HR processes – offer letters, on-boarding, granting options, review processes, terminations, benefits

  1. You will have a hiring plan and compensation levels (covering cash, incentive and option grants) from your financial planning process.  You should also have job descriptions written for each of the positions you are intending to fill.  To implement this part of your plan, you will need to figure out how you will source candidates, have interview feedback forms, have a standard offer letter template and establish an on-boarding process which integrates the employee into their work team and informs them of their administrative responsibilities.  On the flip side, you need to establish a termination process, which includes all government required communications and payments on an employee’s last day.
  2. If you intend to incent employees with stock options, you need to legally establish that plan (including what types of instruments it covers, vesting, etc.), authorize the number of shares available for the option pool with the board, do option pool planning (determine option allocations for management and other hires) and issue a standard option agreement once the board approves grants.  Besides basic accounting software and a fixed asset tracking system, any company that issues a sizeable number of options should invest in option tracking softwaresuch as E*Trade’s Equity Edge (  As with fixed assets, the calculations (of vesting, returns to the pool, etc.) are just too complicated to maintain on a spreadsheet.In addition, you will probably need to have a 409A valuation done to establish the value of your common stock so that you can issue options at the fair market price.  It is worth the money to engage an outside valuation service, because if the valuation is challenged by the IRS there can be person tax implications for your option holders – a disaster.
  3. If you have an incentive bonus plan or sales compensation plans, you will need to set timeframes, goals and a tracking mechanism in order to be able to assess achievement and pay out.
  4. You will need to put in place standard review forms to assess performance (manager, project and employee feedback).  It is important to maintain employee files that have all offer letters, payroll set-up information, reviews and any documentation of positive or negative feedback to employees.  This will be critical if you need to terminate any employees.  You must have a clear paper trail of employee performance.
  5. You will need to figure out any training plans needed and how to get the required training.
  6. Once you have your first employees on board, you will probably need to offer benefits as part of their compensation.  You will need to determine what to offer, which depends on what it will take to hire people, what competitors are offering and your basic philosophy on benefits.  All of this needs to be balanced against the cost both to the company and to the employees (and these are large costs).  You need to assess the true benefits delivered by the pharmacy, vision and dental plans.  You need to look carefully through the medical coverage to assess if it will address your employees’ needs.  It is sometimes difficult to get competitive quotes for small group plans but a good benefits broker will assist you in finding the right carrier, helping you with coverage tweaks, how the costs should be split with the employees and how to communicate new or changed benefit plans to employees.  Pre-tax medical savings accounts can be funded by either the employer or employee or both, and are a great benefit to offsetting some of the out of pocket medical costs.  It is often hard to offer a 401K type plan for small groups but when you reach a critical size this is a key benefit that employees look for, even if it is not matched.  It is important to have a broker that can assist with finding a good administrator for your pre-tax health savings account or 401K accounts.  A good administrator will assist you with employee communication, key to boosting participation and without participation you cannot offer the plans.  You may need to consider other market driven benefits such as short term disability, life insurance, etc. depending on your market space.
  7. Lastly, you can choose to offload portions of the HR function to employee leasing companies where essentially they hire your employees and manage some of the administrative aspects for you.  You need to determine how critical control of your employee relationship is for you, what parts they will and won’t manage and the cost.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: