HR Tools, Outsourcing and Your First HR Hire
Founders handle HR themselves for longer than they should. The right tools remove most of the admin early, outsourced help fills the gaps, and a first HR hire pays off once hiring and people issues take a meaningful share of a founder’s week.
When should a startup hire its first HR person?
Usually between 30 and 50 employees, or earlier if hiring fast, operating in several countries or dealing with frequent people issues. Before then, combine software, an outsourced HR advisor and a founder or operations lead who owns HR part-time.
| Stage | Typical setup |
|---|---|
| 1 to 10 people | Payroll software, contract templates, a founder owns HR |
| 10 to 30 people | HR system for records and time off; outsourced HR advice; operations lead |
| 30 to 50 people | First HR hire, often a generalist or people operations lead |
| 50+ people | Small people team: recruiting, people operations, later HR business partners |
Which HR tools do startups need?
- Payroll: from the first hire, with source deductions handled correctly.
- HR information system (HRIS): employee records, time off, documents and org chart, usually from 10 to 20 people.
- Applicant tracking system: once you hire several roles at once.
- Performance and feedback: templates are enough early; tools later.
- Equity management: to track the cap table and option grants.
Payroll obligations such as source deductions are set out on the CRA payroll pages.
Should you use a PEO or employer of record?
A PEO (professional employer organization) co-employs your staff to provide payroll, benefits and compliance, and is common in the US. An employer of record (EOR) employs people in countries where you have no entity. Both cost more per person than doing it yourself, but save time and risk for small or international teams. Remote hiring is covered in HR for remote teams.
What should the first HR hire do?
A generalist who can run hiring, onboarding, policies, compensation reviews and employee relations, and who is comfortable building processes from scratch. Give them clear goals: time to hire, onboarding quality, retention and compliance. The processes they will own are in the hiring process, onboarding and reviews and compensation and benefits. The same hire-or-outsource logic applies to marketing; see hire or outsource marketing.
Buy software for admin, hire people for judgment.
Tools handle records and payroll well. Hiring decisions, conflicts and culture still need a person.
What should you do now?
- Make sure payroll runs in software, not spreadsheets.
- Add an HR system at around 10 to 20 people.
- Find an outsourced HR advisor for policies and tricky cases.
- Name one person who owns HR until you hire.
- Plan the first HR hire before people issues take a founder’s week.
Start from the startup HR checklist.
Frequently asked questions
When should a startup hire an HR person?
Often at 30 to 50 employees, or earlier if hiring fast or across countries.
What is an HRIS?
An HR information system for employee records, time off, documents and the org chart.
What is a PEO?
A professional employer organization that co-employs staff to provide payroll, benefits and compliance, common in the US.
What is the difference between a PEO and an EOR?
A PEO co-employs staff where you already operate; an EOR employs people for you in countries where you have no entity.
Can I outsource HR completely?
You can outsource admin and advice, but the company remains the legal employer and responsible for decisions.
What should a first HR hire focus on?
Hiring, onboarding, policies, compensation reviews and employee relations, with clear goals for each.
Sources & further reading
Employment and tax rules change. These government sources let you check the current requirements directly.