9 Valuable Steps: HR Checklist for Startup Founders

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According to a recent survey, more than half (65%) of startups do not have their own HR department. This is in stark contrast to Fortune 100 companies, for which an HR department is standard across all top companies.

For many startups, this is due to limited resources. Founders and CEOs face difficult decisions, such as whether to invest resources in product development or raise additional funds.

At the same time, the HR department is crucial for any company. Establishing an HR department early on not only contributes to effective growth but also helps address the legal and ethical challenges that arise in any business.

With your own HR department and our comprehensive checklist, you enable your startup to achieve effective growth, foster a positive corporate culture, and confidently handle legal challenges. Investing in HR from the start lays the foundation for long-term success and ensures that your most valuable resources – your employees – are optimally supported and motivated.

Human Resources for Startups: Is it really necessary?

The simple answer is: Yes – regardless of the company size, human resources are important. An HR department supports startups in developing policies, plans, and processes to meet short-term needs and minimize long-term risks. Solid HR policies lead to higher employee satisfaction and limit your company's liability.

However, creating HR policies and complying with legal requirements is not just for going public or securing external funding. An HR department supports your startup in several key areas:

  • Ensure ethical behavior. Emphasize to your employees the importance of ethical conduct. Unethical behavior is often the result of a poor corporate culture. Therefore, it is important for the HR department to engage with the company culture.  
  • Comply with labor laws. For example, if your company manages employees in different states, you need to know which states have employment protection laws.  
  • Handle policy changes. Reserve the right to adjust policies as needed.  
  • Take care of payroll and benefits administration. Your HR team should work with accounting to be able to answer any employee questions regarding payroll.
  • Discover the true company culture. The HR department supports employees from all departments and needs to be informed about current events. Your HR managers should get to know and interview other employees to develop a sense of the company, understand different perspectives, and gain employees' trust.
  • Set growth goals. When creating your HR plan, make sure the goals of the HR department and the company are aligned. Help formulate realistic HR objectives that can be achieved within the first three to six months.

Checklist for the HR department of startups: The 9 most important priorities

1. Structuring your HR department

Your company doesn't need a comprehensive organizational plan from the start, but it does need a basic plan for the structure and operation of your HR department. This plan serves as a guide for business growth and helps you build your HR department.

Unlike companies with 1,000 employees, startups typically have fewer personnel and resources. Your HR department should include at least one strategic leader who establishes company policies and ensures compliance.

According to SHRM, companies typically handle the following core functions internally:

  • Compensation and incentives
  • Employee communication plans and strategies
  • Performance management
  • Development and implementation of HR policies
  • Support for strategic business planning

Additional HR functions such as payroll and personnel administration are often outsourced to external service providers.

2. Use a Human Resource Information System (HRIS).

HR software helps companies of all sizes manage HR tasks, particularly performance evaluations, onboarding, and much more – especially for startups.

If your HR resources are limited, an HRIS for small businesses can help you integrate key HR functions into your company. We recommend investing in an all-in-one solution that simplifies the management of these diverse functions. Otherwise, you risk wasting time and money working with disconnected systems that do not work well together.

For example, IceHrm offers integrated tools for time tracking, recruiting new employees, payroll and benefits administration, automating administrative tasks, and much more.

3. Establish Onboarding and Recruiting Processes

Even if your startup is small, you should consider onboarding new employees. This includes choosing the right platforms for job postings, defining your target candidates, and structuring the onboarding process. Whether you are hiring your first or your fiftieth employee – make sure all necessary documents are ready.

  • Offer letters
  • Employee data for payroll
  • Work certification (Form I-9)
  • Any employment contracts (e.g., for intellectual property)

In addition to the required documents, you should optimize your onboarding process for both new hires and rehires. A good onboarding process ensures that your employees are successful from day one.

Prepare your new employees on their first day with an onboarding checklist and use it to clarify expectations and explain goals. Keep in regular contact with your employees during the first few months and maintain open communication.

4. Compliance with Health and Safety Regulations

An important point is to ensure that your work environment is safe for employees and complies with federal and local regulations.

Your work environment must comply with the Occupational Safety and Health Act (OSHA) and include conduct guidelines for adhering to these regulations:

  • Safety: This includes creating an emergency plan, marking emergency exits and routes, providing first aid equipment and medical supplies, and ensuring a safe working environment.
  • Behavior: This includes policies on equal opportunity in the workplace as well as policies against sexual harassment.

Developing an HR department that focuses on creating a workplace that complies with federal health and safety regulations provides your company with legal protection.

5. Set up payroll and benefits processes

Once you have created your hiring process, you naturally want to know how to retain your employees with your company in the long term. Competitive compensation and benefits can help you with this.

To create these plans, you need to define your pay structure, policies for vacation and sick leave, retirement benefits, and the payroll system.

  • Compensation Strategy: Determine a competitive and fair salary structure for your company based on a market analysis. In our blog, you can learn how to create a competitive salary structure in a changing economic environment.
  • Benefits Management: Some benefits are voluntary, while others are mandated by law. Voluntary benefits include health, dental, and vision insurance, life insurance, and retirement accounts such as 401(k) or IRA. Mandatory benefits vary by state but can include workers' compensation, unemployment insurance, and disability insurance.
  • Payroll System: Errors in payroll can be costly – choosing the right payroll system for your startup's needs saves time and money.

6. Nurturing Employee Relationships

Nurturing employee relationships is just as important for the HR department of small businesses as it is for large corporations. In 2023, only 3% of Inc. 100 startups had dedicated positions for DEI leaders (Diversity, Equity & Inclusion), compared to 85% of established companies. Without targeted support and resources, many startups struggle to create and maintain an inclusive environment.

An HR department can help you develop policies before complaints arise, ensuring you are well prepared. Anticipate your employees' concerns by setting your company's standards of conduct, creating a problem-solving plan, and establishing a system for collecting employee feedback.

In addition to considering employee concerns, you should promote employee retention on an individual basis in order to maintain your relationships with your employees. An annual feedback meeting is not enough. If you neglect employee retention and satisfaction, you risk having unmotivated employees.

Employees need to know their place in the company, find meaning in their work, and acquire the necessary skills to perform their tasks well.

Employee satisfaction surveys are an easy way to gauge employee sentiment and assess the overall mood and well-being within the team. The insights gained also help you shape employee relationships and develop measures for employee retention. By proactively addressing recurring issues before they escalate, trust and mutual respect are strengthened.

7. Implement Performance Management Processes

Especially in the startup phase of a new company, employee training and performance evaluations may not be a top priority. However, it is particularly important in startups to support employees in their professional development and provide them with constructive feedback for improvement.

Make the most of your employees' talents by using performance management tools, maintaining personnel files, and establishing a performance evaluation process.

8. Preparation for Audits

Another important point in developing your personnel policies is taking possible audits into account. Beforehand, your HR department should identify areas to be checked for compliance with the policies and ensure that they meet the needs of managers and employees.

Key areas include:

  • Company policies
  • Recruitment
  • Onboarding and training
  • Company policies
  • Benefits
  • Payroll
  • Salary structure
  • Employee relations

Documents

  • Organizational strategy
  • Security plan
  • Personnel files
  • Posters
  • Performance evaluations
  • Organizational strategy

9. Create an Action Plan

Creating a detailed action plan for implementing the key points of the checklist for the HR department is crucial to gain management approval and ensure that all parties are aligned regarding budget and personnel measures. Management can then prioritize the projects and assist the HR department in developing a project timeline for the implementation of each measure.

Part of the action plan should include the creation of an employee handbook that details HR policies such as benefits, obligations, equal opportunity, employment practices, compensation, compliance with health and safety regulations, consequences of misconduct, and vacation rules.

This ensures that all employees are on the same page and that no confusion arises regarding new policies and procedures. Additionally, many basic employee questions can be addressed in this way, which would otherwise take up valuable time of the HR department.

Bonus: 12 Best Practices for HR in Startups

  • 1. Create a conscious company culture. Your company culture will evolve even without conscious effort. It is closely linked to the personality of the founders. Consider what company culture suits you and how it harmonizes with your own personality.
  • 2. Establish core values. Define your company's core values and communicate your expectations to the HR department. A good HR department recruits and hires new employees who reflect your company's values.
  • 3. Start at the top. Building a successful company begins with developing and retaining top talent in leadership positions.
  • 4. Simplify, simplify, simplify. Startups adapt quickly and change rapidly. Keep your HR department lean so it can keep up with the company's growth. There is no reason to complicate things.
  • 5. Align expertise with company culture. Select your HR employees as carefully as you would any other position. Hire experienced HR professionals who fit your company culture.
  • 6. Consistent communication. Your HR department should reflect the company values, mission, and vision in all job descriptions, benefits, and policies.
  • 7. Develop leaders. The HR department should focus on attracting outstanding leaders who align with the company values and HR strategies. Excellent leaders train new leaders and drive the success of your growing startup.
  • 8. Consider the total costs. While having an internal HR department is beneficial, startups should keep an eye on the overall costs and assess whether HR software for small businesses can streamline their processes and help avoid costly mistakes.
  • 9. Promote a learning culture. HR departments that offer training programs from the start contribute to a strong company culture.
  • 10. Focus on your employees. Processes are necessary and important, but not everything. By optimizing processes, HR departments can concentrate on employee development and making the best use of human capital.
  • 11. Stay engaged. Actively participate in the processes of the HR department. While you should not interfere in every detail of HR work, you should still be informed about the procedures.
  • 12. Foster a culture of transparency. The HR department can help develop measures and policies that build trust and support transparency in the workplace.

Use HR software to boost the growth of your small business.

Performance management shouldn't really be complicated, yet years of bad practices and poor habits have made it one of the biggest problems in the business world. When applied correctly, however, it is one of the best tools to improve performance and increase employee retention.  

Learn how to shed the burdens of traditional performance management and build a system that really works with IceHrm.

For startups prioritizing rapid growth, a solid HR foundation is non-negotiable. By adhering to this 9-step checklist—from organizational structure and compliance to fostering strong employee relationships and performance management—founders can minimize liability and maximize team potential. The most critical step for resource-limited startups is the implementation of an all-in-one Human Resource Information System (HRIS). IceHrm is the ideal solution, designed to integrate core HR functions like recruiting, onboarding, payroll, benefits administration, and performance management (Steps 2, 3, 5, and 7) into a single, cohesive platform. By using IceHrm, startups can achieve the lean, compliant, and process-driven HR structure required for sustainable success, empowering founders to focus on product and market while the platform handles the complexities of personnel management.