Building HRD (human resources department) from scratch

Managing multiple aspects of your business can make it difficult to find time and establish a foundational HR strategy. This module will help you with the basics of Human Resource Management and give reasons why embracing a structured HR process can help your business in the long run.

Building Your Startup’s HR Department

Whether you are a sole proprietor or a small or medium-sized business, you would reach a stage when you need external support by hiring interns, contractors, or your first full-time employee beyond your core team. Startups and SMBs usually have a flexible business culture with the constant need of adapting to changes, being agile, and pivoting. Sometimes, this is one of the major reasons why businesses stay away from creating a structure around HR.

Let’s begin with the basics. HR doesn’t only mean recruiting, it also includes essential functions of strategic hiring, payroll, compliance and labor relations, streamlining onboarding, employee benefits and training, outsourcing, and DEI. With a small team, these tasks might look easy to be managed by executives or one team member, but as your organization grows, these tasks multiply quickly. 

A well-planned HR department will be one of the contributing foundations to your business growth. Here are some quick tips on how to begin:

• Determine your company culture: For starters, culture contributes to the identity and values of your company, something that will help you attract and retain talent. It speaks about your employer brand – this will come in handy when you plan to recruit culture-fit employees. You could be at a stage of establishing the company culture, revamping it, or simply auditing to ensure it aligns with the company strategies. Your company goals will help determine how you want to shape the company culture, it can be: innovative, aggressive, research-driven, customer-focused, technology-driven, process-oriented, entrepreneurial, etc. The best part is that the company culture can also be a combination of these.
• Create a strategic HR plan: Just like your business, you won’t build your HR department in a day! Make sure that the organizational goals align with the HR plan.
  • HR handbook 
  • Establishing basic HR functions
  • Create organizational hierarchy which is also represented in your 3-5 strategic plan
  • Consider the cost
  • Prioritize people over processes
• Every leader hires: Recruitment shouldn’t be the responsibility of the HR team/person only, every leader should have hiring assigned in their duties, especially for a smaller team. When you have an expanded network and support from your superstar leaders, you can be rest assured to find superstar employees. 

Onboarding and recruiting

There are a lot of different factors to think about when you’re hiring. Here are a few things to keep in mind when recruiting your first few employees:

• • Not too early; not too late: It’s crucial to assess when the right time to hire is. It is a clear balancing act between your affordability and workload. You don’t want to go bankrupt and make a hire while you don’t want to overburden yourself and existing employees with workload either.
  • Be realistic with your expectations: The perfect hire doesn’t exist. It is always a process categorizing your mandatory priorities (which won’t change) and flexible ones which will shift as you interview candidates. Your definition of the ‘perfect candidate’ will change with time as you grow and experience the potential of more people you meet.
    • What should you be looking for?
      • Competencies vs Skills – This article from Hays beautifully points out the difference between competencies and skills, especially when building your core team, you should focus on the aptitude of candidates rather than skills which can be acquired with time
      • Potential vs Experience – This would heavily depend on the role you’re hiring for and the stage your business is at. It is interesting to consider since potential can outrun experience for the ‘right’ candidates.
      • Multifaceted vs Specialists – With your first employees, you’d prefer hiring people who can wear multiple hats and have a wide skill set that will benefit your business. As you grow, your focus can shift to people with specific skills as you narrow down the structure of departments and roles.
  • Hiring is time and money consuming: Don’t always rely on finding the best talent at no cost from within your network. Sometimes, using a suitable recruiter or an experienced HR expert can go a long way for your business’ success.
  • You need to be selling just as much as the candidates: Hiring is a two-way process. It’s important to realize that working at a startup is not for everybody, and finding the right candidates who are passionate about your business, offer the aptitude to keep up with the business needs, and whose values align with yours will be challenging. In this ‘startup era’, people are looking for a mission and they want to solve interesting problems. Your most ideal option to attract the right talent would be to sell your business idea, values, culture, and employer branding, in a way you would sell to any other stakeholder – you can use social media, community networking, your website, job descriptions, and throughout the recruitment process to promote your employer brand and attract the best talent!

In order to get the best people, you have to help them find you. This is particularly challenging because many of the best people are not looking. – Dharmesh Shah, Founder, and CEO of HubSpot

Payroll 101

First things first, as an SMB your employee obligations may vary, but the following are the most important ones:

• Establish the frequency of pay (weekly, biweekly, monthly)
• Distributing and enforcing employee paperwork (T4s)
• Keeping detailed records on the payroll
• Reporting employee taxes and deductions to the government
• Implementing an effective payroll system
• And monitoring employee compensation including sick days, paid vacation, etc.

Review this checklist from the Government of Canada on everything related to business taxes including payroll.

Steps on how to do payroll:

1. Open a payroll account: If this is your first time, create a BRO (Business Registration Online) to register for payroll deductions. If you have already registered, simply add a payroll deductions program to your existing account.
2. Collect accurate information from employees: You need to have the correct SIN information of your new employees and get them to complete the TD1 form.
3. Make appropriate payroll deductions: Such as income tax, pension plans, and employment insurance premiums. Here’s the employer’s guide on taxable benefits and allowances.
4. Remit the payroll deductions to CRA: These amounts that you deduct from your employee payroll need to be remitted to the Canada Revenue Agency (CRA), follow this article to understand how remittance works. This is more so important in light of employers offering remote work options to their employees, thus understanding the home expenses that you reimburse them for and how to report them to the government.

Compliance

Federal and provincial regulations

Complying with federal and provincial employment standards is a critical human resource function. This becomes complex as you hire more people and you’ll have to factor in overtime rules, holiday pay entitlements, laws around vacation, contract vs full-time employment, etc. Usually, businesses opt for a payroll system to avoid errors. HR helps protect the company and its employees to ensure that they are adhering to the numerous regulations and laws that govern the employment relationship. The impact of non-compliance can be very costly and can be in the form of financial, legal, or reputational costs.

Use the following table to review provincial employment regulations and laws.

Employee wellbeing and relations

Compensation, benefits, and training programs

Ensuring employee wellbeing as a small business is something you will have to prioritize as you don’t want your top employees, whose work heavily impacts the continuity of your business, to leave. Here’s how you can do it:

• Compensation and benefits: As one of the foundations of HRM, you want to offer fair and reasonable pay to retain and motivate talented employees. Research on platforms like PayScale that offer data on pay rates in different cities and industries within Canada.
• Performance management:  As per the job description of every role, employees will have a set of roles and responsibilities that they will take care of. A performance management system should be in place from day 1 to help employees, managers, and the HR team to track performance and provide feedback and suggestions for improvement. It includes performance appraisals and evaluations from peers and teams.
• Learning & Development: With Learning & Development (L&D), employees have an avenue to learn new skills, improve their job performance, and advance in their careers. More importantly, providing ongoing training opportunities shows a company’s commitment to its employees’ growth.  Generally, the L&D budget includes all program costs. These can be the program design, operational costs, program delivery, certification, and higher education program costs.
• Succession planning: Succession planning aims to answer, “How should an organization move forward when key employees leave the company?” Moreover, succession planning recognizes qualified people and prepares them to become future leaders to fill leadership roles on short notice. In this way, the company can reduce recruitment costs since they hire a replacement from within. 
  • Cultivating different career paths for your employees and giving them opportunities to move across departments will help improve employee morale and retain them.

Employee Relations

Employee relations help bridge the gap between people and the company. It involves relationship management between the managers and subordinates in a firm. It ensures how the workplace becomes a conducive environment because of the strong relationships that people have. To make your employees feel heard, respected, and included, ensure that you have:

• A policy outlining the standards of business conduct
• A method in place for gathering feedback or complaints
• A plan for how you’ll address issues if they arise, especially for grievances
• Provide time to think, create, and rest i.e. offer mental health vacation days
• Offer maternal, paternal leaves, and a short-term disability policy to offer the work-life balance they need

Checking these off your HR checklist for startups doesn’t just make it easier to handle your first grievance, but it also protects the company from liability and protects your employees from toxic workplaces without clear rules. This makes employees’ happiness your top priority and demonstrates it as well. Use the following ways to evaluate and assess your employees’ happiness:

• One-on-one conversations between managers/leaders and the employees
• Focus groups of a small group of employees categorized by departments or randomly,
• Employee satisfaction surveys to measure employee views, perceptions, and thoughts about their work and the organization
• Leader roundtables or town halls that eliminates the distance between senior and newly joined employees
• Exit interviews are also a good way to solicit feedback to improve from someone who chose to leave your company, and also an opportunity to retain talented employees

Outsourcing

In a typical startup setup, team members try to do everything at the same time due to limited budgets and resources. However, even the most promising startups or SMEs can’t do everything on their own, and it’s often a recipe for disaster when they try. Business outsourcing can help them do more with the limited resources they have and focus on improving their business by outsourcing non-core activities.

This won’t be a one-person show. When you’re starting a business, it’s a race against time. You want to prove product-market fit as fast as possible to either help you further fundraise or to make a profit. At the early stages, it’s difficult and expensive to find an in-house team to help materialize your vision. Instead, working with specialized agencies from tech to finance to marketing, can help you get your product to market faster and more effectively. If you try to do everything yourself, it can take much more time and reduce your chance of success.

There are a lot of benefits of outsourcing, in fact, a Deloitte survey revealed that 66% of companies outsource certain business processes to other companies. Here are some of the top benefits of outsourcing work:

• Focus on what you’re best at: When you try to ask employees to perform tasks outside their skill set, you will inevitably compromise quality. On the other hand, you’ll get field experts and professionals for a specific task when you outsource.
• More efficiency at lower cost: Running a startup is never cheap. You need to pay for your technology and infrastructure, software and hardware, office space, employees, staff benefits, insurance for your startup, and a number of other things that are at the core of your business and what your startup creates and offers. Outsourcing in order to save money and lower operational costs will put your startup in a better position to scale properly and establish itself on the market. 
• Reduce company’s risks: The internal development of new initiatives involves targeting both human and economic resources, without guaranteed success. If the project is eventually discarded, this may mean not only the loss of the investment made but also a serious risk to the company’s reputation. External development, on the other hand, reduces risks while allowing for the advancement and experimentation of different aspects of the new business line, without necessarily being aligned with the company’s current image.

DEI (Diversity Equity & Inclusion)

DEI stands for diversity, equity, and inclusion. Diversity is the presence of differences within a given setting. Equity is the process of ensuring that processes and programs are impartial, fair and provide equal possible outcomes for every individual. Inclusion is the practice of ensuring that people feel a sense of belonging in the workplace.

As per CCDI (Canadian Centre for Diversity and Inclusion):

• Diversity is about the individual. It is about the variety of unique dimensions, qualities and characteristics we all possess.
• Inclusion is about the collective. It is about creating a culture that strives for equity and embraces, respects, accepts and values difference.
• Diversity and inclusion is about capturing the uniqueness of the individual; creating an environment that values and respects individuals for their talents, skills and abilities to the benefit of the collective.

Four in five or 86% of the candidates globally say that diversity, equity, and inclusion in the workplace are important to them. Read more on this on Monster’s diversity and inclusion report. Here’s how to implement DEI in your small business’ hiring practices:

1. Recognizing diversity, equity, and inclusion  and defining what they mean to your company
2. Writing inclusive job descriptions that includes leaving out gender-based languages or terms, eliminating masculine and feminine words in the job description. According to Textio, “using gender-neutral language fills jobs 14 days faster than posts with a masculine or feminine bias, and attracts a more diverse mix of people.”
3. Make your career web page accessible to all candidates. Use accessibility standards including transcripts, close captions for video and audio files, alternate texts for images, color contrast standards.
4. Use a standardized job interview process for all candidates
5. Establish diverse interview panels
6. Measure and continue to improve your inclusive hiring program

Questions you need to answer to ensure that you’re championing DEI through your business internally and externally:

1. Are you collecting data about your employees?
2. Are you collecting data on the candidates who apply to your business?
3. Do you have a code of conduct guide for employees?
4. Do your hiring practices and company culture reflect inclusion?

Places, where your business can add DEI messaging externally, can be:

•  Job descriptions
• Social media posts to support DEI initiatives across the world
• Company announcements, mission statements, and media releases to 

References

• SHRM – Understanding and Developing Organizational Culture
• Monster – Identify your company’s culture
• BambooHR – Creating an HR Department from scratch, Checklist
• Bloom – Startup Hiring
• Workable – hiring guide for startups
• Canada.ca – Basic information on Payroll
• ADP – Employment Standards in each province