Human Resources is a function few startup entrepreneurs have the skills or time to manage. Nonetheless, attracting and retaining the right talent is as important to your business success as any other area we’ve discussed.
Fortunately, there are many external resources you can call on to help you with everything from recruiting to record-keeping. Here is a quick overview of a complex field and what you need to attend to as you begin:
In the Beginning: Defining Your HR Strategy and Organizational Structure
The Human Resources function is very strategic. Before you write a job description, you need to have very clearly articulated goals for the kind of organization you want to create. What are the values you want your employees to embody? What do you want their employment experience to be like? At the outset, the lean startup is likely to need everyone to wear many hats and the management structure will be very flat. As time goes on, however, you’ll need to be ready to modify the company ethos to keep up with growth.
Recruiting, Hiring, and PEOs
When you’re ready to begin hiring, you will need to have clearly defined job descriptions, even if they require your new hires to work across disciplines. You want to seek people who are comfortable with a fast-changing environment. They need to be ambitious and energetic, and should ideally have skills across more than one area so they can pitch in as needed.
An early and critical decision is whether to hire employees on your own payroll or to hire them as independent contractors. It is increasingly difficult to satisfy the complex and changing government requirements for legally using independent contractors. Be sure to consult a professional in your state to determine whether you could be subject to penalties for managing your hiring in this way.
A second decision is whether to use one or more outside consultants or services to aid in the hiring process. A recruiting expert can help with defining jobs and compensation strategies, searching for and screening candidates, and negotiating the employment contract. A Professional Employer Organization (PEO) – goes further and actually hires the employees on your behalf, assuming full financial responsibility and handling all of the HR functions of hiring, training, managing, paying, disciplining and rewarding your workforce.
Another reason to outsource some of the hiring function is the expert guidance you’ll get on the rules governing job advertising, interviewing, and hiring practices. A common problem for many employers is unknowingly breaking discrimination laws governing hiring by asking questions that pertain to forbidden areas, which include race, religion, nationality, age (if over 40), gender, family status, disability and veteran status.
Compensation is an enormous topic. You can research competitive wages and salaries at sites like www.salary.com. You should consult the Department of Labor for guidance on current minimum wages and overtime requirements for hourly workers. For salaried employees you may want to negotiate a combination of salary and stock options, depending on the resources your startup has to work with. But beware – with the high rate of startup failures, potential employees are likely to be very cautious in accepting stock options for an unproven firm.
For benefits, beyond unemployment, worker’s compensation, and disability insurance and Social Security contributions, you’ll have to offer some type of health insurance if you have more than 50 employees. While the new law does not require an employer to provide coverage, those with fifty or more full-time employees will be subject to penalties for not providing a coverage option. For more information, visit www.healthcare.gov.
Employees will also expect you to offer additional benefits, ranging from flex-time and remote work options to paid sick days, vacation time, holidays, and contributions to a 401K or other retirement vehicle.
Finding Your First Employees
Retaining Top Talent
Contracts and Documentation
Another critical HR function is maintaining a paper trail. This includes any initial protective covenants, such nondisclosure agreements, employment contracts, and the like. It also includes maintaining detailed personnel files for each employee and accounting for their paid and non-paid time off, overtime, comp time, expense accounts, tuition reimbursement benefits, training programs, and so forth.
The HR function should spell out all policies clearly in an accessible Employee Handbook.
Equally important is ongoing job performance documentation. Establishing clear understandings, in writing, or employee performance expectations and progress, and documenting any problems or stellar performances, will be important to maintaining a positive relationship with each employee. In the event of a problem that results in a termination, however, if will also be an essential protection in the event that the former employee files a lawsuit charging wrongful termination.