HR for Startups
Table of Contents
Table of Contents
What Is the Role of HR in Startups?
Startups are simultaneously exciting and stressful. It can be extremely exciting to build something from the ground up, but it’s important not to overlook the people component and HR aspect of the startup.
For the startup founder. You want to ensure that you get solid processes in place from the beginning in order to save a lot of headache down the road. If you don’t take the time to really develop policies and procedures with your HR team, they most likely won’t be able to catch up when you have a headcount of 100+ employees.
For the HR professional. Your role is to act as a partner with the founder to ensure that you are aligned and that policies and procedures are pointed in the direction that the founder sees them going. It is your role to ensure that the company stays compliant with employment laws while also being an advocate for the employees of the company.
“Helping a founder (or founding team) let go of control is always challenging, especially if they aren’t HR-minded naturally. Many founders have great technical expertise in a particular area, but don’t know much of anything about HR, people management, or organizational leadership. If we have the chance to interact with and influence them, we need to gently help them to understand the complexities (of which they are often quite unaware) and help them to see why we are essential to the long-term sustainability of the company (including during growth/scaling).” – Jonathan H. Westover
Role 1: Put Policies and Procedures in Place When the Company Is Small
It’s always easier to scale policies and procedures than to attempt to implement them when the company has grown. A policy that is developed when the company is small can be built to grow and encompass more employees as time goes on. It also is a great way to provide foresight into things that may be coming down the road, such as an FMLA (family medical leave act) offering when the company hits 50 employees. If you get certain things out of the way early on, you won’t be bogged down trying to implement them later when the company is bigger and you have other priorities.
Some of the policies and procedures you create will be for the benefit of HR (or whoever currently handles HR functions), while others will be employee-facing and should be added to the employee handbook. Policies employees should know about include the following:
- Paid time off (PTO)
- Time tracking and attendance
- Meals and breaks
- Leave (maternity/paternity, bereavement, etc.)
- Anti-harassment and non-discrimination
- Drug and alcohol use
- Social media
- Workplace safety
Role 2: Focus on the People
Yes, the bottom line is going to be important to the founder. But people are the lifeblood of the business. Put the emphasis on getting good people in the door and create a culture that enables them to grow and develop. People want to feel empowered when they come to work. They want to feel like their work is making a difference. As the startup continues to grow, focuses can shift. As an HR professional, it is your primary responsibility to ensure that the people that you represent (the employees) are taken care of and that they know someone has their best interests in mind.
When it comes to keeping your focus on people, here are a few things to keep in mind:
- Provide benefits that people want and need. For most employees, health insurance is the most meaningful benefit they can receive. But there are many other benefits that can lighten the load on your people. Examples include dental and vision insurance, financial wellness, student loan repayment, and the list goes on. Ask your employees what benefits they would appreciate the most, and then do your best to provide them.
- Promote employee wellbeing. As a company owner, manager, or HR leader, it can be tempting to start viewing employees as assets instead of human beings. But it’s important to remember that each of them is struggling with things that may not be obvious. On both an individual and a workplace-wide level, make sure that employee physical, mental, social, and emotional wellness is prioritized rather than stigmatized.
- Throw a party once in a while. Most people come to work for a salary. But going above and beyond to create an enjoyable workplace culture will make employees want to stick around for years to come. Host workplace celebrations on holidays like Valentine’s Day, Independence Day, Thanksgiving, and Christmas. Promote DEI by celebrating Black History Month or Juneteenth. People will love getting a chance to relax and spend time with their coworkers in a social setting.
- Recognize employees. Employee recognition is a great way to show people that you see the value they add to the business. Consider creating a program to ensure that everybody is recognized in meaningful, consistent ways.
You also have another hat to wear. Generally speaking, you will also be representing management to the employees. Make sure that you are living your company’s values. At times, you will have to enforce policies and take disciplinary action against employees. Do so the exact way that you would want someone to discipline you in the workplace. Come from a place of humility and empathy and convey that to the employees that you represent.
Role 3: Provide Guidance on Navigating the Employment Laws
As the company gets started, there will be numerous questions regarding which laws become applicable to the company at what point. It can be difficult to stay up-to-date on all of the laws and changes that occur, especially if you are operating in multiple states. It would be best practice to create a list of laws that will apply at different employee counts and as time allows (obviously, before reaching that employee count) start writing out policies to cover those tiers.
For example, FMLA kicks in when an organization reaches 50 employees regardless of full-time or part-time. For at least 20 weeks of the year the company is required to comply with the federal FMLA regulations. However, in California, you also have CFRA (California Family Rights Act) which is basically the same thing as FMLA, but covers employers with 15 or more employees. Your job is to act as a coach and ensure that you know the laws that apply at different stages. Do your research and reach out for help when needed.
Here’s a list of resources that provide more information about the most common federal employment laws:
- Fair Labor Standards Act (FLSA). For an overview of the FLSA, see this article. For more detailed guidelines, this page provides some basic information on the minimum wage, overtime pay, and child labor laws, with links to learn more about each of these areas.
- Occupational Safety and Health Administration (OSHA). OSHA is a government organization responsible for workplace safety. You can find an overview of their mission and additional resources here.
- Family and Medical Leave Act (FMLA). As mentioned above, this law will kick in once you reach a certain number of employees. To learn more about what life events fall under this law, check out this page.
- Office of Federal Contract Compliance Programs (OFCCP). The OFCCP is meant to prevent discrimination “on the basis of race, color, sex, sexual orientation, gender identity, religion, national origin, disability, or status as a protected veteran.” This page explains in more depth.
What Does HR Do in a Startup?
The previous section gives an overview of three of HR’s most important roles in a startup. This section takes a closer look at several of the most important tasks that HR does on a regular basis. These tasks will be particularly valuable to younger startups that don’t yet have HR processes in place.
Here’s a list of specific HR items that founders should consider as they get their companies off the ground.
Create the Employee Handbook
Once you begin hiring employees, you’ll definitely want an employee handbook. A company handbook outlines principles, policies, codes of conduct, and more. It’s basically the guide to how you expect employees to behave and conduct themselves while working for your business. Create a handbook early on, then modify it, adjust it, and re-think it as your company grows.
Oversee Employment Compliance
Do you know if your state gives employees certain rights to employment? Are your state laws such that employment is considered “at will?” Does your state have laws and regulations around vacation time and sick leave? Do you understand FMLA and guidelines around unpaid leave? These issues around employment compliance are critical to understand. You’ll also want to have them written into your employee handbook so your employees can reference these policies.
Oversee Document Compliance
There are certain documents you’ll need to collect from new hires to legally work in the United States. Common documents such as the I-9 form (which verifies a legal right to work in the US) and the W-4 form (which is used for tax purposes) are absolutely essential. On top of these two documents, you might have new hires sign offer letters, non-compete or non-disclosure agreements, stock agreements, and your employee handbook.
There is no shortage of paperwork when a new employee is brought onto the team, and you need a way to get this all signed and stored securely. The government requires that certain documents (like the I-9 form) must be kept on file for years.
Offer Standard Training
From the moment you begin to hire, it’s a good idea to conduct training on behavior and comportment in the workplace. Although many trainings are only required once you reach a certain size or scale (in California sexual harassment training is required for companies as small as five employees), it doesn’t hurt to get into the habit of conducting trainings every year. Certain training such as sexual harassment training, discrimination training, workplace safety training, and others are vital to a healthy workplace culture.
Determine What You’ll Pay Employees
As you hire people to work for your startup, you’ll need to understand the labor market so you can offer appropriate compensation. Although you might not be able to pay at the high end of market rates, it’s important to do the research so that you’re at least competitive for talent in your area.
As early as possible, you should think about compensation ranges for each position, how you might afford annual raises, how compensation will be reviewed, and whether or not you’re contributing to the gender pay gap.
Along with what an employee is paid, the benefits your company offers completes the compensation package. Certain benefits are required by state and federal law. This includes things such as unemployment insurance, disability insurance, and worker’s compensation.
Beyond this, you’ll want to also ask yourself if you can afford to provide your employees with health, dental, or vision insurance. The government provides some resources if this is something you’re looking to do.
Running payroll accurately and on-time is critical for any business, but messing it up is a sure-fire way to lose the trust of early employees at a young startup company. Understanding what software or service you’re going to use to run payroll, assigning responsibility to make sure it’s accurate, and getting the correct taxes and withholdings subtracted from each paycheck are all vital functions of a business.
Hire the Right Way
Bringing on talented employees to help grow your business is likely the quickest way to success. Having the right team is everything, and you’ll want to be sure your hiring process is competitive and exhaustive.
Of course, there are some things to be aware of that can get you in trouble with the law if you’re not careful. During the interview process, there are questions you can and cannot ask job applicants. Anything related to a protected class (meaning questions about age, gender, sexual orientation, race, ethnicity, etc.) is completely out of bounds. Asking questions about any of these issues, even seemingly innocent ones, could land you in the midst of a discrimination lawsuit.
You’ll also want to be sure to document reasons for rejecting applicants. For example, if a candidate believes you rejected their application because of their race, you’ll need to be able to point to documentation to defend yourself. Without any notes or documents that can clearly articulate the real reason for the candidate’s rejection, you might have a hard time proving in court that race wasn’t a factor.
The list goes on! Here are a few other areas that HR can focus on:
- Employee contracts
- New hire onboarding
- Creating workplace policies
- Time tracking
- Overtime pay
- Performance management
- Disciplinary action
Benefits of a Startup Having an HR team
There are many benefits to having an HR team as part of a startup. In fact, there are too many benefits to list them all here, but we’ll cover a few of the primary benefits below.
Benefit 1: Having a People-Centered Business
We touched on this above, but it’s incredibly important to have the focus on the people in any company, not just in a startup. We have all worked at companies where the culture is too focused on the product and the people are simply a means to produce the product. That culture is toxic and ultimately creates turnover and attrition. By developing a culture where the employees are treated like people first, you develop a culture that is a cut above the rest and your employees are more likely to be more productive. If your employees are more productive, then you automatically have a great impact on the product and the profitability of the company. This principle applies to the founder and the HR team. By creating this culture from the beginning, you have an incredible opportunity to continue to develop that and position your company as a premier employer.
Benefit 2: Developing Best Practices
It’s never too early to start building out your best practices and your operating procedures. These are all things that you as an HR professional in your startup can handle for the founder and CEO. As an HR professional, you have an incredibly important role to play in assisting the founder develop policies and procedures that are focused on the people. Just as stated above, the people are truly the lifeblood to any company.
Do some research on your particular industry to see where other companies fall short. Start by looking at the reviews of your competitors to see what their people like and dislike about working there. You can then adopt some of those same principles, assuming that they fit into the culture you are attempting to develop. You can also take and tweak things that you have seen work well at other companies.
Benefit 3: Taking the Administrative Work Away From the Founder
The founder’s focus should be on growing the business. There is a lot of administrative work that goes into an HR department, such as new hire paperwork, verification of employment, benefit administration, etc. As an HR professional, you should be the one to take on the majority of this work as you will have direct access to the things that these tasks will be requiring.
There are also legal requirements that may have an impact that you should be aware of. For example, ACA (the Affordable Care Act) applies to companies with 50 or more employees. You will use your expertise and knowledge to ensure that your company remains compliant on the administrative side as well.
How to Start an HR Department in a Startup
Now that we know the roles and the benefits of a startup having an HR team it’s time to actually build one out. Maybe you’re just starting out with a startup and the founder’s given you the responsibility of building an HR team. Where do you begin? We’ll break down the steps below.
Step 1: Determine Your Need
For the founder. First and foremost, while every startup needs HR help eventually, make sure the time is right for your company. Every company is in different stages.
If you’re working with a limited budget, hiring a full-time, salaried HR professional might not be a top priority. One option is to have someone in the company be responsible for HR. Assigning HR responsibilities to someone makes them less likely to be forgotten. It may not be your number one priority, but it needs to be a priority for someone in the company.
There are other options as well. Maybe you don’t need full-time help right now, but could use someone part time. Maybe you just need a consultant to get you started (check out New Age HR Consultants). At the very early stages of a startup, bringing on an HR consultant is the fastest, most affordable way to ensure you’re doing things the right way. An HR consultant can help you do the following:
- Form your employee handbook
- Create company policies
- Ensure state and federal compliance
- Train staff on hiring/firing best practices
- Write offer letters
- Answer your questions
You may need to spend significant time with an HR consultant to help you get set up, but once you’re up and running you likely only need to check in a few times each month. HR consultants can bring authoritative and professional advice to your business before you’re ready to hire someone full-time.
“The number one aspect of HR is to make sure that people are paid on time and correctly (payroll). This is one area that I think sometimes is better to be outsourced rather than just adding to someone’s job and it only getting a portion of time that it deserves. I would also add benefits to this.” — Tatiyana Cure
For the HR professional. Whatever stage the startup is in determines who to bring onto the HR team and how much time you’ll need to dedicate to this step. You may originally be brought into the startup solely to run payroll, but you can start developing other policies and procedures that you can see benefiting the company and then showing those to the founder or CEO. If you are brought in on a part-time or contract basis, work hard to show your worth and give the founder amazing results to position yourself for a full-time and permanent offer of employment.
Step 2: Define the Duties
For the founder. Do you want HR to help write policies and procedures? Administer benefits? Run payroll? Assist with recruiting? There are so many things an HR professional can do. Determine what your business actually needs them to help build out.
For a list of common duties that the HR professional often takes on, see the section above titled “Taking the Administrative Work Away From the Founder.”
For the HR professional. While it is important to remain in your lane and perform the tasks and duties assigned to you by the person you report to, don’t let that limit you. Your potential for growth in a startup is astronomical. As suggested above, if you see a need or something that is out of compliance, don’t be afraid to develop a policy or procedure to correct that. That will set you on a great trajectory for growth and advancement.
Step 3: Hire Your HR Professional or Consultant
For the founder. It’s time to make that jump into the deep end and hire someone. Indeed provides several sample job posts for the position of HR generalist. While using models is a great way to learn what makes a good job description, always remember to adapt job descriptions to your company’s needs. Highlight the unique perks of working for your organization while staying honest, straightforward, and original.
While interviewing, make sure that candidates fit the culture that the company is trying to build and that they actually have the experience to make it happen. Ask for work examples or speak to their former employers.
For the HR professional. You have just been hired by the startup you have been dreaming about working for. This is an exciting moment! But this is just the beginning. You have a lot of work ahead of you. Get ready to wear multiple hats and handle multiple duties. Don’t be afraid to jump in and make suggestions. Just as we said above, you are on a rocket ship at this point, but don’t forget to take in how far you’ve come.
Step 4: Schedule Internal Audits
For the founder. Once you’ve made someone accountable for HR (whether that’s a current employee, a newly-hired HR professional, or a consultant), you’ll want to schedule internal audits every 3-6 months. Use this as a time to review and evaluate the status of HR operations in your company. Is payroll being run on time and is it always accurate? Are new hires having a good onboarding experience? Are all your documents stored securely and could you access them if needed? If the person accountable for HR left your company, would you know what to do?
Mini internal audits are important as you start and grow your business. Life in a startup is certainly chaotic, challenging, and stressful. If your HR processes are weak, you add significant risk to your business. Do your best to get things set up the right way and then circle back every few months to ensure they’re still working as designed.
How Eddy Can Simplify Your HR Processes
As your company grows, remember that HR can become a lot to handle for a single person. To automate key HR functions, save time, and operate more efficiently, consider investing in a good HR software.
Eddy is an all-in-one HR software platform designed to help small businesses thrive. With Eddy Hire, you can post to top job boards with one click, casting a wider net to attract candidates. Eddy People makes the onboarding process a breeze with digital document signing, easy-to-manage tasks lists, an employee directory, and more. It also takes care of day-to-day tasks like time tracking and paid time off. And Eddy Payroll is a full-service payroll solution that ensures that employees are paid accurately and on time—and that the company stays compliant.
Questions You’ve Asked Us About HR for Startups
Nick is a certified HR professional holding an SPHR and SHRM-CP. Nick has built HR teams from the ground up as well as worked for big corporations. Nick enjoys consulting and training those who are just getting started in HR. When not working, he enjoys spending time with his family.