HR Checklist for Startups and Small Businesses

The past two years have been difficult for businesses around the world. Companies have had to adjust to unique challenges like the Great Resignation and a mass shift to remote and hybrid working models. They have also had to keep up with evolving compliance and regulatory issues. This has highlighted the value of an effective HR department. It has also demonstrated the value of tools like an HR checklist for startups to help small and newly established businesses navigate these changes.

In this post, we will discuss the importance of using an HR checklist for small businesses to help your company prosper. We will look at what you need to consider when you build your HR department so you can grow and protect your business and keep your employees safe and engaged. 

Why Do Startups and Small Businesses Need an HR Checklist?

An established HR department is vital, whatever size company you are. It helps you grow as a business, and it is vital for ensuring compliance. In fact, compliance is one of the most critical roles of the HR department. Aside from protecting you from potential legal implications and costly fines, a compliant company is far more likely to attract, develop and retain high-performing talent, vital for developing your business. 

As an HR manager or business owner, the first step towards achieving full compliance is being aware of all state, federal, and national laws. You then need to make sure every level of your company adheres to required standards and legal obligations. An HR compliance checklist is a great way to achieve this. You also need to stay on top of any changes to the law and conduct regular audits to make sure you continuously comply with all legal requirements. 

Think of your HR checklist for small businesses as a roadmap to ensure all aspects of legal compliance are reviewed during your audit. We will discuss shortly which components you need to incorporate into your checklist, but let’s start by reviewing some of the employment laws you need to comply with as a business owner:

• Fair Labor Standards Act (FLSA)
• Affordable Care Act (ACA)
• Americans With Disabilities Act (ADA)
• Occupational Safety and Health Act (OSHA)
• Family and Medical Leave Act (FMLA)
• Health Insurance Portability and Accountability Act (HIPAA)
• Equal Pay Act
• Equal Employee Opportunity Commission (EEOC)
• National Labor Relations Act (NLRA)
• Age Discrimination in Employment Act (ADEA)

Components of an HR Checklist for Startups

Now that we’ve seen which laws you need to consider when you design your HR checklist for startups, let’s take a look at the various components of your checklist. This will help you design a plan of action that covers all essential HR tasks, allowing you to grow and develop as a successful business.

There are a number of aspects that will influence how detailed your checklist should be. For example, the size and infrastructure of your business will influence how comprehensive your checklist and subsequent audits need to be. Your geographic area, dependence on financial markets, and required professional standards will also have an impact. 

Generally speaking, though, an HR checklist for startups usually takes into account the following categories:

• Organizational plan
• Recruiting, small business hiring, and onboarding (including contracts, applicant tracking procedures, I-9 forms, employee data collection, etc.)
• Compensation and benefits
• Policies and procedures (including policies for time and attendance tracking, absence management, health & safety, sexual harassment, bullying, and drugs, etc.)
• Training and development
• Performance management (including appraisals, feedback, tracking employee engagement, etc.)

Building an HR Department from the Ground Up

So, what do you need to do to build an HR department from the ground up?

Ultimately, each area of your HR department will serve to protect your business, strategize your goals, and motivate your employees to perform to the best of their abilities. It’s all about creating plans, policies, and processes that support your business operations, protect your employees and serve as a roadmap for success. You need to assess your needs and goals both now and in the future. 

Where do you want to be as a business and as a small business manager? How can HR help you get there? What do you need to do to protect your business, your assets, and your employees? How will you manage payroll, hiring, grievances, and general employee relations?

One of the most important aspects to consider when you build your HR department is how you are going to document everything that you do so that you are prepared for audits and can guarantee compliance. All the data you collect and store, from personal data to payroll, health and safety records, and employee handbooks should be organized, clearly accessible, and in compliance with good standards of business management. The more measures and controls you have in place to guarantee the integrity and reliability of your documents and records, the easier it will be to ensure compliance.

HR Checklist for Startups and Small Businesses

What exactly do you need to do to start a new HR department in your business? Your main priorities will be performance, compliance, and engagement, but there are a number of other key areas that will help you drive your business forward. 

Here are some of the main business areas you should be including in your HR checklist for small businesses. 

Organizational Plan 

The first item on your checklist for your HR department should be creating an organizational plan. This will guide your business as your company expands and help you develop your HR department as you grow. 

What structure will you use? Who will employees report to? How will departments be organized? 

A clearly defined structure with clear roles and responsibilities will help all your employees understand what’s expected of them. It will also help them understand how their work contributes to the overall goals and vision of the company. It will also help you with current and future strategic decisions relating to workforce planning, outsourcing, and succession plans, giving you a solid foundation to grow on.

Recruiting, Hiring, and Onboarding 

The next aspect to consider is how you will source, verify, hire, and onboard new employees. You should create a clear job description template for each hire by identifying which roles and skillsets you need. You also need to create templates for offer letters and employment contracts. Make sure they clearly detail all terms of employment in order to avoid any potential disputes. 

Who will process I-9 legal employment verifications? Will employees also need to sign non-competition, confidentiality, and intellectual property rights agreements? How will you collect and manage employee data?

A great way to manage your recruitment processes from start to finish is by using an applicant tracking software solution. 

Compensation and Benefits

You also need to establish a fair and realistic system for compensation and benefits. What pay structure will you offer new recruits? Will you offer additional health care and retirement benefits? Salaries need to be within budget, but they also need to be competitive enough to attract and retain quality talent. You also need to establish policies and procedures for time tracking and managing payroll, vacation, and sick days. 

Policies and Procedures 

Aside from creating comprehensive employment contracts and establishing processes for managing payroll and time off, you also need to create policies and procedures for other aspects of HR in order to stay compliant. This is an important component of any HR checklist for startups as it helps you stay compliant with the law. It also helps your employees understand what behavior will not be tolerated.

Examples of policies you need to create include:

• Health & safety 
• Disciplinary/Dismissal policy
• Grievance policy
• Code of conduct
• Sexual harassment, bullying, and drugs
• Termination policy

Once you have drafted all your policies you should include them in an Employee Handbook.

Training and Performance Management 

Another important component of any HR checklist for startups is making provisions for the training and development of employees. You need to design a plan of action to help your staff grow and develop their skills. You also need to establish a performance evaluation process and conduct regular appraisals so you can monitor their development. This will help you nurture a motivated, engaged, and productive workforce

HR Compliance Technology

It is important to conduct a company audit regularly to understand all aspects of your business and catch any potential issues as early as possible. Using a comprehensive HR audit checklist can help your startup or small business stay compliant as you grow. You can also use Factorial’s HR Audit Checklist to help you plan your HR audit and stay up to date with what’s happening in your company. Just fill in the form and we’ll send you your free HR Audit checklist!

Finally, one of the most effective tools for ensuring compliance is having access to reliable and comprehensive HRIS employee record management software. The right software solution can help you streamline your HR processes and conduct your HR audits in the most effective way. The best HRIS employee record management software should go beyond a simple digital filing system, though – it should integrate all your HR solutions. For example, aside from document management, Factorial’s software solution includes key features such as time and attendance management, applicant tracking, absence and leave management, an employee database, and an employee self-service portal.