HR for startups: The complete UK guide

Having HR systems and processes in place early means you can cover the essentials (like a written contract) and avoid potential compliance and culture risks. HR support means you can proactively guard against issues like employment tribunals, missing right to work checks and culture drift, instead of struggling to keep up with necessary tasks.

The right HR support enables founders and early startup teams to move quickly, innovate and adapt to challenges with confidence, knowing that both the legal and employee growth support side of things is taken care of.

“Personio offers a great opportunity for startups to bring structure into their HR processes and to optimise them based on the data.“

Dr. Lea Schroeder

VP of Talent & Culture, Raisin

There are certain legal obligations that all businesses carry—including startups. Here’s what you need to take care of before or immediately after making your first hire. 

All employees are entitled to a written statement of employment particulars (informally called a contract) from day one, as set out in the Employment Rights Act 1996. Verbal agreements don’t hold up: the contracts need to be written down.

An employment contract needs to include certain information, including an employee’s name, start date, pay, hours, location, holiday entitlement, notice period, and job title. 

Startups need certain HR policies right from the start, including a disciplinary and grievance procedure, equal opportunities policy, absence management policy, and a health and safety policy.

While it’s not legally required, a company handbook is strongly recommended as a place to store your policies for easy reference. Acas’ codes of practice are also a valuable resource for founders on topics like disciplinary and grievance procedures, trade unions and flexible working requests. 

UK businesses are legally required to check that every employee has the right to work in the UK before you employ them, known as right to work checks. Failing to do this can result in a civil penalty. 

Right to work checks involve verifying documentation and keeping accurate records. Follow the government’s employer’s guide to right to work checks for information on how to carry out manual and digital checks, and use the quick tool to check whether a document allows someone to work in the UK or not.

Every business needs employers’ liability (EL) insurance as soon as they employ someone. It must come from an authorised insurer and cover you for at least £5 million, although in practice many businesses choose a higher limit. 

As well as taking out insurance, you also need to make sure it’s properly displayed—on your website or intranet is fine—otherwise there’s the risk of a fine. There’s also a significant fine for not taking out EL insurance at a rate of £2,500 for every day you’re not insured.

Employers are required to set up a workplace pension scheme as soon as an eligible employee starts working for them. All eligible employees should then be automatically enrolled in the scheme when they join. 

Eligible employees are those aged between 22 and the state pension age, earning more than £10,000 a year, and that normally work in the UK. Failing to set up or manage workplace pensions correctly comes with the risk of fixed and escalating penalties, and non-compliance is monitored by The Pensions Regulator.

Employee data is personal data under the UK GDPR, so startups need to establish a lawful basis for collection and storage, inform employees how it will be used, and have a data retention and deletion policy. 

Lots of startups rely on emails and spreadsheets for storing employee data, but moving to a secure HR system becomes necessary for both operational reasons and compliance.

Beyond the legal and compliance foundations, the HR function in startups focuses on operational priorities like attracting, retaining and developing the best possible teams. Here’s where to start with your HR operations. 

Innovation can’t happen without solid foundations in place. Much of the everyday HR work involves taking care of the fundamentals like time-off management, onboarding, updating policies and completing employment checks. 

As you build out your HR function, ask yourself these questions: 

• Do we have employment contracts? Can we sign them digitally?

• What policies do we have? Where are they stored?

• Do we have a holiday policy? If we offer unlimited time off, how is it recorded?

• Have we completed a health and safety assessment?

• Is our pay and benefits package in place? How does it compare to competitors? 

• Do we have one central place to store all our employee data?

The answers help you understand what’s missing or could be improved, so you can create the ideal environment for growth.

A clear and intentional company handbook acts as a digital home for more than your HR policies: it’s also central to your company culture. 

On the compliance side, the company handbook should include your code of conduct, leave policies, equal opportunities policy and data protection policy. It can also become a resource for the way your organisation works—with information on your approach to remote or hybrid work, dress codes, communication, and feedback. 

When you’re competing for the best talent, you need to raise the bar. The recruitment process should be clear, simple and memorable for the right reasons—and that calls for a lot of intentional work behind the scenes.

Startup HR teams need to balance the legal requirements with creating a candidate experience that removes friction. It should be easy to go from identifying a need to a live job ad, review candidates, schedule interviews, and make an offer to the right person. 

Onboarding a first hire might feel like an experiment, but by the time you’re ready to scale it should be a clear, repeatable, and automated (yet personalised) process. Every new hire should be welcomed with the same energy, resources, and support, so they can hit the ground running.

A good startup onboarding process includes prompts to handle the legal requirements (like right to work checks and contracts). It also lets managers and employees know what’s expected of them and when (with a clear employee onboarding checklist), and how to access support if they need it.  

Performance management enables employee development, growth and innovation—something that’s essential in a startup environment. But the way you operate isn’t the same as a 200-person company, so avoid the corporate playbook when it comes to performance development processes.

Design an automated performance management system that aligns with your goals, supports employee growth and development, and prioritises unlocking talent—so you can stay competitive and take care of your team at the same time.

Improve your performance management process with Personio

Gather feedback, automate review cycles and track important metrics in one centralised platform.

See Personio in action

You don’t have to go from zero to everything in one step. Here’s how to approach the process of building the HR function at a startup from the ground up in a practical way.

Figure out what you already have, what’s missing and what needs fixing right away. Confirm that you have the basics covered like contracts, right to work records, and payroll setup—if not, this should be your priority.

Record what your current HR policies—including disciplinary, grievance, equal opportunities, health and safety, and absence. You can make changes to these once you have them captured, but for now focus on documenting how your business handles each scenario (and make sure this falls within the law). 

Decide whether you want to handle everything as the founder, hand it over to someone on your small team, hire an in-house HR manager, or outsource it to a fractional HR expert or agency. The choice you make depends on your needs and budget. 

Create a simple recruitment and onboarding process now that you can re-use every time you hire. It’s normal to make small adjustments as you learn more about how you like to hire and onboard people, so don’t worry if your first workflow isn’t perfect: at this stage it’s more important to be clear and consistent. 

Choose the right HR software for your startup (like a HRIS or HR Information System), then work with the implementation team to get everything set up and ready to go. Handling HR manually becomes impossible as you grow, so now is the best time to invest in your HR tech stack. 

Startups have the same options as any other business when it comes to HR support: using HR software as a founder, outsourcing the work, or making an in-house hire. Most startups use a combination of these approaches—the right mix depends on your team size, budget, and needs.

Here’s a quick look at how the different support options compare:

While you might start using HR software as the founder, it’s a valuable asset that can scale as your business grows and you make your first HR hires. 

Taking on the role of HR can introduce challenges for founders, but it’s also an opportunity to get close to your recruitment and onboarding processes so you know exactly what to improve as you grow.

Here’s a sample of what to cover in each stage of the journey:

• Audit your existing HR processes and policies

• Create all the required HR policies

• Decide how you’ll find and shortlist applicants

• Make yourself familiar with relevant employment law (see our section above)

• Issue written statement of employment particulars

• Complete right to work checks

• Ensure that you’ve provided the new employee with the correct policies

• Document your recruitment and onboarding process for future hires

• Adapt your workflows and policies based on feedback

• Consider bringing in outsourced HR support

• Introduce a simple performance review process

• Use HR software to automate steps and improve the employee experience

• Start building your own in-house HR team

• Continue to introduce policies that shape your culture (e.g. remote working, unlimited paid time off)

• Build more robust policies and processes for continued growth

• Use your HR software for insights, analysis, and reporting

Use this checklist as-is, or copy and adjust it based on your startup’s unique needs and approach to HR.

Startups need HR software that has all the features they need in a system that scales alongside them. The right startup HR software combines core HR, recruitment, compliance, and analytics with workflows and automations that make it easy to grow—whether you’re going from 0-5 employees or onboarding at scale. 

Personio’s all-in-one HR platform is ideal for startups that need software designed for growing UK companies, where support for European compliance standards is built-in rather than being an afterthought. 

Personio’s startup-friendly features include: 

• Intelligent HR platform with AI and automations

• Easy onboarding for founders and non-HR experts

• Support for UK GDPR and data compliance

• Centralised data for better access and flow

• Integrations with top UK payroll software and 200+ other tools

• Transparent pricing based on your unique needs

• Scalability as your headcount grows

Whether you’re making the move from spreadsheets or free software that you’ve outgrown, our onboarding team can help you make a smooth transition to Personio. Book a demo to find out more. 

Personio knows HR for startups

We've helped teams like Raisin and Mentimeter scale their HR work to supercharge their growth. Speak with an expert for us to help you do the same.

Speak with an expert

The time to start building out your HR function is when it starts to feel necessary. If you can no longer handle the legal requirements, recruitment, and onboarding process as a founder, it’s time to invest in HR software and support so you can free up your time for innovation and leadership. For some startups, this will be when you make your first hire—for others, it may be around employee number 10.

Most early-stage startups don’t need a dedicated HR department, but you do need the right HR processes in place to cover the legal basics. UK employment law introduces certain obligations (like contracts, right to work checks, and pension auto-enrolment) that apply from your very first hire. It’s possible to manage this by yourself with the right HR software, but at a certain point it becomes necessary to bring in more help—whether that’s outsourced or in-house.

At a minimum, UK startups should have a disciplinary and grievance procedure, an equal opportunities policy, an absence management policy, and a health and safety policy. These provide legal protection in any dispute and set clear expectations for employees from day one. Many startups choose to include these policies within an employee handbook. 

A fractional HR consultant or manager is a senior HR expert that works with your business on a part-time or retained basis, often working with several startups at once. Fractional HR leaders provide specialised people management support without the cost of a full-time hire. This model suits startups that need someone with solid HR experience but don’t need an in-house team yet. 

Most startups make their first in-house HR hire when the volume and complexity of HR work becomes overwhelming for the founder or operations manager. For many UK startups, that’s when the team hits between 30 and 50 employees, but you can choose to start building your in-house team whenever you feel ready. 

The best HR software for startups is easy to set up without specialist knowledge, compliant with UK employment law requirements, scalable as your team grows and simple to integrate with your payroll provider. Personio meets all these requirements and more, and is built for the full employee lifecycle—from recruiting and onboarding to absence management, time tracking and people analytics.

Startup founders and early HR teams need to be aware of what’s required of them, then follow the guidance in a consistent way. Introduce clear policies and processes that align with UK law, so you don’t miss an important step like issuing contracts or completing right to work checks. Check the Acas advice section for guidance on common issues for employers. 

Sources:

• Employment Rights Act 1996

• Right to work checks

• Acas codes of practice