A Startup’s HR Survival Guide

That lone-wolf approach to starting the business can drain the entrepreneur’s and the business’s success. Many startups don’t make it out of the initial phase to see the success that the owner envisioned. According to Chamber of Commerce, 18% of small businesses fail within their first year.1 And the number making it to the fifth year is only 50%. Surviving past a decade is even rarer, with 65% of businesses closing shop by their tenth year.¹

However, those that make it past the first year or two find that while they may have the product or industry knowledge that got the business off the ground, other aspects ranging from sales to marketing to accounting and more may not only be beyond their abilities but also robs them of the time to focus on the core business that has gotten them past other startups. 

One of the most complex and essential aspects of successfully growing a business—and one that many startup founders and owners tend to understand the least is also one of the most important—human resources (HR). 

Here are a few things to remember when preparing to expand your team beyond yourself to make the process smoother and help keep you compliant. 

Attracting the best and the brightest can be difficult for startups, especially early in the company’s lifecycle. Startups may struggle with potential candidates’ concerns about long-term success and competition from established companies that can often offer significant salaries and robust benefits. However, getting the right people at the right time for your growth cycle is possible. It does, though, take the right approach, which can be challenging without a full-time HR department. 

• Describe the role - Building your recruiting around the job description you have created will allow you to catch the attention of those most interested and qualified for the position. The key is to hire for fitness to the role and mission to get the right person for the job and one who will be part of developing your company culture. 

• Setting compensation - Of course, people tend not to work for free and that’s where you may need to get a bit creative to compete with larger companies that may have the resources to pay at or above market to attract or retain talent. That doesn’t mean you can’t compete. Building incentives to supplement base compensation dependent on the company’s success can provide an added reason to join your company. Since you have chosen for fit and mission, they will be paid for growing something they believe in. 

• Benefits - While it is optional to provide health insurance benefits, not offering access to them will likely make it more difficult for you to compete with other companies in recruiting the best talent for your growth. You can, however, think outside the box and provide wellness programs, flexible savings accounts (FSAs) or flexible work schedules. 

Startups and small to medium-size businesses (SMBs) can offer access to benefits like big companies—and get help managing their HR administrative tasks—by working with a professional employer organization (PEO). 

• Prepare for the interview - Your candidate is preparing for the interview with you. It is equally important that you prepare as well. Determine what you are looking for in a candidate, so you can evaluate the candidate beyond what is apparent on a resume.

• Ask the right questions - While you may want to keep the interview conversational to see more of the candidate’s personality, it is essential to prepare questions you want answered to evaluate their fit for the role. Of course, be sure to stay away from questions related to race, religion, sexual orientation and other federal, state, and local protected classes that may open the door to discrimination claims and issues. Keep these prohibitions in mind when reviewing candidates throughout the hiring process.

• Zooming in on interviews - Social distancing during the pandemic turned virtual interviews into the norm. It probably isn’t going away anytime soon as many companies continue to work remotely. A survey of hiring leaders found that 41% plan to use a mix of in-person and virtual interviews, with 23% of respondents planning to move solely to virtual interviewing.3 While there are some drawbacks to virtual interviews, such as not being able to read body language, observing social skills and other traits, the convenience and ability to find talent from a wider geographic area still makes it a viable option.

Once you’ve hired the candidate that fits both the role and your company culture, get them started on the right foot by providing them with a warm welcome, an understanding of what is expected of them and what they should expect from you. 

The average U.S. employer spends $4,000 and 24 days to hire.⁴ Suppose you’re doing it without the help of an HR department or partner. That’s a lot of time spent focusing on something other than your business. Effective onboarding is a key to retaining employees long-term. A study commissioned by Glassdoor found that organizations with a robust onboarding process improve new hire retention by 82% and productivity by over 70%, showing a quicker ROI on the hiring process.⁵

Here are a few things to keep in mind when creating a new hire onboarding plan for the first few days. 

• Get paperwork done ASAP - Allow your new hires to voluntarily complete necessary paperwork before the start date if possible. For those that don’t choose to do so, or haven’t completed all the paperwork, make sure that any and all remaining paperwork is done on day one, such as Section 1 of the Form I-9. Also be sure to provide all required documentation and notices to the employee on the first day of work, such as Wage Theft Prevention Act notices where applicable.

• Trust team members - Incorporating the team into your onboarding process allows them to help the new employee learn about the role and become familiar with the corporate culture. 

• Get them going - Nobody enjoys a day of doing nothing but video calls and training. Have some meaningful and varied tasks for the new employee in addition to learning about the company and the core business.

•  Prepare for the interview - Your candidate is preparing for the interview with you. It is equally important that you prepare as well. Determine what you are looking for in a candidate, so you can evaluate the candidate beyond what is apparent on a resume.

• Ask the right questions - While you may want to keep the interview conversational to see more of the candidate’s personality, it is essential to prepare questions you want answered to evaluate their fit for the role. Of course, be sure to stay away from questions related to race, religion, sexual orientation and other federal, state, and local protected classes that may open the door to discrimination claims and issues. Keep these prohibitions in mind when reviewing candidates throughout the hiring process.

• Zooming in on interviews - Social distancing during the pandemic turned virtual interviews into the norm. It probably isn’t going away anytime soon as many companies continue to work remotely. A survey of hiring leaders found that 41% plan to use a mix of in-person and virtual interviews, with 23% of respondents planning to move solely to virtual interviewing.3 While there are some drawbacks to virtual interviews, such as not being able to read body language, observing social skills and other traits, the convenience and ability to find talent from a wider geographic area still makes it a viable option.

As you’ve probably learned, course corrections are needed on the road to success. ThIs is also true for managing employees. Despite your best efforts during the hiring process, only some people are a fit for a role or company, and changes need to be made for everyone’s long-term success. 

• Use your employee handbook - When you create your handbook take the time to give forethought on your progressive discipline procedure and how you will determine the applicable level of discipline for each type of violation, including when termination may be appropriate, so everyone knows what is expected of them.

• Document violations - If an employee violates company policy or underperforms, document it in writing and ensure the worker reads, understands and acknowledges it. Create a performance improvement plan where appropriate and allow the employee a reasonable amount  of time to rectify their issues. Store any documentation in personnel  files for future reference so you can support your decision should it be necessary to discipline or terminate the employee.

• Be concise - It is never easy letting someone go, especially from a small team. Once you have everything organized, sit down with the employee and explain why you’re letting them go. Keep the discussion brief and factual. Don’t soft-sell your reason for termination to spare feelings, as that could muddy the waters and harm the company 

• Legally speaking - Specific legal obligations and information about benefits, final paycheck, unemployment options and transportability of other insurance must be planned ahead of time and communicated to the employee. Failure to do so can lead to costly payments such as late payment of final wage penalties and damages. 

If HR is a part-time job for people at your company whose true passion and expertise lie elsewhere, it can put your success at risk in multiple ways, such as: 

• Unnecessary distraction from your core business - Having to spend time on the complexities of HR compliance can distract you from what you do best, whether it’s developing new products, forging strategic partnerships, raising capital, building culture or acquiring new customers. 

• Inability to deal effectively with a crisis - Without HR experts to help you prepare for and adapt to unexpected problems, your business can experience unnecessary or considerable losses due to temporary stops or slowing operations. 

• Exposure to fines and lawsuits - Managing ever-changing HR laws and regulations can be challenging. Absent HR expertise, it is easy to get tripped up.

As an entrepreneur, you may not know what you don’t know about HR. Startups often partner with other companies for help with functions from accounting to customer service to IT, shipping and more. This gives them the ability to focus on their core business and the expertise that has allowed them to surpass their competition. Working with a PEO is no different. 

Whatever stage your business is in, growth is likely your primary focus. However, to grow, you need the time, resources, and, eventually, staff to help you do that. And as you try to focus on your core business, the time drain of HR administrative tasks as you add staff can rob you of the growth for which you strive. 

Building a team that will succeed in the startup environment is challenging. The work is demanding and it’s harder to compete with the benefits and compensation offered by big companies, making your growth tougher to achieve. Working with a full-service PEO can help you grow with access to benefits, help with HR compliance, HR expert guidance when needed and more. 

Case in point: During the economic uncertainty of 2020, 69% of small business using a PEO grew, while small business growth overall was only 28%.⁸ 

Going it alone is an instinct for most entrepreneurs. However, as a business grows, so does its need for people that can keep it moving forward. But, as many startups find, HR can be complex and you may not even know what you are struggling with until it is too late. 

Working with a trusted PEO, such as TriNet, allows you to control the day-to-day operations of your workforce while the PEO gives you access to competitive benefits, technology to handle many of the administrative tasks and an open line of communications to a human resources expert when you need it. 

To learn more about how TriNet can help, contact us at 888.874.6388.