As a founder of a startup, or perhaps someone who has gotten into a business from the ground floor, it’s not unusual to be someone who wears many hats, doing your regular job, as well as covering for the lack of an HR department that many businesses that are just starting out tend to forgo.
That’s why, to help founders, we decided to create this article on startup company HR advice you can use to manage your business as you try to forge your way to becoming a unicorn.
Let’s jump straight into it.
Pro tip: If you’re looking for a recruitment agency to assist your startup with hiring, we recommend starting your search with The 5 Best Recruitment Agencies for Startups article.
Why Startups Need HR Advice Earlier Than They Think
For many founders, the pressure to get operations up and running as soon as possible while finding the most profitable path for their business becomes the number one priority.
That’s why many people working in startups treat HR as more of an administrative infrastructure than anything, a bridge to be crossed once an arbitrary milestone has been achieved, preferring to rely on informal processes to keep things moving. The issue with this mindset is that you only realize the importance of bringing in someone to manage your HR processes as soon as a problem rears its ugly head.
And in most cases, this problem comes in the form of a resignation letter from a star employee who has struggled with your systems and ways of working not being able to keep up with your scaling pace, and now they’re out the door because they’re:
- Overworked
- Undercompensated
- Underappreciated
Suddenly, you lost an essential puzzle piece to your business's success, and you’re on the back foot trying to backfill their position, meaning what few managers you do have are now occupied with hiring and training a new hire instead of growing your business.
This scenario isn't particularly unique. A startup can end up scrambling and needing to bring in a consultant or start building their HR department because:
- A high performer suddenly quit
- A payroll error caused panic
- An internal conflict has spiraled and stalled a major project
The longer you avoid having a person dedicated to managing your HR functions, the more you’re going to lose momentum trying to fix problems when they arise, which would otherwise potentially have been nipped in the bud with someone preemptively on the case.
How to Know It’s Time to Hire Your First HR Person
According to findings published by Zelt, after analysing 973 UK-based startups, they found that the average benchmark for when startups start hiring their first HR person is when their headcount reaches 40 to 50 — with almost 100% of startups hiring at least one full-time HR person by the time they reach 100 employees.
And while there are other rules or milestones recommended to follow, like how much time leadership is spending on HR tasks or hitting a certain headcount, ultimately finding the sweet spot for your business is going to depend on a bunch of factors. Here’s our startup company HR advice on what to look out for to start determining if you’re in need of someone to handle your HR responsibilities.
Starting with:
Looking Beyond Headcount
Don’t get fixated on the number of people on your payroll, as there are far more important factors to determine if you need to hire or bring in a talent acquisition partner.
The first is how much time your leadership team is spending on hiring and doing people management instead of running your business. For example, in a startup it’s not unusual for the CEO to be heavily involved in hiring (after all, they are the one building the company at this stage and need to be the very best for the job):
- Performing interviews
- Making compensation decisions
- Writing and sending offer letters
- Handling conflict resolution
But it’s only a matter of time before these jobs start to become 10- to 20-hour affairs. At this point, it can easily be categorised as an HR problem.
The second factor is the growth trajectory.
Businesses come in all different shapes and sizes, and depending on their fundraising efforts, have different requirements. For example, if there’s a startup company with a headcount of 30 that is about to start scaling, ready for a Series A fundraising push in 6 months, its aims and objectives are going to look vastly different from those of a company of the same size with stable and profitable revenue and no need to fundraise. The startup is going to need someone who can manage the hiring process and pipeline as it doubles over the next year and a half, while the established company is more concerned with ensuring that stability continues.
Finally, there’s the complexity of your workflow process.
Without an HR person in place, you’re ultimately exposed to:
- Informal hiring and ad hoc compensation decisions that create friction
- Inconsistent performance reviews with 360 feedback assessments and terrible eNPS scores
- Lost opportunities and candidates from a disorganised process
- Remote employees spread across the country or even the world
- Contractor-to-employee reclassification exposure
- Performance issues that have been managed informally for too long
- Pay equity questions you've been putting off
And even though this is a lot to manage and potentially damaging, it’s not as scary as the legal repercussions of doing all of this yourself.
For example, a single employment lawyer's bill or wrongful dismissal claim can cost more than a year of a mid-level People Ops salary. Money you can't afford to burn through as a startup operating on limited capital.
Matching HR Support to Company Stage
The needs of the HR department (or the person who is responsible for HR stuff based on your company's size) are usually dictated by the size of your headcount.
Here’s what HR support for startups might look like at different stages of a startup's growth:
- 1 to 10 employees — You’re starting to see more of a need for writing up contracts, managing payroll, and work eligibility checks on candidates, which at this volume can be outsourced to an All-Inclusive Recruitment Partner or managed with legal templates.
- 10 to 20 employees — Now you should be shifting away from templates and ad hoc approaches to hiring and people management, and starting to introduce policies, structured onboarding, and processes to manage anything surrounding disciplinary or grievance situations. At this point, you’re going to start to look for someone who can handle HR tasks part-time or find a fractional HR partner.
- 20 to 50 employees — At this stage, you should be implementing processes around HR functions and seeing the introduction of structured recruitment, formal performance management, and compliance audits. If you’ve been outsourcing these jobs up until this point, this is the moment when you should consider hiring a senior HR Advisor, Manager, or agency.
- 50 to 100+ employees — At this stage, it’s a matter of keeping your growth engines chugging along while maintaining stability, and you’ll need to look into HR strategy for startups like workforce planning, leadership coaching, and HRIS implementation. At this stage, you're going to be looking for a Head of HR to build up your department or turn to an RPO agency that can fully embed itself into your business.
What should you be taking away from all this? Around the 20 to 50 headcount mark is when you should be seriously considering filling roles entirely dedicated to HR.
Choosing the Right Type of HR Support for Your Business
Founders don't usually come from a people-management background (unless you’ve started up your own recruitment agency).
In a startup, a founder is more than likely to have experience in:
- Product
- Marketing
- Engineering
And when it comes to the people management side of things (leading, motivating teams, or handling disciplinary issues or terminations), they may not come with experience in these skill sets — and will likely learn them on the job as they build their business.
So, when a founder finds themself in a position where they need to perform HR jobs, they might not have the administrative or compliance know-how to do this properly. Whereas a dedicated HR consultant is going to be knowledgeable about these things, and be able to handle everything a founder might not even realise is a part of the job, such as:
- Employee handbook updates
- Day-to-day employee questions
- The right steps to take when someone raises a harassment complaint
So, when the product shows potential and the startup shifts from finding product-market fit to entering the growth phase, you'll need more than a consultant can manage. Now, you’re looking for a Head of People or VP of People who can build a scalable hiring infrastructure and nurture your company culture.
But on the topic of policies and compliance, this brings us nicely to our next topic — HR policies in a startup company.
Must-Have HR Policies and Compliance Basics for Startups
Regardless of whether you plan to wing it or you want to bring someone in to help you with your HR processes, it’s always a good idea to understand what the baseline should look like in your company.
Ideally, before your first hire, you should have some policies in place to limit legal exposure and to set clear expectations of what success looks like before your teams start to grow. All the policies we’re going to cover below fall into one of two categories:
- Internal policies that govern how people are managed day-to-day
- Compliance requirements that apply by law regardless of company size
Did you know? Recruitment and employment laws change fairly regularly around the world. For example, recently, businesses in Europe were introduced to the EU Pay Transparency Directive, where, depending on a business's size, there are new reporting compliance laws that you need to follow.
13 Core HR Policies You Should Have in Place
- Employment Contracts: Job descriptions and clearly defined job scope, as well as compensation, work hours, probation period, notice period, IP assignment, and termination conditions. Having all this set up and ready to go before you even get your first hire through the door makes it easier for both employer and employee to understand their obligations and helps legally protect both parties.
- Recruitment Policy: Having talent assessment tools in place helps you create a structured hiring process so every candidate is fairly compared against other candidates. Having a proper recruitment policy will also help you manage the different interview stages, perform background verification, and outline offer approval steps.
- Attendance Policy: With remote work becoming more of the norm, businesses need to determine how their workforce should operate, meaning you should have a policy that defines remote or office work, working hours, shift timing, handling of late arrivals or start times, or flexible work hours.
- Leave and Time Off: Startup company HR advice from many consultants is usually to give your employees more benefits, especially if they’re sacrificing pay to work at your company. That’s why it’s a good idea to have clearly defined policies around vacation, sick leave, parental leave, casual and earned leave, unpaid leave, accrual rules, carryover, and the holiday calendar.
- Payroll Policy: And speaking of the lower salaries that usually come from working at a startup, you have to pay your employees something, and your payroll policy is going to cover this. Getting this done sooner rather than later is going to reduce the volume of questions from staff around pay, as they will already know everything around pay dates, salary components, deductions, reimbursements, bonus eligibility, and tax withholding.
- Code of Conduct: Ties in with company culture, but it's also a good idea to imagine how you would like your employees to act when representing your brand and how collaboration should look, and your code of conduct is going to outline exactly that, so they know the standard for professional behaviour, attendance, dress code, use of company resources, and conflict of interest.
- Anti-Discrimination and Anti-Harassment: Commit to a workplace free of discrimination based on protected characteristics, with a defined, confidential process for reporting and investigating complaints.
- Performance Management: Define how goals are set, how often reviews happen, how feedback is delivered, and what a performance improvement plan looks like, so evaluation isn't ad hoc or inconsistent across managers.
- Disciplinary and Grievance Policy: Lay out the steps the company follows for misconduct (written warnings, suspension, termination) and give employees a clear channel for raising grievances.
- Exit Policy: Cover notice periods, exit interviews, final settlement, return of company property, and reference or experience letters, so departures are handled consistently and don't damage the company's reputation with former employees.
- Confidentiality and NDA: Protect trade secrets and assign ownership of work product to the company. Enforceability of these clauses varies by jurisdiction, which matters more once a startup hires outside its home country.
- Health and Safety: Document emergency procedures, incident reporting, and general workplace safety rules.
- Technology and Internet Usage: Set rules for company devices, internet access, social media use, and basic cybersecurity practices to protect company data.
And there you have it! What is essentially an HR checklist for startups that you can use to make sure that your company's basics are covered while you start hiring and managing your workforce.
However, one thing we did omit from this list is that the laws and compliance you need to follow vary from country to country. So, let’s quickly cover some examples of how countries expect you to run your HR side of things.
Four Examples of Legal Compliance Requirements by Country
Let’s imagine you’re a startup based in Estonia, and you hire a developer in Lithuania, a remote closer from the US, and an HR rep based in the UK.
In this scenario, you’re going to need to understand the hiring and workforce rules for four different markets, each with its own formation and tax requirements. So, let’s explore some of these in a bit more detail.
Estonia
Estonia is unusual in that a written contract isn't strictly mandatory.
According to the Employment Contracts Act, employment is implicitly established once someone works for a company in exchange for pay, and a contract can even be a verbal agreement. But even so, it’s a very common practice that employers still use a contract, and the indefinite-term contract is the most common form for beginning employment in Estonia.
Before a new hire starts, employers are required to declare all new employees to the Estonian tax authorities, which happens through the Employment Register. Once that is done and staff are in the workplace, employers need a written occupational health and safety policy, which covers:
- Risk assessments
- Hazard mitigation
- Training programmes
- Emergency preparedness
If your startup starts to scale and you end up with a headcount of 50 or more employees, then you will need to introduce a whistleblowing policy with structured reporting, confidential handling of reports, and protection from retaliation. In Estonia, employers are also responsible for:
- Health and safety compliance
- Maximum working hours
- GDPR-compliant handling of employee data
All of this applies regardless of whether your employees work from home or from an office.
On payroll, employers must calculate and withhold income tax, social tax, and unemployment insurance contributions and remit them to the Estonian Tax and Customs Board by the applicable deadlines (the 10th of the month following the month in which the employee was paid).
Lithuania
Lithuania requires contracts to be in writing, as a verbal agreement doesn't provide sufficient legal protection and exposes employers to administrative penalties and disputes, and the written contract must be signed before the employee begins work.
The contract must state:
- The job title and description
- Place of work
- Agreed salary and payment terms
- Start date
- Probationary period (capped at three months)
The contract must also explicitly state notice periods and any confidentiality, non-compete, or training-cost provisions. Before the employee's first day, the employer must also submit an electronic hiring declaration to Sodra, the state social insurance fund, no later than one day before the start date.
Working-time and pay rules are specific in Lithuania.
The standard workweek is 40 hours, typically 8 hours a day across five days, and overtime is only permitted with the employee's consent and is compensated at no less than 1.5 times the regular hourly rate. Mandatory benefits include unemployment insurance, healthcare insurance, an old-age pension, vacation pay, and sick leave. Failing to provide them can result in fines and retroactive repayment.
Termination isn't left to the employer's discretion either, as it's regulated by the Labour Code, which sets out notice periods, severance pay, and protection against unfair dismissal. Remote work is explicitly addressed in the law and regulated under Article 52(3) of the Labour Code, and the employer is obligated to provide the equipment needed for remote work or compensate the employee for using their own.
United States
Employment contracts and worker classification fall under the Fair Labor Standards Act, which governs minimum wage, overtime, and the distinction between employees and contractors.
Payroll obligations kick in immediately, as employers must withhold federal income tax, Social Security, and Medicare from every paycheck, and IRS penalties begin the day after a missed deposit. New hires must have their identity and work authorisation verified via Form I-9 within three business days of their start date. Anti-discrimination protections under Title VII and the ADA apply once headcount reaches 15 employees, and accurate time records for non-exempt employees are legally required — those records typically become the primary evidence in any wage dispute.
United Kingdom
There's no single law mandating an employee handbook, but it's the practical vehicle most UK employers use to satisfy the Employment Rights Act 1996 requirement for a written statement of employment particulars on an employee's first day, covering pay, hours, and disciplinary procedures.
Right-to-work verification is extremely important, and failing to complete the check before employment begins removes the employer's statutory defence against a civil penalty entirely, regardless of the employee's actual immigration status.
8 Tips for HR Strategy for Startups
The strongest HR strategy for a startup rests on three interlocking pieces:
- An intentional culture
- A structured approach to hiring
- Retention practices built in before scaling pain forces the issue
The following covers the practices that separate startups with a deliberate people strategy from those that handle everything reactively.
1. Build a Foundation of Intentional Culture
Culture is set almost entirely by founder behaviour in the earliest days, and the harder challenge isn't creating it initially but sustaining it deliberately as the team grows past the point where founders are present in every conversation.
Defining core values early, ideally before the first five hires, gives the company guardrails for hiring decisions, daily communication, and conflict resolution, rather than leaving culture to develop by accident.
In practice, this means encouraging open communication and transparency so people trust each other enough to disagree productively, and building genuine psychological safety — an environment where employees feel safe proposing ideas and admitting mistakes without fear of embarrassment.
As teams go remote or hybrid, culture needs to function as a system rather than a vibe: clear norms around communication tools, asynchronous work, and meeting cadence matter as much as any values statement.
2. Hire Deliberately, Not Just Fast
In the earliest stages, it typically makes more sense to hire generalists who can flex across multiple responsibilities than to hire narrow specialists, filling specialised gaps like accounting or IT with freelancers or external providers instead of full-time headcount.
A clear, honest employer brand matters here too — articulating what the company stands for and why someone should join its mission over a more established competitor, and baking that message into every job posting.
Structure is what separates startups that hire well from those that just hire fast. Consistent interview questions, clear scorecards, and practical trial tasks produce better signal than ad hoc conversations that vary by interviewer, and lightweight applicant tracking tools keep the process consistent as more people get involved in decisions. Job descriptions should be outcome-focused rather than generic — spelling out what success looks like in the first 30, 60, and 90 days gives candidates a real basis to self-select and gives new hires a concrete target from day one.
3. Structure Onboarding for Early Retention
A well-designed onboarding process does more than paperwork — it helps new employees understand their role and see how it connects to the company's direction, which measurably reduces early turnover.
This matters enormously in a startup, where every individual hire carries outsized weight on a small team. Even a lightweight system, such as a shared onboarding checklist and a simple documentation hub, ensures legal coverage and a smoother first-week experience without requiring enterprise-grade infrastructure.
4. Replace Annual Reviews with Continuous, Agile Feedback
Traditional annual performance reviews tend to move too slowly for the pace startups actually operate at.
Regular one-on-ones and lighter, more frequent check-ins (quarterly goal-setting conversations, pulse surveys, or informal feedback loops) catch friction before it turns into burnout, resignation, or quiet quitting, and keep individual effort aligned with priorities that shift quickly in an early-stage company.
5. Invest in Learning, Leadership Development, and Succession Planning
Learning and development is often the first thing founders deprioritise as they scale, but in a startup, where employees routinely wear multiple hats, continuous skill-building is what keeps the team adaptable.
Offering targeted training based on identified skills gaps helps employees stay ahead of the company's changing needs, and well-structured development plans double as informal succession planning — preparing high-potential employees to step into bigger roles as the company grows, rather than leaving leadership transitions to chance.
6. Use Data and HR Technology to Drive People Decisions
Tracking core people metrics (engagement, turnover, time-to-hire) gives founders a factual basis for HR decisions rather than relying on gut feel alone.
This doesn't require enterprise-scale infrastructure. A modern HR platform that combines payroll, time off, onboarding, and basic compliance in one place, with self-service features for employees, can meaningfully reduce the manual overhead that otherwise falls on founders or a single generalist hire.
7. Prioritise Employee Well-Being and Belonging
Well-being and productivity are closely linked, and startups that treat this as a strategic priority rather than a buzzword tend to see it reflected in engagement and retention.
In practice, this means supporting flexible work arrangements, mental health resources, and genuine work-life balance rather than expecting always-on availability. It also means building diversity and inclusion deliberately — creating platforms for open dialogue, addressing bias in hiring, and making sure inclusion is felt day-to-day rather than merely referenced in a values document.
As with culture generally, this only works as a genuine commitment since treating it as something to signal rather than practice is obvious to employees and tends to backfire.
8. Build Compensation, Equity, and Compliance Foundations Early
Setting transparent salary bands early avoids the ad hoc, inconsistent negotiations that erode trust later, and documenting a clear approach to equity (grants, vesting schedules, eligibility) signals fairness even at a small scale, well before the company can compete on salary alone.
None of this holds up, though, without a compliant foundation underneath it: consulting local labour experts on contracts, benefits, and worker classification early protects both the business and its employees and is not something to defer until the company is large enough to attract scrutiny.
And there you have it, our startup company HR advice guide.
As you might have already guessed, if you have made it this far, HR actually requires a lot of effort to pull off successfully. And if you realize that taking this advice and putting it into practice might be more challenging than you initially thought, we’d recommend teaming up with an agency that can help you scale your startup.
You can start on your journey to finding the best agency for your business with our article covering exactly how to do it: How to Find European Recruitment Agencies.
How TalentHub Supports Startup HR and Hiring
TalentHub is an Estonia-founded, data-driven recruitment partner built specifically for early-stage and venture-backed startups across Europe.
Rather than working as a traditional external agency, TalentHub embeds within a startup's team to run the hiring pipeline end-to-end, freeing founders and lean HR teams to focus on product and fundraising.
Beyond filling roles, TalentHub positions itself as a brand ambassador, helping young companies communicate a compelling growth story to candidates weighing the risk of joining an early-stage business. It also brings structure to hiring through skills-based assessment frameworks, tracked metrics such as time-to-hire and offer acceptance rates, and localised salary benchmarking — helping startups make competitive offers without overspending their limited runway.
Want to find out how we can help you take your startup to the next level? Feel free to book a short 30-minute call with us, and we’d be happy to help you on your journey.
