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Startup HR checklist: Building your HR department

LAST REVIEWED Nov 29 2022 14 MIN READ

By The Human Interest Team

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Key Takeaways

  • An HR department is a valuable resource for growing and protecting your business and keeping employees happy and safe.

  • You may not be hiring a lot of employees at first—but it’s important to think about how you’ll post job openings and hire new employees.

  • It also helps to retain employees to stay with your organization by offering competitive compensation packages, including healthcare and retirement benefits.

How should you think about HR for your startup? It’s about creating plans, policies, and processes that meet short-term needs and budgets while taking into account long-term risks and goals for your “human resources.” Startups rarely have dedicated HR staff, and often one person (who may or may not have experience in HR) handles hiring, payroll, benefits, grievances, promotions, and other employee-related tasks.

An HR department is a valuable resource for growing and protecting your business and keeping employees happy and safe. It’s always a good idea to start building policies and investing in robust HR software that will be the foundation of your HR department. In doing so, consider your startup’s unique needs both now and in the future. 

Some or all of the following categories generally fall under the umbrella of human resources:

  • Organizational design: Who will report to whom? How will teams and sub-teams be structured?

  • Recruitment and onboarding: How are we going to find great new employees? How do we make sure they’re set up for success?

  • Compensation and benefits: What’s fair and realistic in terms of compensation? How should we decide what to offer?

  • Employee relations: Are employees happy? Who represents their interests?

  • Compliance, health, and safety: These sound intimidating, and that’s because they’re important! How to make sure you’re all safe, both legally and physically.

  • Training, development, and performance management: As employees stay with the company, are they growing and developing at the right pace, for both their personal goals and the goals of the company?

Clear HR policies indicate that your business has a good organization, a positive culture, and is planning for the future. They can help you attract top talent, too. This HR checklist for startups will look at a few essential HR items that a startup can consider in the short term and how these elements can help set your business up for long-term success.

Organizational design for startups

You don’t necessarily need an all-encompassing organizational structure in place when you open your business. However, a simple company structure document will assist you with current and future decisions related to workforce planning, outsourcing, and succession plans. HR for startups can be messy and unorganized, but it doesn’t have to be. Investing some time now in creating a design for your organization will provide a strong, clear organizational foundation upon which your business can grow.

Recruitment and onboarding

You may not be hiring a lot of employees at first, but it’s important to have an idea about how you’ll post open positions, make hiring decisions, and onboard new employees. Even for the first employee you hire, there are critical elements you need to have in place on your human resource checklist:

  • Offer letter

  • I-9 legal employment verification

  • Employee data for payroll purposes

  • Employment agreements, including non-compete, intellectual property, confidentiality, and non-solicitation agreements.

  • Equity paperwork

Startup compensation and benefits

After you’ve recruited employees, it helps to entice them to stay with your organization. One way to do that is by offering competitive compensation packages, including healthcare and retirement benefits. For compensation and benefits, you’ll want the following to be in place:

  • A general outline of your salary structure (this should reflect fair and competitive compensation for your industry)

  • A system for managing and processing compensation and payroll

  • Paid time off policy for vacation, sick, and holidays

  • Health and retirement benefits, or a plan to make them available

Work with your accounting department to clarify potential payroll questions and create documentation. Related articles:

Employee relations

With all the excitement of launching your business, you may not be able to imagine a day when an employee comes to you with a grievance. Make sure that from the first day you have a policy outlining your standards for workplace conduct and a general plan on how you might gather feedback and address concerns.

Having a plan in anticipation of receiving a grievance will make it easier to handle your first one, and can also help you protect employees from toxicity in the workplace.

Traditional HR: Compliance, health, and safety

Fair employment practices and a safe, healthy workplace are critical elements of employee productivity. Employers are subject to federal and local labor regulations related to compliance, health, and safety. Startups are not exempt from recordkeeping related to healthcare reform, tax codes, and labor laws—and they should have processes ready to roll out on day one.

Employers have a legal responsibility to prevent workplace injuries and illnesses and to comply with the Occupational Safety and Health Act (OSHA). The U.S. Department of Labor (DOL) provides information about workplace safety requirements, including:

  • Emergency action plans

  • Sufficient exit routes

  • Safe walking and working surfaces

  • Medical and first aid supplies (as appropriate for the specific workplace)

Employment policies establish a precedent and understanding among your employees about acceptable behavior. With a small number of employees, it may seem unnecessary to create formal policies, but there are at least two standard policies that a startup should have in place:

Check out the DOL’s FirstStep Employment Law Advisor to help determine which major Federal employment laws administered by the DOL apply to your business, to understand record-keeping and reporting requirements, and identify which posters you must post. Be mindful that labor and employment regulations can change. Avoid mistakes and delays by working with an HR or a legal expert who can provide you with the information you need to ensure you are complying with necessary regulations from day one.

Training, development, and performance management

When you’re getting your business off the ground, you may not be immediately concerned about training and developing your employees. Managing performance may also sit on the back burner until performance issues arise. But if you ignore these two important components of an HR plan, you will likely regret it.

By your first anniversary of being in business, you should have a performance management method in place so that you can provide employees with a review of their performance, as well as offer them an increase in pay if their performance warrants it. Every employee should have a personnel file and performance evaluations.

To facilitate employee growth, it’s important to establish a plan for employee training and development. It doesn’t need to be expensive or elaborate. But if you wait too long, you risk losing employees who are focused on increasing their skills and developing their careers. Every HR checklist for startups should have talent development measures ready so your business can transition from being a startup to an established company.

Using an HRIS

To manage HR-related aspects of your business, it’s prudent to have one or more human resource information systems (HRIS) that will allow you to recruit employees, track their time, pay them, and manage benefits. HR software can help startups automate administrative tasks, recordkeeping, and compliance tracking. Most cloud-based HR technology solutions offer options for mobile access, tools for talent management, and employee self-service access that makes an HRIS a useful tool for all members of the organization. 

A word of caution about selecting an HRIS: before you begin the search process, make sure you identify your needs (separate from your nice-to-haves), your existing systems, and what HR data you must track. It’s easy to get overwhelmed and over-sold when it comes to HR tech.

Some final thoughts for your HR checklist

Every HR task should protect the company, promote its mission, and foster a welcoming work environment for all. Documenting every step and changes made along the way will help prepare you for potential audits. Your documented plans should be organized, clearly accessible to the employees who need access, and comply with standards of business management. As you develop your action plan, you can create a comprehensive employee handbook for new and current employees. This transparency will help you create a strong company culture.

Don’t let a limited budget or small team fool you into thinking that you don’t need to worry about determining an HR strategy. An attorney or HR consulting firm can help assist you in setting this area of your business up for success. At the very least, do some online research about best practices. With some luck and hard work, your company will start to grow. That’s when you’ll be grateful that you took the time to put an HR plan, policies, and infrastructure in place.

Human Interest can work with startups to help their employees save with an affordable, automated 401(k). Click here to learn more.

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment education, and integration with leading payroll providers.

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