HR/Compliance Challenges by Company Size: Startup to 20 Employees
July 7, 2025
As a startup or small business with 1-20 employees, your HR strategy may not be formalized, and HR tasks are likely handled by the founder or a team member. However, this leads to basic compliance tasks being overlooked, creating serious risks.
Key Challenges for Startups to 20 Employees:
- No Dedicated HR Team: Often, HR functions are handled by the founder, but without HR expertise, compliance issues can slip through the cracks.
- Basic Compliance Issues: Overlooking requirements such as I-9s, employee files, and posters can lead to compliance issues and fines.
- Payroll Errors: Misclassifying contractors vs. employees (1099 vs. W-2) is a common issue that can lead to audits and penalties.
- Lack of an Employee Handbook or Policies: Not having formal policies or clear procedures for onboarding, hiring, or firing creates inconsistencies.
Likely HR Headaches:
- Wage & Hour Compliance: You risk misclassifying employees, which can lead to lawsuits.
- Hiring/Firing Without Documentation: Making these decisions without proper documentation can lead to wrongful termination claims.
- Inconsistent Onboarding: A lack of structured onboarding leads to confusion and inefficiency.
How a PEO Helps:
- Turnkey Compliance Support: PEOs handle all compliance needs, so you don’t have to worry about missing any important filings or regulations.
- Access to Benefits: Even small businesses can offer benefits typically reserved for larger companies.
- Shared Liability (Co-employment): With a PEO, compliance risks and liabilities are shared, helping protect your business.
Pro Tip:
There are over 600 PEOs nationwide. Work with a PEO Broker (like us!) to get side-by-side comparisons and unbiased guidance—at no cost to your business.
Need help getting started?
📧 Email: Suzanna@PEOForTheCEO.com
📅 Book a free consultation: https://calendly.com/suzanna-yourpeoadvocate
Stay tuned for the next post in this series, where we’ll explore HR challenges for businesses with 25-50 employees!