on a scale of 1-10, 27% of new hires rated their onboarding experience as a 5 or worse, and 9% of employees even left a company because of it.

While you may not have the resources of a large corporation, that’s no excuse for an onboarding process that throws new hires in the deep end and hopes they learn to swim. When done right, onboarding can improve employee engagement, performance, and retention.

An effective onboarding program should:

• Help new employees get acclimated to the office space with an office tour (or host virtual meetups for remote employees). Give them access to the tools they need such as spreadsheets, knowledge bases, and software (like Photoshop)

• Make them feel like part of the team with a company lunch or other meetup

• Set clear expectations for their first 90 days of work with the help of their manager

You also want to have an employee handbook where you can document your company’s vision and core values.

The handbook should also educate new hires about benefits, outline behaviors that won’t be tolerated,and tell employees how they can provide feedback, ask questions, or elevate concerns. This should also include any tools or a program for HR in startups environments.

Best HR software for startups

Investing in HR software can streamline your recruiting, hiring, and people management processes, and increase the impact of a small HR team. 

Here are three of the best HR software options for startups:

Bamboo HR

Bamboo provides all-in-one HR software built to help small-to-medium businesses (SMBs) and startups streamline recruiting, employee, and payroll management. Its user-friendly platform supports hiring, onboarding, employee records management, compensation, and culture building. 

It also includes an employee self-service mobile app that workers can use to complete onboarding documents, access performance tracking tools, and request time off, which makes it ideal for companies with remote employees. 

Pricing: Comes in two tiers (essentials and advantage) with a free trial option

Best for: Small businesses and startups with remote teams

Zenefits 

Zenefits is a people operations software with tools to manage HR, payroll, and employee benefits. The platform can be customized, so you can scale from hiring a few people to designing compensation plans that attract top talent. 

The mobile app makes it easy for team members to self-onboard, view pay stubs, and request time off. The app also lets managers track onboarding progress, approve time-off requests, and view an employee directory.

Pricing: Three tiers ranging from $8/month per employee to $21/month per employee when billed annually. You can try a demo account for free.

Best for: Startups scaling operations and growing employee benefits packages

Gusto

Gusto is a payroll solution that includes tools for hiring, onboarding, time tracking, and managing employee benefits. It enables end-to-end digital HR management as well as a contractor-only tier for businesses without W-2 employees.

Pricing: Ranges from $40 to $80/month, plus $6 to $12/month per employee. Optional contractor-only plan at $6/month per person.

Best for: SMBs and startups that regularly use independent contractors

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