How To Hire Employees For A Startup – A Complete Guide

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Editorial Team

Entrepreneurs and managers frequently need to learn about new companies’ hiring processes. Budgets are often limited, and a poor hire can devastate the company’s long-term prospects.

Here, we examine new companies’ main difficulties in hiring and recruiting employees and offer suggestions to help them meet their human resource requirements.

What Are The Difficulties In Hiring Staff For Startups?

Finding and employing personnel has its own set of difficulties for a startup. Below, we examine the main issues.

Risk Of Using The Incorrect Person

The founders’ efforts alone cannot account for a startup’s success; the individuals they associate with also have a significant role.

Since startups are typically lean operations, every new employee hire must be a net benefit to the team. Choosing the wrong candidate can have a significant adverse effect on the outcome of the business. This is particularly true for startup entrepreneurs hiring managers for the first time.

Because of this, employment decisions are among the factors that have the greatest potential to either make or break a new company.

Budgetary Restrictions

Startups frequently find it challenging to pay the same wages as larger, more established businesses. This may make it more difficult to hire senior workers with more expertise. Hiring senior personnel at market rates might necessitate hiring just one person instead of two.

Many firms contemplate equity/stock plans for early employees or more enticing benefits to solve this problem (such as unlimited paid vacation).

Potential For Failure

Unfortunately, a lot of startups fail to grow into long-term profitable companies. Many potential employees may be hesitant to leave a secure position for one at a business with a hazy future.

For some companies, this risk is reduced by highlighting the additional advantages of being a part of one, such as having more responsibility and overall “growth prospects.”

Lack Of Brand Awareness

For many job searchers, working for an established company is vital. A startup must fight the idea that working for an unproven organization is less respectable than working for a bigger, more established company.

There is no all-encompassing answer to these problems. A startup must think outside the box to find innovative strategies to attract top talent.

This frequently entails taking steps within the company to find and hire the finest personnel. Key suggestions include:

1. Build A Desirable Startup Culture

Any recruitment or hiring strategy will only succeed if the correct culture is present to attract and retain personnel.

While pay will always be a factor in luring elite people, there are numerous other considerations. in place, such as:

Flexibility – Does the startup support staff who require flexible work schedules (such as parents and those with disabilities); 

Performance management – Are there any rewards in place to help high-performing employees?

Acquisition of skills – Will employees be able to transfer to other business units (apart from the one they are hired into) to expand or develop their skill set?

Brand standing – Does the business have a trusted and recognizable brand? Even if a company is “up and coming,” employees and potential employees are frequently drawn to working for them because of their “excellent reputation.”

2. Create A Recruitment Plan

A recruitment strategy is necessary to strike a balance between the startup’s needs for labor, the available finance, and the chance of finding employees at a particular price point. It is an internal manual on how to hire staff for fledgling companies.

The startup must now take into account the following:

  • How many employees are required?
  • Is hiring globally preferable to hiring locally?
  • Do employees need to work onsite, remotely, or both?
  • Is hiring workers required, or will contractors or freelancers suffice?
  • What is the “cost of labor,” both nationally and internationally? (I.e., the cost of wages in addition to mandated insurance, social security, and payroll taxes).

Once these considerations are made, the next step is to implement effective tools to manage its workforce. Employee management software can help startups efficiently handle various aspects of HR, from recruitment and benefits to performance evaluations and compliance with labor laws. It also provides a centralized platform for tracking employee information, which is particularly beneficial for startups that opt for a mix of onsite, remote, or freelance workers. 

3. Take Compliance And Legal Obstacles Into Account

A business must consider hiring regulations and compliance issues in addition to its recruitment strategy. Several duties may apply depending on the nation the business intends to hire in. But among the most important things to think about are the following:

Payroll-related Duties

Employers must withhold employee income taxes in most nations (though not all) and regularly remit those amounts to the appropriate tax authorities.

Depending on the location, regulations regarding payment deadlines and acceptable payment methods can vary greatly (for instance, in the US, checks are still frequently accepted as forms of payment, whereas in other nations, electronic payments are necessary).

Possibly Misclassifying Employees

Generally, workers and independent contractors/freelancers are not comparable to workers. Treating them similarly could result in “employee misclassification.”

A firm becomes liable for overdue taxes, unpaid social contributions, penalties, and any applicable interest when it misclassifies its personnel.

Risk of a Permanent Establishment

An international corporation may be treated as having a “permanent establishment” in a foreign place where employees are based, depending on how “fixed” and “ongoing” its presence is there: The corporation is responsible for paying corporate income tax if it has a permanent establishment.

Employing people in that place may become quite expensive as a result, depending on the corporate income tax rates that are in effect.

Varying Responsibilities to Employees

Depending on the location, employers are subject to various legal requirements. For instance, regional differences in annual vacation requirements and paid parental leave can be significant. Additionally, only a few nations (including the United States) permit employers to fire employees “at will.” In many other nations, termination must be “with cause” unless rigorous redundancy/severance standards are followed.

4. You Should Adjust Your Candidate Profile

It is time to create the “candidate profile” when implementing the recruitment strategy. The candidate profile outlines the essential traits of the individual you’re looking to hire, including their training, credentials, and work history.

The organization’s HR analytics can then be informed by this profile and utilized to build job descriptions for open positions.

5. Remember Employee Retention

For a startup, it is only useful to prioritize finding and hiring new people by also considering the retention of those already on board.

This necessitates considering the following:

Growth opportunities – To allow workers to develop their talents through harder labor; ongoing training. Employees are frequently drawn to opportunities to acquire new abilities or credentials;

Progressive advantages – Benefits that become effective for retention after a set period, such as an additional week of annual leave after a year.

Culture – Employees seek a nice work environment in addition to their job’s obvious (financial or otherwise) perks.

6. Constantly Work On Employer Branding

Regarding their primary product or service, all startups are centered on their corporate branding. However, only some businesses are concerned about building a strong employer brand.

According to a 2017 LinkedIn survey, 80% of talent acquisition managers thought employer branding greatly impacted hiring. The “employee value proposition,” or the value that a firm gives to an employee in exchange for the value the person provides is how the company brands itself as an employer.

Potential employees will look at websites like Glassdoor and the company’s “About Us” page to gain a sense of the business as an employer.

In addition to the obvious (providing a pleasant work environment for all employees), companies should make sure that all job advertisements and job descriptions highlight the advantages of working for a startup.

7. Employ A Variety Of Outreach Methods

Businesses can take into account more focused possibilities in addition to conventional recruitment channels (such as job sites and LinkedIn), like:

Networking gatherings and job fairs. To draw in the best candidates for employment, startups should ensure they are present at pertinent networking events in their fields of expertise.

Outlets for academic and trade schools. You can source a consistent flow of potential hires through the graduates of colleges, trade schools, etc., by engaging with them.

8. Create A “Talent Pipeline”

A business must prevent any productivity lags brought on by recruiting inconsistencies. To avoid this result, a developing organization must have a constant “pipeline” of new personnel. Effective methods for handling this include:

  • Providing a program for employees to recommend qualified candidates to the organization
  •  allows it to hire numerous people throughout each round of hiring.

9. Employ A Multinational Group

For a company, hiring a worldwide workforce can be an effective and cost-effective way to find top talent. Options for employing on a global scale include:

International Independent Workers or Contractors

The benefit of working with foreign freelancers or contractors rather than local staff is that it may be less expensive.

International contractors are responsible for their income taxes and are not eligible for benefits (if properly classified; see above).

Open a Branch or Subsidiary in Another Country.

It could be essential to establish a portion of the multinational business abroad for larger operations (such as trading and signing contracts elsewhere). This can be done by establishing a subsidiary or a branch office.

The company may employ personnel if it obtains local employer and business registration.

Consider Using a Global Employment Organization.

A worldwide professional employer organization (‘GEO’), sometimes known as a global employment organization, seeks, employs, and onboards workers on behalf of clients operating in several countries.

10. Think About Hiring Remotely

There can be significant benefits for companies hiring remote workers, whether domestically or internationally. Potential advantages consist of the following:

Cost Savings

Extra office space and tools for new staff can make a big difference when money is tight.

A company can save a lot of money by going entirely remote or switching to a hybrid office model where just some workers work every day in the office. Even while it is usual practice to offer remote work allowances or stipends to meet employees’ demands for home offices, doing so is frequently much less expensive than completely paying for real office space.

Increasing Applicant Interest

When you exclusively hire people in your office, your application pool is restricted to people who live in that region or are willing to relocate there.

Going remote allows you to recruit candidates nationwide for the role.

Improved Internal Communication

There is always a chance that a startup will become “siloed,” with team members not communicating efficiently across the organization when personnel is dispersed among several different offices.

All team members can be “on the same page” regarding daily operations by having a remote-first setup with the appropriate tech tools.

11. Take Into Account A Staffing Firm Or PEO

There are alternatives to directly employing a workforce (either an employee or an independent contractor), whether you’re hiring locally or globally. This entails working with a professional employer organization or a staffing agency, sometimes known as a “contract staffing agency” (PEO). This is frequently called an “Umbrella Company” in the UK.

The employee’s legal employer is the staffing company or PEO. This indicates that the staffing company or PEO handles the administration of payroll, tax withholding, benefits, and employer compliance. However, the employee continues to perform day-to-day tasks for and under the supervision of the client company (in this case, a startup).

Although “contract staffing” and “staffing agency” are occasionally used synonymously, they generally refer to a company that focuses on temporary hiring.

The term “PEO” typically refers to a provider of more “all-inclusive” employment solutions. Long-term employment is frequently available through PEOs, and they may also handle hiring.

The advantages of working with a staffing firm or PEO include the following:

1. Compliance

Startups are frequently not able to understand the complex regulatory, legal, and tax issues relevant to employing personnel.

An expert in employment compliance is a PEO or staffing firm. They are accountable for breaking any laws in place at the chosen employment location because they are familiar with them.

2. Scaling

A startup typically exists in an unsteady growth environment. This implies that their employment strategy must be “scalable” in light of their expansion.

Utilizing a PEO or staffing agency has the benefit of making it simple to hire more employees as needed. The startup does not have to post job openings or provide employees with compliant employment contracts. Since they are specialists, hiring through a staffing company or PEO typically costs the business far less per unit than hiring internally.

3. Efficiency

In a startup, speed is everything. Often, a business is burning through its early investment and wants to expand as quickly as possible.

Running a compliance recruiting and recruitment process takes time and might be distracting for a company attempting to expand its main revenue-generating operations.

4. Setup in many locations

A startup might need to be certain of its exact future course at first. Many times, firms plan for the prospect of future global expansion.

A PEO with a global focus (also known as a “global PEO”) can find and hire employees in practically any nation. An ongoing partnership with a worldwide PEO allows you to easily expand with the same global partner to a new location.

Recruitment Partner Startups confront unique business obstacles, primarily related to financial limitations and the need to concentrate on business expansion.


As a general rule, entrepreneurs should think about the following to optimize their approach to hiring and recruiting:

  • General reputation and brand
  • A technique for recruiting
  • Managing legal and compliance challenges
  • Candidate’s resume
  • Global hiring PEO services or contract staffing.

It is wise to seek a recruiting and hiring partner when management is still determining how to hire startup workers. Horizons offers specialized employment and recruitment assistance for startups, regardless of the employee’s location.