The Step-by-Step HR Department Checklist for Startups
Startups have a lot of work ahead of them, and in the rush of everyday business, it can be difficult to take time and establish a solid HR department strategy.
While many small businesses may not see the need for an HR department, it’s a necessary and valuable asset to have at your company, especially if you’re looking to grow. Not only can establishing an HR department early on help keep your company organized while you grow, but it can handle internal issues that are bound to crop up when you least expect them.
Most small businesses and startups have small HR departments that may only have one person on the team (if they have an HR department at all). Even if you have a one-person team in HR, make sure they have experience handling hiring, payroll, benefits, onboarding, and training. Having an HR software for small businesses will help keep you organized and on task as you develop your HR department from scratch.
Why Do You Need HR Policies?
Before starting your HR checklist, it’s important to establish why having HR policies is important. Setting up an HR department in a small company is about creating policies, plans, and processes to take care of your business’s 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. Delivering a great experience advances ROI in other areas, including employee productivity, company profit, and employee experience. Employers that care about their people gain a reputation as a great place to work, attracting amazing talent to their ranks.
In order to jumpstart your HR department startup checklist, you should also include company policies regarding:
- 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.
- Employment at will: Make it clear that the employee or employer can end the employment agreement at any time, providing your business is in an at-will state.
- Policy changes: Reserve your company’s right to change policies whenever necessary.
If you’re at a loss for where to start when creating your HR policies, the Society for Human Resource Management (SHRM) is a great resource to turn to. As you go through your HR department startup checklist, keep in mind that your HR plans and policies should be customized to your individual startup’s needs. Implement your policies simultaneously once you’ve decided on them to eliminate confusion and communicate the need for these policies to your employees. This can minimize negative impact and maintain your startup’s culture for the long-term.
Your HR Department Startup Checklist
Whether you’ve worked with HR departments in the past or are new to the game, it’s important to start with the basics. Many employers wonder how many employees they need on their HR team. While there’s no set number, many startups simply begin with one HR professional and add more as they grow. No matter the size of your HR department, it’s a good idea to start by considering these three areas:
- Employee compensation and benefits: Your HR team should work with accounting so they can answer any payroll questions employees have.
- Other department concerns and priorities: 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.
- An HR plan specific to your startup: 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.
If there is no plan in place, it will be up to your HR professional to develop an HR department from the ground up. They can do this by following our step-by-step HR department startup checklist and taking time to implement each aspect in a way that best suits your business’s needs.
1. Establish Organizational Design
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.
2. 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.
3. Outline Regulations for Compliance, Safety, and Health
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 following in parenthesis) (typically by way of signature or E-Signature.
- 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.
4. Determine Compensation 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. In order 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.
- Pay structure: 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: 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.
5. Maintain Employee Relationships
Employee grievances can and do happen. Your best approach to any situation is having established policies in place to handle complaints. 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.
6. Develop Training Programs and Performance Management Methods
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.
7. Use a Human Resource Information System (HRIS)
There’s technology out there to help HR departments. Human Resource Information Systems can help you track employee time, recruit new employees, manage paychecks and benefits, automate administrative tasks, track compliance, keep records, and much more.
However, you should keep in mind that just because an HRIS has all these features doesn’t mean your company needs to spend the extra cash to purchase everything. Evaluate company size, payroll needs, industry, and budget to determine what tools you really need and what would be icing on the cake.
Startups have limited resources and need to focus on the essentials. Companies like BambooHR offer great options for small businesses and startups to help get your HR department running smoothly.
8. 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. Some of these areas may include:
- Orientation and Training
- Company Policies
- Salary Structure
- Employee Relations
- Organizational Strategy
- Safety Plan
- Personnel Files
- Performance Evaluations
- Organizational Strategy
9. 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.
Key Tips for Developing an HR Department
Developing a new HR department is a challenging endeavor, but there are some great advantages, such as the ability to determine and outline your company culture from the ground up. When you start entirely from scratch, you can help set the vision for your company and mold the company culture however you want.
Now that you’ve gone through our HR department startup checklist, here are a few more tips for developing a successful HR department.
- Create an intentional company culture: Your company culture will be there whether you establish it or not. Company culture relates to the personality of founders. Think about your company personality and how it will mesh with your own personality.
- Determine core values: Define your company’s core values and let HR know your expectations. A good HR department will recruit and hire new employees that reflect your company values.
- Start at the top: Building a great company starts with developing and retaining top talent in leadership.
- Simplify: Startups pivot and change quickly. Keep your HR department simple so it can keep up and match the maturity of the organization. There’s no need to complicate things.
- Match expertise with culture: Consider who you’re hiring for your HR team just as you would any other position. Hire an experienced HR professional who reflects your company culture.
- Stay consistent: Your HR department should reflect your company values, mission, and vision in all of its job descriptions, benefits, and policies.
- Create leaders: HR should focus on hiring great leaders that are aligned with company values and HR strategies. Great leaders train new leaders and promote success within your growing startup.
- Count the total cost: Having an internal HR department is great, but startups should consider the overall cost and determine whether HR software can help them streamline their operations and save on costly mistakes.
- Create a culture of learning: HR departments that implement training programs from the get-go help create a strong company environment.
- Focus your energy on your people: Processes are necessary and important, but they’re not everything. Streamlining processes can help HR departments focus on employee development and maximizing human capital.
- Stay involved: Make sure you stay involved in the HR department processes. While you shouldn’t micromanage HR, you should be aware of HR operations.
- Create a culture of clarity: HR can help create actions and policies that promote trust and encourage transparency in the workplace.
Developing an HR Department
By following this HR department startup checklist, you’re prepared to jump in and start creating an HR department from the ground up. While the task might be daunting and the expectations high, focus on small accomplishments in the beginning and allow your HR department to follow through and gain the trust of employees, managers, and leaders.