7 most common HR issues for start-ups

When you launch a start-up, you might begin by working alone, focusing on creating a business plan and developing your product or service.

But as your business grows, you might decide to hire employees, which means you’ll also take on the role of a manager.

Managing a team involves many tasks, such as ensuring employees are paid correctly, providing a safe workplace, respecting their legal rights, and motivating them.

According to 2024 research from the Chartered Institute of Personnel and Development (PDF – 1.7MB), in the previous 12 months, 56% of UK businesses had trouble retaining staff, and 41% were increasingly offering better pay and more benefits to help with hiring challenges.

Read on to discover some common HR issues start-ups may face and how you could avoid or overcome them.

1. Hiring staff

Start-ups could face difficulties attracting top talent due to competition with larger, well-established companies.

Larger companies often offer more benefits such as health insurance, flexibility, or higher salaries.

You can take a few steps to help hire people for your business.

You might want to focus on building a strong employer brand to highlight your start-up’s unique culture and the opportunities you offer.

Social media could be an effective way to reach a wider audience and highlight your work environment.

When advertising job openings, make sure your ads are clear.

Outline the job role, responsibilities, and opportunities for career growth.

By highlighting what makes your business special and the chance to make a real impact, you could attract talented individuals looking for more than just a paycheck.

Read our first-time employer’s guide to hiring staff.

2. Complying with employment laws

As a UK business owner, you have certain legal obligations to your employees.

These include, amongst others, paying the National Minimum Wage and complying with laws like the Working Time Directive and the Equality Act 2010.

You must also adhere to health and safety standards and provide statutory rights, including maternity leave.

Understanding these rules can be tricky, especially for new businesses without HR support.

You could talk to HR professionals who offer expertise and guidance on legal requirements to stay informed or you may wish to consider seeking specialist legal advice.

Compliance software could also help you manage and track these obligations more easily.

Government websites can provide valuable updates and insights into employment rights.

By staying proactive and knowing your legal duties, you could avoid legal problems and create a safe, fair workplace for everyone.

Read about the employment laws in the UK every business should know.

3. Building a company culture

Having a positive company culture can be important for a start-up’s success.

With a strong, positive culture, your staff are likely to be more engaged and productive, which could lead to fewer people leaving.

It could also attract new team members.

To build this kind of environment, start by defining company values that match your mission and vision.

These values can guide how everyone behaves and makes decisions.

You can also promote open communication to encourage transparency and trust, and hold regular meetings to give and receive feedback.

This approach could make your staff feel valued and heard, especially if you act on their suggestions.

Read our guide to creating a healthy work environment for employees.

4. Retaining employees

Having a high turnover rate can be a common issue for many start-ups.

Employees leave jobs for several reasons, including a lack of job security, limited career growth, low pay, or a lack of competitive benefits.

To retain employees, you could focus on attractive benefits that are realistic for you to offer.

These might include flexible working hours, product discounts, or bonuses for bringing in new clients.

Providing career development opportunities may also be key.

You could offer training programmes and plan clear pathways for advancement to help employees feel they can grow within the company.

Recognising employee achievements through awards or bonuses could also boost morale, loyalty, and motivation.

5. Managing performance

Managing employees’ performance in a start-up can be tough because of limited resources.

You might face unclear roles and expectations, especially when employees often take on tasks outside their usual responsibilities.

Consider implementing a performance management system to promote consistency and encourage development.

In addition, consider setting clear, achievable goals to give employees direction and purpose.

Regularly giving and receiving feedback could be essential for helping team members improve and express their thoughts.

Structured performance reviews can formalise this process and offer a chance to discuss progress and future goals.

By having open communication and clear expectations, you could increase productivity and make employees happier.

6. Expanding HR systems

As your start-up grows, you may want to expand your HR system.

Initially, manual processes might be sufficient, but if your team expands, many small tasks could quickly become overwhelming.

Scalable HR systems could become essential for managing increasing demands efficiently.

Consider implementing HR tech solutions to streamline operations like payroll, holiday tracking, and sickness management.

Cloud-based HR tools can offer comprehensive features for automating these processes, saving time, and reducing errors.

These platforms often provide self-service options, enabling employees to manage their own information.

Investing in scalable HR systems early on could ensure smooth operations, support business growth, and allow you to focus more on strategic thinking rather than admin.

7. Managing remote and hybrid workforces

You may offer remote or hybrid working to encourage employee retention and attract top talent.

While this has become the norm for many companies over recent years, managing remote or hybrid teams can be challenging for start-ups.

Think about the benefits and drawbacks for your business, and plan how you’ll manage remote work.

For example, remote opportunities could offer you flexibility and access to a much wider talent pool.

However, maintaining team cohesion could be difficult without a plan for how your employees will communicate.

Set clear remote work policies and guidelines to ensure consistency and accountability.

To manage remote teams effectively, consider using tools like Slack, Zoom, or others for communication and easy collaboration.

Encouraging regular feedback could also keep employees involved and aligned with company goals.

As your start-up grows and you consider hiring people, you could face some of these HR issues.

However, being proactive and open to potential HR solutions could make it easier for you to manage a team.

With the proper planning and tools, you could scale up your business and develop long, positive working relationships with your employees.