Why Startups Need to Think About HR

Starting a business is hard. There is so much to think about in terms of what you’ll be selling, how you’ll sell it, and how you’ll get customers that anything beyond that might seem premature. But implementing and understanding HR policies and processes will set you up for long term success. Read on about why startups need to think about HR.
Why Startups Need to Think About HR

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So you’re starting a new business? Congratulations! You’re in for a wild ride. A startup is exciting, terrifying, exhilarating, exhausting, thrilling, and stressful all at the same time. There’s often so much to do and so much to focus on that most startup entrepreneurs spend little to no time thinking about their HR department.

Of course, getting a company off the ground is no easy task, and so it comes as no surprise that HR is an afterthought.  But just because it’s often forgotten doesn’t mean it’s not important.

We understand that you probably won’t have a fully-staffed HR department when you launch, but there are certain steps every entrepreneur can take to ensure that their business is prepared for the future. Let’s examine when and why startups need to think about HR.

When should startups start thinking about HR?

The short answer: before they even launch.

Look, thinking about HR and having a fully-staffed HR department are two completely different things. You likely won’t do the latter, but anyone can do the former.

Get this top of mind as you start your business and you’ll reap the rewards for years to come.

Why should startups think about HR?

The list here can get long, so we’ll dive into a few of these briefly. Just remember running a business comes with certain regulatory and compliance requirements, many of which revolve around people.

You’ll want to get this right from the start to avoid employee complaints, missteps in audits, and general violations of the law. 

Here’s a list of HR items startups should consider as they get their companies off the ground:

Just starting a business? Eddy can help you manage your people, processes, and payroll.

Employee Handbook

If it’s just you and a few co-founders you may not need to have an employee handbook; however, once you begin hiring employees, you’ll definitely want one. 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. Also, think of whether or not you’ve informed employees of your right to make changes to the handbook and how you’ll notify them when changes are made.

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.

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. And don’t forget, the government requires that certain documents (like the I-9 form) must be kept on file for years.

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.

Employee Pay

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. 

You can also read more here about other benefits you may want to offer as a startup.

Running Payroll

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.

"If there’s one area where you really don’t want to mess up in the early days of your startup, it’s in payroll."

Hiring 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 candidate 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, then you might have a hard time proving in court that race wasn’t a factor.

Need help hiring great people? We’ve got you covered.

How to Implement HR in a Startup

So now that you have an idea of what HR tasks you’ll need to pay attention to, let’s walk through a few points about how to start implementing HR processes in your startup. 

We think you’ll be pleased to know that it’s not as complicated as you might think.

Assign someone to be accountable for HR

When you’re just starting a company, the chances of there being much room left in the budget for a full-time, salaried HR employee are usually pretty slim. If you can afford someone like this, we suggest you go for it. But we understand that you’re working with a limited budget and hiring for that role might not be a top priority.

This is ok as long as someone in your company is willing to be responsible for HR.

If you ignore HR completely, you’ll set your company up to fail. Designate a founder or an employee who is responsible and accountable for all things human resources. By assigning this task to someone it is 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.

"Designate a founder or an employee who is responsible and accountable for all things human resources."

Consider working with an HR consultant

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.

Use HR Software (HRIS)

HR software, often referred to as a Human Resource Information System (HRIS), allows you to leverage technology to manage all your HR tasks. As we detailed above, there is no shortage of things to worry about when it comes to HR. Luckily, there are companies like Eddy who are 100% dedicated to providing startups and small businesses all the resources they need to successfully manage their human resources.

HR software will allow you to automate tasks, sign and store documents, hire and onboard new employees, track employee time, and even run your payroll. By choosing a great software companion, the bulk of your HR worries can be eliminated.

Schedule Internal Audits

Once you’ve made someone accountable for HR, worked with a consultant, and purchased HR software to make your life easier, 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 then 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.


Startups are hard. There are so many things to worry about and HR might not be high on your list. But honestly, with just a little bit of thought, effort, and money you can get your company set up for success. The risk of ignoring HR completely is far higher than the time and resources you’ll spend to get it right.

So when it comes to the question, “when and why should startups think about HR?” just remember that the time is now, and the reasons are many.  

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