HR for Startups: The Ultimate Guide

It's a good bet that if you ask any entrepreneur to define their startup in three words, "innovation" will be at the top of the list. It's a desirable trait in startups for it is the innovative ones who are always looking for ways to challenge the status quo with fresh and efficient solutions.

Humans, whether they work for a major corporation or a startup, are in charge at the end of the day. As and when unique people challenges arise, founders are left with no choice but to stop turning their backs on people functions and start campaigning towards - what we guessed as the intent of this article - HR for startups guide!

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Understanding the role of HR in startups: Small but impactful

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HR for startups acts as a strategic business partner during the organization's life cycle. It’s reasonable to conclude - that a company's performance is mostly based on how its HR department handles overall organizational challenges.

Startup founders and early employees have to be skilled multitaskers who are ready to take on any assignment. Now, it may be possible to delegate HR activities to other departments like finance or operations. But as a startup grows, founders may want to establish a high-performing HR staff.

Compliance Advisor, Employee Relations Counsellor, Benefits Administrator, and Recruiter are just a few roles of HR in startups. Where to begin? - this depends upon the stage of the organisation’s growth. For example, prioritizing benefits & finding the most effective recruiting strategies would be top HR priorities if the company was in a high-growth phase.

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Role of HR in startups: Justifying the need for HR strategies in startups

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1. Organisational Design: Who will report to whom in the organisation? What will the structure of the teams and sub-teams be?

2. Hiring & Recruitment: How will we discover top new candidates? How will we onboard them? How do we ensure that they have the best chance of succeeding?

3. Benefits and compensation: In terms of remuneration, what is reasonable and fair? What criteria should we use to determine what we should offer?

4. Employee relations: Are your employees content? Who is there to advocate their interests?

5. Compliance, health, and safety: These may appear frightening, but that's because they're crucial! How to ensure that you and your colleagues are both legally and physically safe?

6. Performance management, training, and development: Are employees growing and developing at the correct speed for both their own goals and the company's goals while they stay with the company?

7. Culture and engagement: Are HR responsible for fostering a positive work environment that promotes employee engagement and satisfaction? Can a strong company culture facilitate team-building activities, and addressing employee concerns?

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8-step HR checklist for growing companies: Startup HR toolkit

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There is no such thing as the "ideal time" to hire an HR professional or expand an existing workforce. Neither is there a one-size-fits-all approach when it comes to HR requirements for small business. Rather, startup founders must assess their present workload and look around to examine the common HR challenges in startup companies. HR for startups guide is the only entity that can instill the startup's brand strategy in the minds of its employees.

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Step 1: Hiring the HR staff

The department of HR in startups are often delegated to one individual, who is the single team member. People - or more precisely - a person who handles HR tasks define human resources in a startup, not functional terms.

When screening the ideal candidate for the position, consider the qualifications below similar to the Human Resources Manager Job Description Template:

• Number of years in HR and the level of responsibility held during those years (i.e., was the candidate a generalist, a manager, or a specialist?).
• Working experience with startups or businesses in a similar industry or size.
• Level of education and HR-related certifications
• Knowledge of labour regulations and other concerns related to compliance.
• Ability to conduct research, gain access to resources, prioritise and juggle several tasks, and adapt to a startup's rapidly changing demands

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Step 2: Aligning the HR department's budget with the strategic goals

The HR practitioner's job is to match the HR department's budget to a company’s strategic goals - and also adhere to its policies and procedures. Budgeting involves the method of collecting data to forecast the financial resources required to achieve the goals.

Since startups do not have a prior budget to compare, projecting and estimating are required for the first HR budget. Refer to the below startup HR toolkit to generate a new budget from the standpoint of HR in startups:

• Estimated number of employees for the year.
• Cost projections for the benefits.
• Expected rate of turnover.
  Also read, How to Curb your Turnover with People Analytics
• Costs that have already been incurred in the current fiscal year
• New benefits or initiatives in progress
• Needs for recruiting or new training
• Implementation of other policies, business methods or legislation

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Step 3: Building a payroll system

The creation of a payroll system is a top priority. HR professionals may choose to engage with a payroll vendor to help with payroll compliance and reduce administrative strain. Whether an HR or third-party vendor, the payroll administrator must be familiar with national & state labour laws like minimum wage, overtime pay, eligibility, record-keeping, and how to calculate hours worked.

Structure of Payment

To efficiently attract & retain talent in a startup is to have a fair and competitive pay structure. Building a market-based compensation structure from the ground up entails this HR checklist for growing companies:

• Look out for the necessary background information on the current job market scenario
• Analyze and identify market data
• Develop pay structures
• Calculate the pay structure's costs.
• Put the new pay structures in place and analyse them

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Step 4: Mapping down a staffing plan

HR in startups must develop a 3- to 6-month staffing strategy and budget in collaboration with the founders. The need for HR strategies, for startups, is to evaluate how much time and effort is required to staff the company.

A staffing plan will list the workforce's composition and content to set the startup’s current and future goals. Here’s what to keep in mind while creating a staffing plan:

• Make an accurate list of open positions
• Collaborate with hiring managers to develop a recruiting strategy
• Voice any issues about the task if any. For eg., lack of funding
• Include realistic deadlines and resources in the recruiting plan (budget, timings, training)
• Determine the most effective sourcing strategies

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Step 5: Creating job descriptions

A startup HR toolkit also incudes job descriptions that defines the requirements and responsibilities of a job position. Job descriptions are used for a variety of purposes, including calculating wage levels, carrying out performance assessments, giving titles and pay grades, and mostly as a recruiting tool.

A supervisor can use a job description as a metric to check if an employee is meeting job requirements. They can either go through the mundane process of creating job descriptions from scratch or refer to the customized, pre-existing job description templates.

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Step 6: Deciding upon the benefits plan

The organisation must decide which benefits are mandatory and which ones are optional for employees. Is it planning to provide paid holidays or other paid time off (PTO) such as vacation, sick leave, personal days, or a PTO bank that includes all leave?

HR in startup companies may refer to this list of valuable benefits:

• Group health benefits (such as medical, dental, and vision insurance)
• Disability insurance (short- or long-term disability)
• Life insurance
• Flexible spending accounts
• Employee assistance programmes
• Pension and retirement plan options

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Step 7: Developing an employee handbook

Employee handbooks are recognised by human resource professionals as an important tool for communicating company culture, perks, and employment policies to employees. An employee handbook often contains information regarding the employer's hiring practises, benefits, equal opportunity commitments, attendance policies, pay practises, leave-of-absence protocols, safety concerns, labour relations issues, and disciplinary procedures.

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Final step: Rolling out the final plan

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Following the HR checklist for growing companies, HR - for startups - should develop a strategy and present it to top management for input and, most importantly, buy-in. The following stage is to synthesise overall impressions and prioritise individual action items based on the assessment results, keeping budget implications in mind for each item.

As per legal compliance and organisational benefit, HR in startup companies should prioritise various initiatives and actions as high, medium, or low priority. They should next create a timeline for action on the highest-priority things that can be completed in the next three to six months, including cost forecasts, the reasons for the tasks, and the expected end results.

HR professionals should be prepared, succinct, and direct when presenting a strategy to senior management, and anticipate questions that may be posed. They should also explain how these activities will effect the organisation's bottom line, illustrating how a HR department improves the company's operations in terms of profit, productivity, increased business, reduced liability, and employee satisfaction.

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Some HR requirements for small business

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1) Align new initiatives with the company's culture

Building culture into your startup will improve HR’s case, as culture appears to be universally accepted as a driver of success. Startups are always fighting to avoid adopting cumbersome processes and layers of bureaucracy or hierarchy that would suffocate their agility. Because the founding culture is what allows them to do so, new people initiatives must tap into and strengthen the corporate culture.

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2) Start small, gather input and assess

HR for startups, more than other businesses, should be willing to try new things and test their ideas - before putting in too much work. They may, for example, invite a few managers to watch a TED talk on a relevant leadership issue & discuss what they learned. Or have a conversation with one manager about team performance principles to test their interest. They must yearn to receive feedback on their presence & initiatives for improving the company in these areas.

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3) Take a look outside of the startup

Peers at other hr startups may have a solution that has previously proven successful in their firms. Or they can serve as collaborators in tackling common HR challenges in startup companies. Talent management specialists and recruitment thought leaders also have a wealth of expertise, research, tools, and solutions at their disposal and are usually eager to start a conversation.

If you choose to engage with an external consultant in the future, you might be able to split the cost with another startup. A bad decision made early in the process can stymie a people project, so harnessing existing knowledge is essential.

The characteristics of HR in Startups are as follows: 

HR for startups requires a unique set of skills and characteristics due to the dynamic and fast paced nature of startup culture. 

1. What matters is the influence of the HR function holder and their trustworthiness, not the size of the HR department.

2. Plan A is to always have a plan B: Being adaptable when laying the groundwork for people's practices.

HR for startups is required to develop and maintain value-added people practises - and adjust them at a moment's notice if the business requires it. HR must have a plan B in place in some firms where outcomes might drastically alter any strategy.

3. The purpose and values of a startup have a double-edged sword: they attract talented people. They also quit more quickly if they lose faith in their leaders and the way their principles are being lived out.

4. A history of remaining adaptable in the face of rapid change may cause startups to resist HR's efforts to promote consistent people practises or to invest in staff to support those practices.

Why is HR Automation essential for startups?

HR automation refers to the use of technology to streamline and automate HR processes and tasks like onboarding and offboarding, employee engagement, payroll processes, performance management, time management, etc.  It also involves the use of HR software and other digital tools to automate repetitive and time-consuming tasks, allowing HR staff to focus on more strategic initiatives. For example, an HR system might automatically track employee hours and generate payroll reports, eliminating the need for manual data entry and reducing the risk of errors.

Employees can make changes as necessary with the tools that HR automation can offer them, which include functions like time off requests, performance reviews, and online benefit enrollment. It can also aid HR professionals with useful insights and analytics in addition to increasing productivity and accuracy. 

Final words

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Some of the globe's most intriguing startups use peopleHum's people management platform. Our tailored suitability, especially designed for startups, automates the dull and time-consuming administrative activities that come with running a small business. From powerful performance reviews to a variety of engagement surveys tailored to startups, it's all here.

The solution also aids startups in HR processes from hire to retire while guaranteeing an excellent user experience for their most valuable assets, their people. To see how we can tackle the growing challenges of HR for startups, come sit for our free demo session. Or reach out to us at connect@peoplehum.com