When does a founder need to hire HR?

When starting a company, head count at first is simple—just you, maybe a co-founder or two. But as a company scales, increasingly complicated questions can eat up a founder’s time.

How should I classify certain employees? How do I attract talent and then keep them from leaving? When is it time to hire a HR person?

To help answer that last question, Founder Brew spoke with Katie LaFranchi, an HR expert with over two decades of experience in technology and startups.

After starting her career in HR with small Seattle-area tech companies, LaFranchi eventually moved on to massive organizations like Google and Amazon. In 2024, the Austin, Texas-based LaFranchi started working as a fractional HR exec for startups across consumer products, wellness, and semiconductors. Currently, she serves as the chief people officer at agentic AI startup NinjaTech AI.

LaFranchi offers a road map for founders: what percentage of your time should be dedicated to HR, what questions to ask when starting to hire, and what kind of help exists for the in-between stages. Though you may not need a dedicated HR person right away, LaFranchi recommends thinking about the topic from day one.

“When you are hiring your very first employee, even if that’s yourself, you should be putting your HR cap on and going like, ‘Okay, am I establishing this company and paying myself and others on the team correctly?” she said.

This interview has been edited for length and clarity.

What should a founder be thinking about when they start to bring on employees?

First and foremost is protecting your business from a compliance standpoint, and so the table stakes are thinking about: How am I going to classify this employee? Are they a 1099? Are they W-2? Am I doing that correctly? Should they be salary or hourly, exempt, nonexempt? Those most common lawsuits are around those things.

How soon should a founder be thinking about HR?

Your first real HR hire is not so much a number of people that’s the threshold. It’s the complexity of your business and the amount of time that you’re having to spend on it, or other leaders who find themselves handling HR. I’ve talked to leaders who are like, “I spent three hours last night investigating HSA plans and to answer an employee’s question, and I still don’t know the answer.” That is not the founder or CEO’s best and highest use. If you’re the CEO and you’re finding that you’re spending 20% of your week on sourcing candidates, hiring, onboarding, all of those things, and dealing with employee questions, that’s when. That’s the point.

What size companies do you think work best with fractional HR setups?

Fifteen to 20 employees tends to be the tipping point for founders, where they’re like, “I need help. This is going to break. I am trying to do this off the side of my desk, and I no longer can.” Like I said before, I don’t like to focus on the numbers. I like to focus more on the complexity. It does vary, but I’ve also seen companies with like 70 employees that are bringing in HR for the first time and think they just need a fractional person.

We would often start at an eight hour per week engagement. One of the things I learned over time was less than that is not worth it for anybody because it’s just not enough time to really move the needle on any big initiatives. So we ended up putting like an eight-hour minimum in place.

But if you’re like, “Hey, we’re going to scale really quickly. We just got a big VC investment.” You want to hire ahead of where you’re at today. If you’re like, “Hey, maybe today we have 20 employees and we need a senior HR manager with you for our needs today.” Well, okay, but are you planning to grow to 50 in the next year? And then 75 in the next year? Because having the expertise of a VP of HR, head of HR, chief people officer, who’s not only seen what good looks like, but has actually built that…can help prepare you now so that you can scale effectively for the long term.