Person meeting with an HR representative in a cool office sitting on a couch.
Every startup should have some version of HR, and fortunately there are various options depending on the needs of your business. — Getty Images/Dimensions

Human resources (HR) is an important element of every business — including startups. HR manages employees’ needs throughout the lifecycle of their employment and administers benefits. At the beginning of a business, it can be difficult to maintain a human resources department when a small team is handling a variety of responsibilities. Here’s how entrepreneurs can establish and implement HR at their startup.

Do startups need HR?

Every startup needs some version of HR, even if they don’t have the resources to staff an entire department. Since startups and small businesses have flexible cultures, they have to implement HR processes to create a positive work environment, develop hiring and employee processes, and establish overall clarity at work.

Having clear HR practices at work keeps employees safe, ensures they are paid in an efficient and timely manner and helps them understand the company’s operations. When startups don’t have enough of a workforce to hire an HR professional who is solely dedicated to these tasks, the responsibilities often fall on the founder, CEO, or senior manager of the company.

Benefits of HR for startups

Having clear and defined HR practices helps employees understand their roles and responsibilities, as well as provides them with a place to turn when they have questions or concerns. Here are the benefits of having HR at your startup.

  • Hiring and onboarding. As your startup grows, so will your team. You’ll need to standardize your hiring and onboarding processes as you bring new employees into the company. HR professionals can handle the interviewing, scheduling, and administration aspects of the hiring process, so leaders aren’t held down by the process. Once new employees are hired, HR can handle their paperwork and onboarding process to get them ready to work.
  • Understanding benefits. Offering benefits is a great way to incentivize talent prospects to join your startup. As you hire new employees, they’ll need to know their benefits and how to use them. HR can sign employees up for health care benefits, manage their PTO, and ensure access to other fringe benefits.
  • Implement company policies. Executives don’t have time to police their employees. Having HR systems in place ensures that every employee knows company policy and follows it accordingly.

Not every startup is in a financial position to hire an HR specialist to run their operations. When this is not an option, businesses should look towards outsourcing their HR needs to a third party.

Options for how to handle HR as a startup

Outsource your HR efforts

Not every startup is in a financial position to hire an HR specialist to run their operations. When this is not an option, businesses should look towards outsourcing their HR needs to a third party. A company makes an agreement with an HR provider to handle all of its employee management and operational needs. They handle staffing, development, compensation, health and safety, and labor relation needs for a business.

Hiring a third-party HR provider gives your startup all of your needed HR functions while saving you money by not having to hire a full-time employee. The downside is your startup loses control over your HR oversight. These providers follow their own internal protocols and may not work as efficiently as needed.

[Read more: Outsourcing HR: Is a PEO or ASO Right for You?]

Hire an in-house HR representative

A successful startup will transition from a position of having everyone do a little bit of everything to employees having more defined roles. As your startup scales and roles become more specialized, you may want to start looking into hiring a full-time HR specialist. The responsibility of ensuring that you are compliant, handling all insurance needs, and hiring and onboarding at an efficient pace may be too much for senior managers who also need to focus on running the company. If the person handling HR or your third-party provider is having difficulty keeping up with your needs, it’s time to hire someone internally.

Hire a fractional HR company

Hiring a fractional HR company or associate is similar to hiring a part-time HR employee. This person or company acts as a member of your organization and handles all of your HR needs on a part-time basis. A fractional HR company is more involved in your company’s specific operations and policies than an outsourced company yet still does not require the benefits of a full-time employee.

[Read more: What Is Fractional Hiring?]

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Published June 17, 2022