Imagine yourself smoothly navigating a financing or acquisition transaction. That is until you discover that you are missing a number of documents on the due diligence list, including fully executed employment agreements. To make matters worse, some of these missing employment agreements belong to employees who have left the company a while back, and may not be willing to cooperate on this matter.

When hiring a new member of your team, it is best to have a process in place to help insure that you have a complete, fully executed set of documents satisfying the law and best practices of the start-up industry. This is a 3-step process consisting of using:

• a new hire checklist
• a system to identify missing documents/signatures and follow up through completion
• an exit process which includes a final check that all relevant documents are complete and executed before the employee leaves the company.

In this article, which is geared towards companies based in the US, we’ll discuss the basic components of a new hire checklist and briefly cover how a tracking system and the exit process can be used to help maintain complete records.

Before we address the checklist, we’d like to stress the importance of providing your staff with an employee handbook. This document sets forth a number of policies and procedures including at-will employment, equal opportunity, business ethics, immigration law compliance, conflicts of interest, exempt vs. non exempt, employee benefit programs, leaves of absence, timekeeping, safety, travel expenses, internet and e-mail usage, and many others. If you do offer an employee handbook, you should always obtain a signed acknowledgment from your employees confirming receipt of the document.

New Hire Checklist

The list provided in this article is for illustrative purposes and may not address the specific situation of your company. Please seek the advice of a qualified human resources and/or legal professional when developing a new hire checklist for your company.

Offer Letter/Employment Agreement
This document sets forth the terms of the employment offer, including job title, duties, at-will employment, salary, bonus, commission, stock option and vesting, time off, health and welfare benefits, employee start date, and other additional terms specific to the offer such as sign-on bonus, vesting acceleration upon termination, etc. It is executed by a company executive (often the President/CEO in the case of an early stage start-up) and the employee. In some cases, companies use a different version of the employment agreement for key employees. This document is requested in the course of due diligence.

I-9
The purpose of this form is to verify the identity and eligibility of an employee to work in the US. This form, including document verification, must be completed by a company representative and the employee within three business days of the date employment begins. The form and instructions are available for download on the US Citizenship and Immigration Services website. I-9 forms should be filed separately from the employees’ personnel files. Once the document verification is completed, there is no need to keep a copy of the verified documents on file with the I-9.

W-4
Form W-4 or withholding exemption certificate is used by the employee to indicate marital status and the number of withholding exemptions claimed, which should not exceed the number to which the employee is entitled. The W-4 must be completed, signed and dated by the employee on or before the date of employment.

Proprietary Information and Inventions Agreement
The PIIA addresses the handling of company proprietary information by the employee, the assignment of inventions to the company, exclusions of prior inventions, and other related matters. This document must be completed and signed by the employee as well as the company. Note that this document is absolutely essential for start-ups, and one that will be requested in the course of due diligence.

Non-Disclosure Agreement
The NDA governs matters related to confidential information disclosed by the company to the employee. In some cases, the NDA is embodied in the PIIA described above. When it isn’t, a separate NDA agreement is executed by both the company and the employee. Similar to PPIA, the NDA is requested in the course of due diligence.

Resume
A clean resume should be included in the employee’s file. By clean, we mean a copy that has no scribble, comments, drawings, and other markings. The resume provides an inventory of skills and experience which may be requested by prospective investors, or used when planning resources for future development, marketing or administrative projects. When applicable, the application for employment should also be included in the employee’s file.

Employee Information Form
This form summarizes basic employee data such as name, address, telephone number, birth date, hire date, dependent status, dependent information, and emergency contacts. There are packaged solutions on the market such as People Manager from KnowledgePoint that track employee data and more. Also, some payroll service providers offer an HRIS (Human Resources Information Systems) option for a fee, which include online tracking tools of personnel data.

Employee Benefits
Depending on the benefits offered, the employee will be required to complete a number of enrollment forms including medical, dental, vision, life insurance, disability insurance and a retirement plan such as a 401(k). The law requires that all health related forms be filed in a location that is different than the employee’s main personnel file.

Payroll Service Enrollment/Direct Deposit Information
If you’re using a payroll service, the employee will need to complete an enrollment form providing basic information and direct deposit details, when applicable.

PTO-Vacation Policy and Form
Even if the company does not have an employee handbook, it must have a policy describing how the employee accrues and uses time off. The policy will also drive how the finance department will accrue these hours on the books of the company. Time off can be in the form of an all-purpose personal time off (PTO), or vacation and sick leave. It is best to provide employees with a form where they can request a certain number of hours or days of PTO/vacation in advance from their supervisor. Such a form enables managers to better plan resources, especially with start-ups where resources are scarce. It also allows finance to record the actual hours taken against the vacation accrual. Please note that by law, exempt employees cannot take PTO/vacation by the hour. The minimum unit for them is one day.

Expense Report and Policies
The expense report form is used by employees to document and file business expenses for reimbursement. The company needs to supply all new hires with an expense report template along with an expense reimbursement policy.

If the company does not have an employee handbook, it needs to develop a reimbursement policy covering travel, meals, entertainment, telephone/mobile and other miscellaneous purchases. Such a policy is essential to avoid disagreements between the employee on one hand, and management or finance on the other, about whether or not an expense is reimbursable. This may seem trivial, but what would you do if you don’t have a policy covering the reimbursement of mobile phone expenses, and your employee submits an expense report for $600 in mobile charges incurred in one month for work-related calls made in good faith? It’s best to be proactive and develop such policies before problems surface.

Tracking System

No matter how complete your checklist is, some documents will invariably fall through the cracks, as everyone gets busy with their daily tasks. That is unless you have a tracking system, or a sort of dashboard listing every employee on one side, and every document on the checklist that has not been completed. Using this dashboard, a designated employee in HR or accounting can follow-up with management and employees to get every pending item executed and filed appropriately.

Exit Check

Even if the above system is implemented properly, there is a chance that some documents may still be pending for an employee who is terminating his/her employment with the company. As part of the termination procedure, the HR records should be checked one last time, and missing documents completed, before the exit process is deemed complete.

Early stage entrepreneurs sometimes express their dismay regarding such an onerous process, especially at a time when they are stretching every single resource to reach the next milestone. Interestingly enough, some of those entrepreneurs who have succeeded beyond the seed stage have expressed their appreciation for this systematic approach that helps maintain the records up to date, and contributes towards their company’s readiness for the next significant event’s due diligence.

Josiane A. Kristensen is a Human Resources Consultant offering companies a wide range of Human Resources related services through her firm, Kristensen Consulting. Josiane’s background includes 23 years of domestic and international experience in the Human Resources field. Since founding Kristensen Consulting in 2000, Josiane has been working with many major corporations including hotels, distribution, food service, property management and retail. Her generalist background enables her to provide a menu of services to assist in a variety of corporate environments.