Over the years, we’ve had a front row-seat to the challenges faced by fledgling businesses. And one thing has become abundantly clear – if you get HR wrong at the beginning, it creates systemic problems that are far harder to fix later. So, what are the most common pitfalls, and how can they be avoided?

Hiring in haste, repenting at leisure

Startups are notorious for making quick hires, and we mean, why wouldn’t they? The cash flow starts to look healthy. And so as workloads mount, the temptation is to bring people in as fast as possible. But hiring decisions made in haste often lead to regret. Without clear job descriptions or a considered recruitment process, businesses risk bringing on board the wrong people. This can be people who don’t fit the culture, lack the right skills, or simply aren’t suited to the pace and demands of startup life.

A strategic approach to recruitment pays dividends. That means knowing exactly what’s needed, taking time to interview properly, and ensuring candidates align with the business’ values and ambitions. After all, a report by the Recruitment and Employment Confederation found that your average bad hire costs businesses an average of £19,355 on lost productivity and recruitment and training expenses.

The right people are assets that help you grow; the wrong ones are costly distractions.

Neglecting contracts and policies

It’s surprising how many startups onboard new employees without robust employment contracts in place. Verbal agreements might feel flexible and “modern” in the moment, but at the end of the day, they leave you exposed. Without clear terms and policies, disputes over pay, hours, holidays, and responsibilities become inevitable.

If you’re serious about scaling upwards, then you’ll need to walk the walk in your policies. Every new hire should receive a well-drafted employment contract that outlines rights, responsibilities and expectations.

Clear policies on issues like absence, discipline, grievances, and health & safety are essential frameworks that protect employer and employee. Trust in the idea that if you make the effort early on, you’ll learn from any mistakes. And then build the groundwork for a workplace culture that’s the envy of the best talent when you’ve scaled up.

Failing to set a workplace culture

Culture for some startups has historically been a bit of an afterthought. But it shouldn’t be. Culture is the glue that holds a team together – more important than ever in the high-pressure environment of a startup. Yet so often, culture is just left to chance.

Without real intention, businesses can and will drift into unhealthy habits: long hours become the norm, boundaries blur, and burnout inevitably sets in. Founders: you set the tone. Defining a set of core values early on and living by those values helps shape behaviours and expectations.

Communicate, recognise, and be flexible. Your wellbeing initiatives shouldn’t wait until the business is bigger either. Startups that invest in a positive culture from day one find it easier to retain talent and build loyalty.

Overlooking legal compliance

Employment law is complex – and it applies from the very first hire. Startups, understandably, focus on innovation, not regulation. But the law doesn’t really give you leeway for lack of knowledge or flawed approach.

Getting it wrong can lead to tribunal claims, fines, and reputational damage. It’s expensive too – one business was fined £4.6 million in 2024 for disability discrimination and harassment. There’s a lot to deal with, and so many startups opt to outsource their HR or rely on professional advice in the early days, which often proves more cost-effective than dealing with the fallout from a legal misstep.

Ignoring employee development

There’s a misconception that startups can’t afford to focus on employee development. But the better question is whether you can afford not to? Failing to invest in people risks stagnation. Talented staff need and desire opportunities to learn, grow, and progress, even in a small business. 59% of employees say training improves their overall job performance, and 92% of workers think workplace training impacts their job engagement.

That development doesn’t have to mean expensive training programmes, either. It can be as simple as regular feedback, mentoring, or stretch assignments. Providing clear paths for career growth not only boosts morale, but also helps startups retain valuable talent in a competitive market.

Inadequate record-keeping

Startups so often operate informally. But sloppy record keeping has no excuse. Accurate records are a legal requirement – covering anything from contracts and pay to absences and appraisals. Failing to document these key processes could see the any one of dozens of regulatory bodies and government organisations throwing the book at you.

Invest early on in a reliable HR system, or at the very least, secure online document storage. It’ll simplify this process and give you some more peace of mind.

The bottom line

Startups succeed by moving fast and taking risks – but HR isn’t an area where cutting corners pays off. Putting strong foundations in place early on – clear contracts, fair policies, legal compliance and a healthy work culture – allows founders to focus on what they need to do best: growing a quality business.

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