What Is the Role of HR in a Startup Company?

The Milestone Team February 5, 2024
What is the role of HR in a startup company (1)

Your HR department is the difference between your team members running in different directions and those same employees working in unison to take your startup to the next level. For many organizations, outsourced HR for startups makes these essential services accessible even early in their business’s growth stages. In this blog, we show you how.

Why Is HR Important To a Small Business?

The role of HR in a startup company—or any small business—is to ensure that all of the “behind the scenes” functions of your organization run smoothly so your employees can succeed in their roles. If you think of your business as a racecar (cool, right?), then HR is your pit crew. Your HR members change tires, refuel your engine, check for issues, and repair parts—metaphorically, of course. Here are some of the key functions that HR is actually responsible for:

  • Recruitment and Hiring
  • Onboarding
  • Training and Development
  • Total Compensation Packages
  • Employee Relations
  • Performance Management
  • Safety Procedures
  • Legal Compliance

HR gets a lot done for startups and small businesses. At least, they should. However, businesses reported labor shortages and employee engagement as top issues in 2023, according to SHRM.

When businesses are strained for resources, less visible back-office tasks (like HR functions) can often take a back seat. If this sounds like a situation your startup is in, it’s time to consider outsourced HR services. These services equip your team with experts who are ready to hit the ground running and who have experience solving the problems that startups face. Get in touch with our team to learn more.  

What Is the Role of HR in a Small Company?

The role of HR in a small business or startup is to enable the rest of your organization to succeed. There is no single type of role that HR fills. Instead, an HR checklist for start ups or small businesses can be broken down into three broad categories:

  • Monthly HR Support: These roles cover the day-to-day administrative complexities of operating a business. Here’s what you need covered:
    • Employee onboarding and offboarding
    • Employee/owner relations
    • Exit interviews
    • Handbook development and delivery
    • HR compliance monitoring
    • Benefits, COBRA, 401k, and leave administration
    • Unemployment claim administration
    • Annual personnel file audit and maintenance
    • Labor law postings
    • Performance review coordination
    • Employee engagement/sentiment surveys
    • Stay interviews
    • New manager playbook
    • Quarterly business reviews
  • Strategic HR Initiatives: These roles focus on achieving specific strategic initiatives. Here’s what your HR team should be capable of:
    • Restructuring compensation, benefits, and rewards packages
    • Headcount planning and recruitment strategies
    • Talent retention
    • Personnel assessments
    • Ongoing learning and professional development
    • Maintaining company culture to foster employee engagement
    • Professional employer organization (PEO) unbundling
  • Payroll Services: These roles ensure your employees get paid consistently, accurately, and on time. Here’s what payroll tasks include:
    • Payroll administration
    • Registering employees in compliance with varying regulations
    • System selection and implementation

Is your startup leaving any of these boxes unchecked? Doing so can dull your competitive edge at best and put you in murky waters with the law at worst. The good news is that you can quickly fill roles without burdening your budget with excessive overhead costs. Outsourced HR consulting for start ups services could be the answer you’ve been looking for. Contact us to see which services would benefit your startup the most.

What Is the Role of HR in a New Company?

The role of HR in a new company is to build a lasting foundation in two areas: staffing and compliance. 

  • Staffing: You need people to help run your business! You want the best engineers to develop your product, the best salespeople to sell it, and the best marketers to share your story. But first, you need HR professionals to source, vet, hire, onboard, and train new employees.   
  • Compliance: In order to grow your team, you need certain legal systems in place. Different states have different labor laws. These laws cover a wide variety of requirements, including hours, wages, overtime, hiring practices, workplace discrimination, retaliation, and more. Violating any of these laws can make your business vulnerable to costly penalties and lawsuits that can jeopardize your future.  

Outsourced HR services can supplement some or all of these essentials. Explore options for monthly HR support, strategic HR initiatives, and payroll services. It may be hard to figure out which beginning steps to take first. With outsourced HR services, you can get professional support for your new company earlier than before. Reach out today to find out how you can get a head start.

What Is the Role of an HR Manager in Startups?

HR functions keep your startup running, and HR managers ensure that these functions get done and get done well. Specifically, the role of an HR manager includes:

  • Acting as a link between leadership and employees
  • Finding opportunities for employees to develop and use their talents
  • Planning and overseeing employee total compensation packages
  • Handling human resource investigations, such as equal employment opportunity and sexual harassment cases
  • Supervising and coordinating projects of specialists and support staff
  • Overseeing recruitment, interviewing, hiring, onboarding, and training procedures
  • Mediating disputes and implementing disciplinary measures

According to the U.S. Bureau of Labor Statistics, the average salary for human resources managers in May 2022 was $130,000. Average salary also varies from industry to industry. For example, here are the numbers of several major industries:

  • Professional, Scientific, and Technical Services: $153,830
  • Management of Companies and Enterprises: $144,640
  • Manufacturing: $128,620
  • Government: $109,990
  • Healthcare and Social Assistance: $107,120

For startups, these costs can tie up a significant portion of your resources. If you need a leaner organization, consider partnering with an outsourced HR services provider. These services provide you with best-in-industry professionals at a fraction of the cost of full-time team members. Contact us to see how our team can support yours.  

What Is the Role of an HR Manager in a Small Company?

One key role of HR managers in a small company or startup is to foster positive employee engagement. This is a vital role, considering that teams with low engagement have 18% to 43% higher employee turnover rates than highly engaged teams, according to Gallup. The role of HR in employee engagement covers many functions, such as:

  • Creating and maintaining a productive, engaging, and inclusive company culture
  • Keeping a pulse on employee morale and planning initiatives to improve engagement
  • Facilitating onboarding and exit interviews to find opportunities to improve engagement initiatives
  • Resolving disputes between employees
  • Rewarding employees through professional development, advancement tracks, and compensation

As a result of these needs, an HR employee engagement job description for your startup should include the following:

  • Create strategies focused on improving employee engagement.
  • Manage growth opportunities to foster employee development.
  • Lead recruitment efforts, including job posting, interviewing, hiring, and onboarding.
  • Developing paths for ongoing engagement, such as learning and advancement opportunities.

Ready for an HR professional who can get to work improving employee engagement in your startup? Partner with the experts at Milestone to get started immediately. 

What Are the Biggest HR Challenges for Startups?

Some of the essential HR needs for startups are also the greatest challenges; recruiting and retaining top talent can be especially difficult for new businesses in any industry. Why? Because you’re not just competing with other startups, you’re also competing with established organizations across the globe.

Fortunately, HR experts can fine-tune and leverage your compensation packages, equity offerings, and mission alignment to connect with exciting candidates. 

How Do I Start an HR Plan for a Startup?

Don’t start from scratch when creating an HR plan for your startup—spring ahead with outsourced HR services! These services bring in experts who know what it takes to formulate and execute HR plans for startups. During planning, these experts will guide you through:

  • Aligning budget with strategic goals
  • Creating a payroll system
  • Developing a staffing plan
  • Determining compensation and benefits packages
  • Creating an employee handbook
  • Posting job descriptions
  • Leading recruitment efforts

Need help setting up HR for your small business or startup? Let’s talk!   

Developing an Effective HR Strategy for Startups

For startups, crafting a strategic human resources plan is crucial for scaling effectively and building a strong organizational foundation. Understanding the fundamental aspects of HR strategy for startups can significantly enhance your ability to attract, retain, and develop talent, which is instrumental in driving business growth.

Core Components of Startup HR Strategy

At the core of an effective HR strategy for startups are several key elements:

  • Recruitment and Talent Acquisition: Design tailored recruitment strategies that align with your startup’s culture and long-term goals. This includes creating compelling job descriptions, utilizing the right recruitment channels, and establishing a structured interviewing process.
  • Employee Onboarding and Retention: Develop a streamlined onboarding process to help new hires integrate effectively into your team. Focus on retaining top talent by fostering a positive work environment and providing opportunities for professional growth and development.
  • Performance Management: Implement clear performance evaluation methods that encourage feedback and continuous improvement. This will help in aligning individual goals with organizational objectives and in identifying opportunities for training and development.
  • Regulatory Compliance and Risk Management: Ensure that your HR practices comply with legal standards and employment laws to mitigate risks and avoid costly penalties.
  • Culture and Employee Engagement: Actively work on building a culture that promotes innovation, openness, and inclusivity. Regularly engage with your team to gauge satisfaction and to implement initiatives that boost morale and productivity.

By addressing these critical areas, startups can build a robust HR strategy that supports their growth trajectory while managing potential challenges effectively.

Benefits of a Strong HR Foundation

Establishing a solid HR foundation not only streamlines operations but also enhances your startup’s reputation as a desirable place to work. It attracts skilled individuals who are crucial for innovation and competitive advantage. Additionally, a strategic approach to HR can lead to more effective management of resources, ultimately contributing to the startup’s sustainability and success.

How To Implement HR in a Small Company

HR processes are crucial to the success of any company, so the first step in establishing your business should include building an HR team. In doing so, you have a few options:

  • Keep processes in-house.
  • Outsource all HR processes.
  • Handle some HR processes in-house while outsourcing others.

Outsourcing certain HR responsibilities can free up your time and money to focus on other important initiatives while establishing your business. Reach out to find the best situation for you.

Check Off All Your HR Boxes with Milestone

Whether you need a single HR process handled or support for your entire HR department, our fractional HR services provide the assistance you need to turn your human resources into a competitive edge. Our offerings include:

Give us a call to start exploring your options for more impactful HR systems.

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