5 Key HR Solutions Every Startup Should Have
As a new business owner, you’re focused on launching products, signing up customers and growing operations. But an equally important – and often overlooked job – is managing your employees, administering benefits and complying with employment and labor regulations. For startups, these human resources responsibilities can be overwhelming. To help, HR specialists and consulting firms offer specialized support and support for businesses of all sizes. Your business can outsource its HR needs on a project basis, for a period of time or even hire a consultant to function as your own dedicated HR professional.
In this article, we’ll cover:
- Why your small business needs an HR solution
- What types of services and solutions are available
- How to assess your HR needs
- How you can locate and contract an outside HR vendor
Why your business needs an HR solution
As a startup evolves from an idea to a functioning business, a logical next step is adding employees. Once you grow beyond a handful of employees, it may be wise to start thinking about human resources. By retaining an HR expert, businesses can ensure their HR services are properly developed and administered.
“If you have an HR consultant, you can focus on your business and you don’t have to stress if a situation arises, like an audit or if OSHA comes in,” said Ivelices Thomas said, founder and CEO of consulting firm HR & Beyond, based in Coral Springs, Fla., referring to the Occupational Safety and Health Administration, which sets and enforces workplace standards. “You know you’ve partnered with someone who has the experience you need and can help solve the problems.”
In most organizations, human resources professionals manage a wide range of functions, including hiring, management and training of personnel. HR executives often oversee employee-related policies and practices, including interviewing, hiring, development, termination and contracts, and administer benefits, such as compensation, health insurance and leave time. Back-office activities, payroll, onboarding are sometimes part of HR as well.
With so many areas to cover, many small business owners struggle to find time to learn and administer these HR functions and troubleshoot issues that arise. Some owners delegate HR responsibilities to managers or office staff, but these individuals may also need training and support. HR-related mistakes can interrupt your business or potentially cost your business money or even result in legal issues.
A business’s HR needs can vary depending on its size and location. Your company is required to comply with applicable federal, state and local regulations, which can govern employment standards, benefits and protections. For instance, different states and localities have varying laws on hiring procedures, benefits (such as providing employees with sick time), and rules about extending benefits to both part-time and full-time staff. Those variables also make it important to retain an HR specialist, advisers say.
A seasoned HR pro will be familiar with the latest rules and regulations in their clients’ markets, said Thomas. ““Most small business owners don’t have the experience or expertise in this area,” said Thomas. “When I’m engaged, I do an assessment and give recommendations of what you should and should not be doing.”
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5 HR solutions for startups
1. Procedures and policies
From the moment you hire your first employee, you become an employer, you’ll need to define and administer policies and procedures that govern their work, said Nicole Mitchell, founder of Atlanta-based HR consulting firm HR Biz.
An HR professional can review your operation, write new policies and help implement them, she said. HR consultants can also help develop necessary forms, contracts and templates.
“Instead of risking revenue going out the door because you asked the wrong interview question or got caught up with the IRS because payroll wasn’t processed, you had these functions off to someone with experience,” Mitchell said. “It streamlines the process.”
Many employment policies get into nitty-gritty paperwork. For instance, when you hire employees, they need to be classified them as full-time or part-time employees, or independent contractors. That can impact what the benefits your company is required to provide, or elects to, as well as the way related taxes are withheld and paid, Mitchell said.
One key function an HR adviser can help with is developing your company’s policies into an employee handbook. A handbook is a document that outlines the business’s standards, regulations, benefits and policies, including any penalties for violations. Some handbooks delve into very specific areas, including social media behavior, harassment and diversity policies, and even driving policies if employees operate company vehicles. HR advisers can draft a form for employees to attest to reading and understanding the handbook as well. “Handbooks are mutually beneficial for both owners and employees,” Thomas noted.
2. Compliance and legal oversight
More than ever, business owners need to be aware of federal, state and local laws that govern hiring, employment and termination, HR consultants say. These rules change frequently and vary by locality, so it is important to be familiar with regulations both in your hometown, as well as anywhere you might do business.
“For any small business, you need to make sure you have the right forms in place,” said Matthew Burr, founder of New York-based Burr Consulting. “It is the most important and most administrative-focused area, but it is a good idea to have someone walk you through it and help you understand to make sure you’re doing everything properly.”
For instance, Burr said, small businesses want to verify federal forms, such as I-9 or W-2 forms, and obtain necessary documentation. As part of his services, Burr reviews clients’ records and employment procedures to ensure they’re in compliance.
Clients will sometimes engage HR consultants to assist with very specific legal tasks, such as terminating employees. Two days after she signed a client, Mitchell says the firm asked her to fire an employee. “They realized if they didn’t word it correctly or take the right steps, it could end up in a legal situation,” she said.
HR advisers will often consult with attorneys, and some have legal credentials themselves. Thomas, a former labor lawyer and in-house HR executive, said she takes continuing legal education classes to stay abreast of the latest labor and employment laws. When a client’s HR issue requires more local legal expertise, she calls on a network of firms and attorneys nationwide to provide insights.
3. Payroll, taxes and time-keeping
Accounting functions can quickly overwhelm a small business owner, including setting up payment systems, generating payments and calculating taxes. HR consultants can help put systems into place that automate many of these tasks. Going a step further, a business can contract with HR companies to fully administer these systems. Similarly, startups can contract with an HR company to devise time-keeping systems, including online systems for recording regular and overtime hours, and generating payments.
4. Workplace services (recruiting, onboarding and continuing development)
As a company grows, it should design a standard process for recruiting, interviewing and onboarding new employees, HR advisers said. While business owners are well-versed in their company’s area of expertise, the hiring process is often an area that presents difficulties because they don’t have experience in hiring.
To streamline recruiting, an HR consultant can help organize a procedure for seeking candidates and outline an interview process, including necessary qualifications and questions. Once prospective hires are identified, the HR adviser can help craft offer letters and contracts, create onboarding packets, and administering training sessions. If an HR adviser helps to onboard new employees, they’ll be able to hit the ground running when they start.
To support existing employees, HR consultants can design development and ongoing training, as well as measurements for tracking their progress. These reviews can be tied to incentives, including bonuses and promotions.
A skilled HR adviser will help guide startups through the stages, Thomas noted. “Companies will need more services as they grow, such as talent acquisition and then retention,” she said. “As the needs of the company change, the HR needs will change too.”
To help meet her clients’ needs and be available, Thomas recently launched an HR Hotline, where for a monthly fee, clients have access to her and her team to answer any HR-related questions.
5. Employee support
Just as important as assisting business owners, HR professionals can support employees as well, freeing up owners to focus on other responsibilities and ensuring staff gets the most accurate information. Thomas said one client created a company email address for her and encouraged clients to reach out with questions, and employees could also take advantage of her HR hotline. Mitchell said she emphasizes that clients’ staff can call or email her with any HR questions. Employees might have questions regarding medical benefits, leave policies, compensation, or need to seek advice, Mitchell said.
Another way HR advisers assist employees is by providing high-quality training, Mitchell said. By developing employees, she said the company will run better and staff will acquire more skills.
How to assess your HR needs
When assessing your HR needs, don’t wait until you have a problem, advisers cautioned. Rather, startups should check in with an HR consultant when you start hiring employees or grow your staff. Many consultants and companies will offer a flat fee for a first review, and then design a plan tailored for your company.
In many instances, the particulars of a company help determine your HR needs, such as if you work in a highly-regulated industry or have federal or state contracts, which may be subject to increased oversight. As you add employees, an HR specialist can advise if that changes compliance and benefits offerings. Likewise, if you plan to alter, add or reduce benefits, you may want to consult with an HR adviser on guidelines and implementation.
Pros and cons of hiring an outside HR vendor
The biggest pro is having an experienced HR executive in your corner. “You need someone not afraid to tell you if you need to change direction or make a change,” said Burr.
Another pro is hiring an outside HR adviser frees a company from hiring a full-time, in-house employee with a salary and benefits. Most HR consultants will work on a project and as-needed basis, which can vary from one-time consultation to ongoing, dedicated services.
Hiring an HR adviser is an added cost that some startups can’t afford. “The challenge is to make sure you can justify and manage the value versus the cost,” noted Mitchell.
HR services can run between $60 and $250 per hour, depending on the location, size of the company and services. Some HR consultants offer package pricing, particularly for projects like an employee handbook or document review. With more services, HR consultants can get expensive, such as hiring someone to be on-call. Burr offers an option where he only bills clients when they use his services.
Another downside is outside HR vendors are not in your office and immersed in your operation on a daily basis. To help bridge the physical divide, Mitchell says she makes in-person visits and video chats. “Knowing the company culture when you aren’t part of it every day is difficult, but I make it a priority to be engaged,” she said. “If they know they can call or email me, they’ll feel a connection.”
How to select an HR provider
To locate an HR consultant, industry veterans offered up a few tips:
- Contact your local Chamber of Commerce or another professional business organization. Many HR advisers participate in these associations, and they may offer a discount to fellow members. Burr, for instance, offers a 10 percent discount to members. Other members can offer referrals.
- Look for someone with experience in your field, industry or community. An HR pro with relevant experience will be able jump in quickly and address your company’s specific needs.
- Seek out an adviser with certification from HR professional organizations. The most popular accreditations include the HR Certification Institute’s Professional in Human Resource (PHR) and Senior Professional in Human Resources (SPHR) designations, and the Society for Human Resource Management SHRM Certified Professional (CP) and SHRM Senior Certified Professional (SCP).
Your HR adviser should have significant professional experience, including working as an in-house HR executive for a reputable organization. Get referrals and check reviews. “Anyone can hang a shingle, but it doesn’t mean they know what they’re talking about,” Burr said.
Since every small business’s HR needs will vary, work with an individual or firm that can customize a program that fits your budget and provides the essential services that you need.
As your business grows, your HR needs will likely shift and evolve. By building a strong relationship with your HR adviser, business owners can stay ahead.
“By working with an HR professional, instead of problems like risking revenue going out the door because you asked the wrong interview question or got caught up with IRS because payroll wasn’t processed, a business owner can focus on their passion,” Mitchell said.