Do We Really Need HRs in a Startup?

Investing in Human Resources is a crucial and controversial topic for corporate setups, especially when they’re startups. Who should have them, how should they start it, and at what stage of business and level of growth should it be introduced are dilemmas that growing businesses always end-up in. Human resources is actually such a sensitive corporate function that many companies have renamed the division into something more inclusive like Google calls its HR the People’s Operations.

What Good Can HR do to Startups?

Many organizations follow the narrative that the role of HR in the initial stages is not as important as there are not many employees in the company. Some say scaling the business should be a factor for introducing an entire department for employee management. One could argue that when you invest in HR, your hiring strategies, employee engagement, and overall morale of the team would significantly improve. HR staff help companies build productive and effective teams while owners can shift their focus to core business activities.

Apart from just recruitment, one has to take measures to retain employees and to see that they have a clear understanding of the goals of the organization. 

If Yes, Then When or What Stage?

Startups have life cycles. Though the startups in their inception stage are not too detailed but it doesn’t stay that way for long and, if all goes well, the business scales up and expands. When companies grow, the amount of work and consequently, the workforce also grows. To manage these people, their work, and the places they work in would depend majorly on the nature of the organization and company culture. 

It’s also important to consider that these strategies will have different forms of implementation in various companies. The industry of the company, the funds available, individual ability, and the team size are all factors that decide whether a startup needs a dedicated department to manage everyone. The stage at which the HR team will be inducted into the business is a decision for the business owners to take based on the pace at which the company is growing.

For instance, a logistic technology or finance services startup (Zomato, PayTM) would initially require a small team with few people doing a lot of things. Hence, there’s no need for an elaborate HR division. However, in a food and beverage startup or ed-tech startup like BYJU’s there are more people managing specific things and need to coordinate efficiently. In that setup, even in initial stages, it’s vital to establish an effective system 

In-House Team, Contractor, or Online Tool?

The company needs to decide if there needs to be a dedicated manual division or should they invest in online softwares or outsource the process entirely to a third-party agency.


An agency or HR service contractor will take care of your employee management, hiring strategy, and policy needs in accordance with your business activities, which would make it a smart investment if the agent is efficient. A contractor allows you to:

  • maintain hiring strategy
  • job posting on job boards
  • conduct screening and aptitude rounds during interviews
  • assist engagement activities
  • embed background checks in hiring
  • gain deeper market knowledge

Online tools:

Online tools, on the other hand, can help you take data-driven action and manage pay-roll systems remotely. They can also:

  • onboarding
  • career & applicant portal
  • payroll benefits administration
  • performance reviews
  • time off and vacation
  • time clock and attendance

Here is a list of HR tech softwares and tools that are efficient for startups that don’t have the an HR department:

  • – Payroll and Benefits management
  • – Hire-To-Retire platform 
  • – Talent Acquisition and onboarding
  • – Full employee lifecycle 
  • greytHR – HR Automation and Payroll Product


An in-house HR team will assist business functions at all times and would be proactive in their function. In-house teams will allow a startup to do the following:

  • record keeping
  • employee training
  • establish organizational design
  • policies & regulations for compliance, safety, and health
  • develop strategies faster than real time
  • employee relations

Although there is the aspect of cost-benefit and resource allocation when it comes to using online tools and contractors, there is a level of insight and corporate awareness that an in-house manual department will offer. So, it comes back again to the size and nature of the organization and what the business demands. A dedicated team for big setups would make sense and softwares would be useful in organizations with around 50 employees or less.

Is It So Great Though?

Be wary of issues and pitfalls – sometimes, it might be a good idea to put off building a formal HR function. Here’s when and why:

Managing employees and the overall functioning of the company are the two primary and critical skills expected of HR personnel, but what if they fail to meet both? Hiring an HR pro doesn’t guarantee you get the best of the lot, and there’s chances companies get stuck with someone whose expertise is enough to get by and nothing intuitive.

To Wrap It Up

As the leader of a new business, CEOs and founders need to make these early decisions very carefully. The generalist or specialist that companies hire will embark on a journey with them and will develop hiring strategies and people management policies for the company. Therefore, it’s safe to say that this decision is quite sensitive.

HR will be an essential driving force of your company and should be the company’s first priority. How and when to implement it should be carefully chosen and perfectly executed.