Why Startups Need an HR Strategy from Day One

According to NatWest and Beauhurst, 846,325 new companies were registered in the UK in 2024, which shows how fast-paced the world of start-ups is. Anthony Sutton, Managing Director of Cream HR, believes that startups need to consider HR from the get-go.  

He says, “When starting a business, it is easy to focus all energy on product development, funding, and customer acquisition. Human Resources (HR) often takes a back seat, considered a luxury reserved for when a company "scales up." But this mindset can be a costly mistake.” He believes that a well-thought-out HR strategy from day one is not just a best practice’s a necessity and here’s why. 

Culture is Built Early

Company culture isn’t something that happens accidentally; it’s shaped by early decisions, behaviours, and the people hired. Without an HR framework, startups risk creating a disorganised or even toxic work environment. Establishing values, communication norms, and expectations from the outset fosters a culture that attracts and retains top talent.

Talent Acquisition is Strategic, Not Reactive

Startups typically begin with a small, tight-knit team. But as needs grow, hiring often becomes reactive, done quickly to fill gaps rather than strategically to build a cohesive team. An HR strategy ensures that hiring is aligned with long-term business goals. It will include diverse perspectives and can help avoid high turnover costs.

Onboarding Sets the Tone

Effective onboarding is vital. It boosts employee engagement, productivity, and retention. Without HR planning, new hires may feel lost, disconnected, or undervalued. A structured onboarding process, however lean, demonstrates professionalism and helps integrate new team members into the company culture and operations.

Compliance Can’t Wait

Employment law, tax regulations, contracts, and workplace policies aren’t just for big businesses. Failing to comply with local or international regulations can expose startups to legal risk. An HR strategy ensures that contracts, payroll, benefits, and documentation are handled correctly from the start.

Performance Management Matters

In the chaos of startup life, performance feedback often happens informally, if at all. But even in a small team, clarity on roles, goals, and growth opportunities is essential. An HR approach to performance management ensures that feedback is regular, structured, and tied to company objectives.

Retention is Cheaper Than Recruitment

Replacing an employee can be costly. Recent figures show the average cost of replacing a member of staff in the UK is around £25,000 per worker, which accounts for rehiring and lost productivity. For specialist and senior roles, this number can range higher, think £40,000 to £100,000 per head. A basic HR strategy, covering employee engagement, recognition, and career development, can significantly boost retention and save money.

Scalability Depends on Systems

Startups that neglect HR often scramble to build processes only after rapid growth has exposed the gaps. By establishing scalable HR practices early, startups can grow with confidence, knowing they have the structure to support a larger workforce.

An HR strategy doesn’t need to be complex or expensive in the beginning. Even simple steps such as defining core values, drafting job descriptions, outlining a feedback process, and ensuring compliance can make a big difference.

Startups succeed not just because of great products, but because of great people. And great people need an environment where they can thrive. That starts with HR.

Ends

Editors notes

Cream HR deliver world-class solutions to your people challenges, adding value and helping you to focus on your business. People are the most important investment in any business. It doesn't matter what you do. Even in a world where Artificial Intelligence is taking centre stage, it’s the people bit that matters most. Cream HR is all about adding value to your business through your people, whether by - • Helping you manage employee challenges through the effective application and interpretation of Employment Law, to minimise the risk to your business. • Developing structures, processes, and environments to get the best out of your people, creating fully engaged high performance teams. • Delivering bespoke training workshops and follow up, resulting in engaged, energised delegates. • Recruiting the right people for your organisation through the application of the law of crappy people and many years’ experience