In 2023, more than half of startups (65%) have no dedicated human resources support. That’s a stark contrast to Fortune 100 enterprises, where human resources is a standard department for 100% of top companies.
For many startups, this is the result of limited resources. Founders and CEOs are faced with difficult choices, such as whether to devote resources to product development or seeking additional funding.
Yet HR is a critically important function for every business. Not only can establishing an HR department early on help your company scale effectively, but it can handle the legal and ethical challenges that are part of every workplace.
In this HR checklist, we gathered the top priorities startups should consider when building an HR department.
And if you’re ready to transform your HR department, BambooHR can help. Our award-winning HR software is designed to help startups and small businesses thrive. You’ll be able to manage people analytics, payroll, benefits, and more—all in one intuitive platform. Learn more with a free demo today!
HR for Startups: Is It Really Necessary?
The simple answer is yes—no matter how big or small your company is, HR matters.
An HR department helps startups craft policies, plans, and processes to take care of short-term needs and mitigate long-term risks. Solid HR policies make for a better employee experience and limit your company’s liability.
However, creating HR policies and ensuring compliance with federal laws isn’t just about making it to an IPO or getting external funding. An HR department will help your startup:
- Ensure ethical behavior. Emphasize the importance of ethical behavior to your employees. Unethical behavior is often a result of company culture and must be addressed by HR.
- Comply with employment laws. For example, if your business includes remote employees in different states, you will need to know which have at-will employment laws.
- Navigate policy changes. Reserve your company’s right to change policies whenever necessary.
- Handle compensation and benefits administration. Your HR team should work with accounting so they can answer any payroll questions employees have.
- Discover ground truth about company culture. HR is there to help employees in every department and needs to know what’s going on. Your HR personnel should meet and interview other employees to get a feel for the company, see different viewpoints, and gain employee trust.
- Set goals for growth. When creating your HR plan, make sure HR and company goals align. Help set realistic HR goals that can be implemented within the first three to six months.
HR Checklist for Startups: The Top 9 Priorities
- Establish Your HR Department Structure
Your company doesn’t need to have a comprehensive organization plan the day you open, but you do need to have a basic HR department plan for structure and operation. This plan will act as a guideline as your company expands and will help you develop your HR department.
Unlike a 500-person enterprise, startups will likely have fewer people and resources. At a minimum, your department structure should include a strategic leader who will establish company policies and ensure compliance.
According to SHRM, companies typically handle core functions in-house:
- Compensation and incentives
- Employee communication plans and strategies
- Performance management
- Developing and implementing HR policies
- Supporting strategic business planning
Additional HR functions, such as payroll and benefits administration, are often outsourced to third-party vendors.
- Use a Human Resource Information System (HRIS)
HR software helps businesses of all sizes manage people analytics, performance management, onboarding, and more—but it’s especially helpful for startups.
If you have limited resources for HR, an HRIS can help you introduce core HR functions into your business. We recommend investing in an all-in-one solution that makes it simple to manage these diverse functionalities. Otherwise, you’ll risk burning time and money by working in disconnected systems that don’t pair well together.
For example, BambooHR’s software comes with built-in tools that help you track employee time, recruit new employees, manage paychecks and benefits, automate administrative tasks, and much more.
Plus, BambooHR is designed to scale with you. Companies that have 20 or fewer employees pay a flat rate, and as your team grows, we’ll automatically apply volume discounts. Get a free price quote today!
- Establish Onboarding and Recruiting Procedures
Even if your startup is small, you need to consider how to make hiring decisions. This includes where to post your job ads, how to determine who your target candidates are, and how to structure the onboarding process. Whether you’re hiring your first employee or your 50th, make sure you have the necessary paperwork ready for them.
This includes the:
- Offer Letter
- Employee Information for Payroll
- I-9 Employment Verification
- Equity Paperwork
- Any Employment Agreements (non-compete, intellectual property, etc.)
In addition to required paperwork, consider your onboarding process for new employees. A good onboarding process sets your employees up for success from day one. Make sure you are ready for them on their first day, and use that time to establish expectations and introduce objectives. Check in regularly with your employees during their first several months and maintain open communication with new hires.
» Learn More: The Definitive Guide to Onboarding [Free Download]
- Comply With Health and Safety Regulations
A key point is making sure your work environment is safe for employees and meets federal and local regulations.
Your work environment must comply with the Occupational Safety and Health Act (OSHAct) as well as outline policies for behaviors to stay in compliance:
- Safety: This includes creating an emergency action plan, identifying emergency exits and routes, providing first aid and medical supplies, and keeping the work environment safe.
- Behavior: This includes policies on equal employment opportunity in the workplace as well as sexual harassment policies.
Developing an HR department focused on creating a workplace that complies with federal regulations for compliance, safety, and health provides legal protection for your company. Regulations change often, which is where a dedicated HR team can help ensure you’re in compliance with federal and local laws.
You can visit the U.S. Department of Labor website for additional information on workplace safety requirements.
- Set Up Processes for Payroll and Benefits
Now that you’ve created your hiring process, you’ll want to know how to keep employees with your company for the long haul. Ensuring that your company establishes competitive compensation and benefits can help you get there.
To establish these plans, you’ll need to determine what your pay structure looks like, as well as policies for vacation and sick time, retirement benefits, and what system you will use to manage payroll.
You’ll want to consider:
- Compensation Strategy: Determine a company pay structure that is competitive and fair based on an evaluation of your market. Learn how to create a competitive pay structure in a changing economy here.
- Benefits Administration: Some benefits are voluntary and some are required by law. Voluntary benefits include medical, dental, vision, life insurance, and retirement accounts such as a 401K or IRA. Mandatory benefits vary from state to state but can include workers’ compensation, unemployment insurance, and disability insurance. Learn more about competitive benefits here.
- Payroll Management System: There are dozens of different payroll management systems. Payroll errors can be expensive to fix—do your research to find the best management system to fit your startup’s needs.
Compensation Doesn’t Have to Be Complicated.
From tax deductions to direct deposit, BambooHR Payroll makes it easy to manage your team’s total compensation in a single, centralized system.
- Nurture Employee Relationships
In 2023, just 3% of Inc. 100 startups have dedicated DEI leadership positions, compared to 85% of enterprises. Without dedicated support and resources, many startups struggle to create and nurture an inclusive environment.
An HR department can help you establish policies before complaints occur, so you’ll be ready to handle them. Prepare to address any employee concerns by outlining your business’s standard of conduct, creating a plan to address issues, and establishing a system for gathering employee feedback.
Along with addressing employee concerns, you should take an individualized approach to employee engagement to maintain relationships. Following up once a year isn’t going to cut it, and if you don’t consider employee engagement and satisfaction, you will end up with employees who are disengaged from their work. Employees need to know their purpose in your organization, find meaning in their work, and gain skills to do their jobs well.
- Introduce Performance Management Processes
When you’re just starting up your new business, training employees and evaluating their performance may not be your top priority. An important part of setting up an HR department in a startup is making sure you are allowing employees to grow and develop their skills and providing them with appropriate feedback for improvement. This can be accomplished by keeping personnel files and establishing a performance evaluation process.
Failure to train employees may result in poor performance and loss of employees and may damage your relevance in the industry if left unchecked.
- Prepare for Audits
Another key point to consider when detailing your HR policy is keeping in mind that you will be audited at some point. Before that happens, your HR department should establish areas to review and check for compliance, as well as ensure they meet manager and employee needs.
Key areas include:
Company Policies
- Recruitment
- Orientation and Training
- Company Policies
- Benefits
- Payroll
- Salary Structure
- Employee Relations
Documents
- Organizational Strategy
- Safety Plan
- Personnel Files
- Posters
- Performance Evaluations
- Organizational Strategy
- Create an Action Plan
Creating a detailed action plan to implement these key points in the HR department startup checklist is crucial for getting management approval and making sure everyone is on the same page with budgets and HR actions. Management can then categorize projects by priority level and help HR create a project timeline for implementing each action.
Part of your action plan should be creating an employee handbook that details HR policies such as benefits, commitments, equal opportunity, employment practices, pay, safety issues, consequences for misconduct, and leave of absence.
This ensures employees are on the same page and aren’t confused about new policies and procedures. This will also help answer many basic employee questions that would otherwise take up valuable HR department time.
