HR Checklist for Startups: 6 Must-Know Practices

Startups rely on agility, creativity, and the relentless drive to grow, often punching above their weight. While this approach works well in areas like product development or marketing, it can leave HR strategies playing a catch-up role. Understandably, time-constrained founders hold off from investing in HR processes, as they assume it’s only necessary for large companies. Still, neglecting HR early on can lead to disorganized teams, employee dissatisfaction, regrettable employee turnover, and even legal troubles, all of which can derail a startup's growth.

A strong HR framework has to do with creating a workplace where employees can perform at their best and aligning their efforts with your business goals. Whether you’re a two-person operation or scaling rapidly, implementing effective HR practices from the start sets your company up for long-term success.

This checklist goes over the essential HR functions every startup should prioritize and provides actionable steps to build a scalable, people-first framework that supports your growth.

1. Hiring and Recruitment

Attracting the right talent is one of the biggest challenges for an HR team, and even more for startups—especially when competing with larger, more established companies.

Hiring Best Practices

To stand out, startups should focus on defining their employer brand. Highlighting your mission, culture, and opportunities for growth in job postings helps attract candidates who are eager to make a real impact.

It’s also important to modernize your application process in a way that keeps it simple and practical to reel in more applicants. Minimize unnecessary steps such as requiring candidates to manually input their entire work history after they’ve already uploaded a detailed resume. Plus, using employee networks for referrals can also be an effective way to connect with pre-vetted talent, especially in the early stages. And don't ask for a cover letter if you won't read it!

On top of this, using ATS software can be a game-changer. You no longer need to rely on hiring managers or an HR professional. Startups often lack dedicated recruiters, but using the right tools can make the hiring process more manageable. An ATS is a software tool that makes selecting candidates much simpler. They help businesses of all sizes organize applications, schedule interviews, and track candidates. ATS are commercialized as standalone suites or within broader HR software packages. TalentHR, an all-around HR software with ATS features, can get you a bit further—it even has an AI-powered feature for writing customized job descriptions. We'll get into that.

Facilitating Diversity in Hiring

From the outset, startups should also prioritize diversity, equity, and inclusion in their HR strategy. A diverse team helps with fresh ideas and also leads to stronger overall performance—key factors for any startup looking to grow. Job descriptions should be carefully audited to avoid gendered or biased language that might inadvertently exclude qualified candidates. Structured interviews using consistent evaluation criteria can further help maintain fairness throughout the process. Also, using tools that help generate the best wording in job ads will also facilitate diversity.

8 Best HR Software for Startups in 2024 →

2. Onboarding Process

The onboarding is a strategic opportunity to integrate new hires into the company culture and align them with the business’s mission and goals. A poorly executed onboarding experience can leave new employees feeling disconnected and overwhelmed, leading to early turnover—a costly issue for any startup. In fact, according to the U.S. Department of Labor, the cost of a bad hire can easily exceed 30% of an employee's first-year earnings.

For startups, where every team member plays a core role, investing in an effective onboarding experience improves retention, accelerates productivity, and creates a sense of belonging. The most appealing part? There’s no need for an HR department or HR professionals to handle the process. Startups can solve it with an onboarding tool.

Onboarding Essentials

Startups must make sure that certain essentials are in place before welcoming new hires. First, all necessary documentation should be prepared in advance, including offer letters, payroll forms, I-9 verification, and any employment agreements such as non-compete clauses or intellectual property protections.

A solid onboarding guide or employee handbook is highly useful too. This guide should include information on internal tools, team communication practices, and company benefits.

Building on the Onboarding Experience

An effective onboarding process doesn’t end after the first week. Startups should maintain regular communication with new hires during their first few months to address questions, provide feedback, and support their development. However, these are almost a given in a startup, considering that new employees will likely work closely together with the founder.

3. Payroll and Benefits

Setting up an efficient payroll system is one of the foundational steps for any startup. Begin by understanding the legal and regulatory requirements for payroll in your region, such as tax deductions, employment classifications, and compliance with labor laws.

When selecting a payroll system, consider whether to handle it yourself (even with a spreadsheet) or outsource the process. But startups, of course, might not want to use payroll services. In fact, a recent poll conducted verified that more than half of small companies still use spreadsheets to track payments. This is totally understandable, especially if said company is only overseeing local employees. Payroll services are more suited for companies with hundreds of employees and in different jurisdictions.

But if you opt for payroll software, look for features such as automatic tax filing, direct deposit, and compatibility with bookkeeping systems to minimize administrative burdens.

Employee Benefits

For startups, offering competitive employee benefits can seem expensive, but a strategic approach can make it manageable. Start by focusing on the basics: health insurance (a very popular benefit), retirement savings plans, and paid time off. A cost-effective strategy is to offer a base plan, such as a silver or gold-tier health plan while allowing employees to upgrade at their own expense.

In addition to monetary benefits, consider non-expense perks such as flexible work arrangements, volunteer time off, or employee recognition programs. Over time, as your startup grows, you can expand your offerings to include gym passes. But that's pricier than offering a flexible workweek, so leave it for a later stage.

6 Small Business Employee Benefits You Should Consider →

4. Employee Management

Considering that, as a startup, you'll be good at assigning tasks to your colleagues, let’s now see how to maintain organized and secure employee records.

First, centralize all documentation, including employment agreements, tax forms, performance evaluations, and benefits enrollment, in a reliable HR management system, like TalentHR’s employee management tool.

Clear Communication and Employee Performance

Communication is at the heart of employee management. And knowing how to tell an employee how they can elevate their performance is part of it.

Startups should implement a simple system for evaluating and supporting employee growth with a performance management policy. There are also performance management tools you can try to get metrics. It's then on the founder to decide the best channels.

5. Compliance and Legal Requirements

Like any other business, startups must stay on top of local, state, and federal labor laws. Familiarize yourself with laws like the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA). Inconsistencies in compliance can lead to costly fines or lawsuits, so considering using HR software to automate compliance tasks and keep up with regulatory changes is a very smart move.

6. Workplace Culture and Employee Retention

To retain your best employees, prioritize work-life balance, growth opportunities, and competitive compensation. In a startup environment, employees need to feel their work matters and that they’re growing professionally. Offer flexible working arrangements, provide mentorship, and recognize achievements. A transparent path for career advancement and a culture of appreciation can significantly mitigate turnover and improve employee engagement.

Address your Startup's HR Needs with Flexible Software

A strong human resources foundation is essential for any startup that wants to grow and stay sustainable. From the very beginning, it’s helpful to set up clear recruitment and onboarding processes, set up efficient payroll and benefits systems, and keep up with labor laws. With a focus on employee management, retention, and creating a positive workplace culture, your startup can create an environment where talent can grow easily.

It seems daunting to tackle all of this as a founder. But HR software goes a long way in setting it up for you. The key to success is locating scalable HR systems that can grow with your business. Start by getting the basics right and build on them as your company expands. One of those tools that can help you out is TalentHR. It offers an HR for startups solution that can set your business up for a strong and sustainable future.

Register now for free. It takes seconds to sign up to TalentHR.