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HR for Startups: The Ultimate Guide (Updated for 2023)

Charlie’s startup journey began back in 2015. Ever since then, we’ve endeavoured to build a business with happy and high-performing team members. We’ve made more than a few mistakes and experienced our fair share of challenges – but going on that journey taught us a lot about what HR for startups is about.

Now, we’ve condensed everything we've learnt about startup HR into one simple guide – and we’re sharing it all for free.

I’ve spent the bulk of my adult life starting businesses. Ever since we were 16, all myself and Rob O’Donovan (another Charlie co-founder) wanted to do was take new ideas and make them into reality.

Over that time, we got to know pretty intimately the challenges that every new startup will face. Never enough time, never enough resources, never feeling 100% certain how best to look after your team – we understood these issues well because we’d been grappling with them all our working lives.

That’s why we started Charlie. We wanted to build something that could help build strong HR foundations for every small business and startup to thrive whilst focusing on work that would have more impact on the company.

Download HR for Startups

In the last few years, Charlie has evolved beyond those fundamentals. Now, we’re building something that gives you the tools you need to run your business efficiently and build an environment for engaged and high-performing teams.

In a lot of ways, Charlie is becoming the tool I wish I had when I was starting my first company. In the same way, the guide you’re reading right now is the guide I wish I could have read myself back in those early days.

Here, you can find everything I’ve learnt about the fundamentals of building and scaling companies from scratch. We’ve written it for everyone – customers, readers and other startup founders – in the hope you find it useful while building yours.

HR for Startups Part 1: Laying good HR foundations

Truly great startup HR is about creating an environment where your team can and wants to do their best work. That’s what we’re aiming for – but before we get there, we need to put down some foundations.

Most of the items on this list are legal requirements that you need to get in place to keep your startup on the right side of the law. A couple of others aren’t strictly essential, but getting them in place now is going to save you a whole lot of time and headaches in the future.

In either case, the bedrock of your startup's HR department is stability – these are the steps you need to take to get there.

1. Employment contracts

Your startup's first step towards 'good HR' is nailing down your team’s employment contracts.

It’s common for early-stage startups to have a fairly casual attitude towards contracts – when your company is just a handful of people, it’s tempting to think that a template you’ve downloaded off the internet and a bit of goodwill is enough to see you through.

But when it comes to people’s jobs and livelihoods, you need the security of contracts drawn up by a professional. Without that clarity, you’re leaving a lot of space for misunderstandings to escalate into full-blown conflicts that end in legal action.

Proper contracts of employment, written by a Human Resources expert and tailored to fit your startup’s unique context are absolutely essential – whatever the size of your company.

If you don't want to hire someone full-time, you can always outsource this service to professionals like the HR support for small businesses we offer at Charlie.

2. The three mandatory HR policies you need to protect your business

According to UK employment law, every company needs three specific HR policies on file.

It doesn’t matter how new your small business is – if your startup doesn’t have these documents, then it’s already in breach of employment law. Without them, your business is vulnerable to legal action that could lead to paying out large amounts in compensation.

Just as with your employment contracts, you also need to bear in mind that templates downloaded from the internet will only get you so far. The cover these templates give you is patchy at best – to protect you properly, these policies need to be tailored specifically to your business.

As an example, the law on Health & Safety Policies requires you to carry out what is called an H&S assessment. That means a thorough examination of the way your company’s work is carried out – so generic templates won't give you that insight.

There's a lot more to this, so download the guide below and we'll walk you through each of those policies in turn, and show you how to protect your business.

Click here to download the three policies to protect your business

3. Check and store your team’s Right to Work documentation

Every employer in the UK has a responsibility to keep a record of their employees' Right to Work documentation. For team members from the UK, that’s pretty straightforward – just keeping a scan of their passport will do the trick.

Nationals from other parts of the world either need to have settled (or pre-settled) status, or a visa that gives them the right to work in the UK. In either case, you’ll need to keep a record of their right to work documentation on file – you can find a complete list of valid documents over at the gov.uk website.

If you choose to invest in HR software for small businesses, you can automate all of this: you'll be able to store important documents safely in the system, and you won't even have to set reminders in your calendar for visa expiry dates – that's done automatically by your HR software.

Illustration showing how Charliehr software collects documentation directly into the software - keeping it safe and secure - and reminds you when a visa is going to expire

4. Get your Employers’ Liability insurance in place

Every employer based in the UK needs valid Employers’ Liability insurance – this is designed to cover you in case one of your team becomes ill or injured carrying out their work for you.

Hopefully, you’re never going to need this, but it’s an essential piece of ‘HR hygiene’ you need to get ticked off (the maximum fine for not being properly insured is £25,000 per day!).

5. Get your team enrolled in a workplace pension

Under the 2008 Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension and make contributions to it. You can check up on your company’s responsibilities by heading to The Pension Regulator.

6. Set up a time off management process

When your startup is only four or five people, using spreadsheets to track time off and sick days is just about workable. But as your team grows, this breaks down pretty quickly.

Holiday requests sent via email and then tracked in a spreadsheet are guaranteed to become an absolute time sink, and there will inevitably be mix-ups – missed requests or holiday clashes that leave you short-staffed and confused.

You can remove yourself from the time off process by using HR software. HR systems can calculate prorated holiday allowances and rollover for you, as well as flag any overlapping time off within your team.

Illustration showing how you can see time off at a glance and have notifications being sent to you

7. Build a bespoke company handbook  

This is one of the most HR basics for small businesses you need to think about: an employee handbook.

A company handbook (you can call them both) is where the three compliance policies we were just talking about will live, but that's just the bare minimum you can do.

As you grow, you'll want to add more guidance as to how you see things at your business to reflect the values you want to pursue. Not only will you want to write policies about leave requests or remote working, but you might also want to start thinking about implementing mental health or DE&I policies.

Your HR policies will ultimately be one of the reasons why people join your business and the more forward-thinking they are, the more likely you are to appeal to new joiners.

Handbook stored in CharlieHR software

And if you have no HR training and don't know where to begin when it comes to HR policies, you can get the help of an HR professional to craft bespoke HR policies that are right for your specific context.

They’ll also tailor your handbook to reflect your company's core values, making sure it speaks to your team in the way you feel is right.

8. Follow an HR checklist for startups

What we've outlined above is a very rough plan of what you should get up to when starting your new business, but of course, you might want some more guidance on how to do it and a concrete plan to follow.

Perhaps that's where an HR checklist can come in handy. Our team created a specific checklist to make sure all startups know what to do each step of the way. You can download it below.

Click here to download our HR checklist

HR for Startups Part 2: An onboarding process that’s ready to scale

1. Getting all the right paperwork for onboarding

For people looking after HR at small startups where there is no real 'HR department', balancing hiring and onboarding with the rest of your role can be a real challenge.

Whenever you bring someone new into your business, there’s a whole load of legal admin you need to work through just to keep your company compliant:

  • Right to Work documents
  • P45
  • New starter Form
  • Contracts of employment
  • Next of kin

There are a lot of loose ends to tie up (and some potentially serious pitfalls if you don’t), but with the right HR software (or HRIS), you can distill this entire process down into a single-click invitation and a seamless onboarding flow.

Once you got all that information, you also get the guarantee that it's stored somewhere safe.

With Charlie, for example, our security protocols are ISO 27001 certified and fully GDPR-compliant, so you know that data is being stored safely.

2. Making your new hire feel welcome

Starting a job at a new company can be a daunting experience.

There are going to be a lot of unfamiliar faces and it can take a while before they really feel ‘part of the gang’. With an automated onboarding flow, you can give the new employee a warm welcome right from the start.

Illustration showing the new hire feeling welcome with the right onboarding process

And once they’ve set up their profile, they’ll be able to browse through the company profile to get to know every person and what's their role within the business.

Finally, you'll get the opportunity to assign onboarding tasks for new hires, line managers or other people involved in their onboarding to help bring them up to speed.

All of that can be done within CharlieHR. Start a free 14-day trial to have a look at how you could use it at your company.


HR for Startups Part 3: Compensation and benefits

In today’s job market, the best talent wants to work in an environment where they feel valued and appreciated.

What this means for today’s startups is that a focus on compensation and employee wellbeing is an absolute necessity to improve employee retention (check out what the best London startups do in that area).

1. Setting up salaries to attract the best talent

One crucial aspect that startups and small businesses shouldn't ignore is how competitive the job market now is, which means you're still going to have to set up salaries that reflect people's skills and experience.

Despite the lack of resources that might be available to you right now, you shouldn't ignore setting the right salaries when you start your business. Here's some advice based on our own experience doing it at Charlie:

  • Be transparent in your job ads about the salary range you can offer depending on role and experience
  • Set up a progression framework with levels and sub-levels to give team members a clear view of their career path (this will also give you the opportunity to set them up to be high performing)
  • Calculate how much you can offer and set salary expectations for all the levels of your progression framework  

2. Get the right benefits for your team

When you’ve just started up a business, money is always tight. For many startups, spending extra cash on treating their team can feel like a luxury.

There’s also the question of what to even spend that money on – you need it to go a long way and it can be tricky figuring out what you can offer that everyone on the team will appreciate.

These were the challenges we had in mind when we put together Charlie’s Perks feature, a solution designed specifically for startups like us.

Gif showing Perks in CharlieHR app

Perks put that choice in the hands of your team, giving them access to a huge range of benefits, discounts and deals to choose from.

But most importantly, Perks is seriously cost-effective – no need to pay extra to unlock the feature as it's included in every subscription.

HR for Startups Part 4: Encourage growth and development

Today, the most successful startups are the ones that make growth and development a central part of their culture.

There are a couple of reasons for this. First, the best talent now has an expectation that they’re going to be nurtured in their roles. Without that sense of development, it’s harder to attract and retain people who want to grow.

Second, the performance of your team is the single biggest factor in the success of your business. They are the ones driving your business forward – help them to perform at their best, and you’ll reap the rewards.

1. Setting up performance management at your startup

There are a hundred different ways to run performance reviews, and just as many products, tools and apps to help you do it.

But running a startup is complicated enough already. Most of the time, it feels like you barely have the capacity to do reviews at all, let alone test all the solutions and design your own process from scratch.

For most startups below the 20-person mark, the key to a good review process is keeping things simple. You need a process that makes an impact, but is also easy to roll out and doesn’t need loads of supervision.

That's where automation comes into play. Charlie's own performance review feature sets teams up for success with:

  1. Templates to streamline the review process and drive conversations
  2. Automatic reminders to avoid getting sidetracked by other priorities and not do reviews
  3. A process that can be set up in a few clicks and where team members and managers submit assessments that they then discuss

Shows how Reviews work in three steps

All the while, you can overview the process at a glance through your dashboard. The more regular and automated the process, the easier it becomes to run great performance reviews at your business and to make it a habit for your team.

2. Having a Learning and Development budget for your team

To support your performance reviews, you should also think about setting a Learning and Development budget for your team.

At Charlie, we allocate a fair amount every year for our team members to develop their skills and make sure they can bring something new to the table as well as feel like they're making progress within their roles.  

You can also learn more about what our friends at LearnAmp did for their own L&D in this blog post.

3. Set up a progression framework

As we previously mentioned, setting up a progression framework will help you by:

  • Allowing for more equality at your business by having a no-negotiation policy and setting salaries based on skills and experience
  • Having a clear set of expectations and goals to assess for each role, whether it's about promotions or hiring someone new in the team
  • Attracting the best talent by setting a clear pathway to promotions and growth

Discover how it's done with our blog about building a career progression system.

HR for Startups Part 5: Get HR software for your small business or startup

As you'll have seen, HR for startups is not as straightforward as it sounds. When we started Charlie, we felt a bit overwhelmed by the amount of admin we had to deal with, but that's how we were able to build software to solve for it.    

There is a multitude of ways you can set strong foundations for your HR, but automating and streamlining your processes as much as possible will ultimately be key to your growth.

With CharlieHR software, you can accomplish all the things I mentioned above, whether it's onboarding new team members, managing your time off, getting your benefits sorted – all the HR services for startups you need in one place.

And perhaps you're already looking at other solutions when it comes to HR, but trust me, none of them's got the insights that we have working with thousands of small businesses and being one ourselves.

Don't hesitate to make the best choice for your business and start a free 14-day trial today with CharlieHR.  

Start you 14 day trial with CharlieHR

And if you want to find out more about HR for startups, we've got some content coming your way: