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Costly Mistakes for Startups

Start-ups are infant businesses and most have doomsday clocks – a deadline by which they must become profitable to survive.  Success in the start-up sphere depends on several elements, and adaptability to the many moving parts while adhering to legal standards greatly increases success rates.

Here are 5 costly mistakes to avoid when launching a start-up:

  1. Focusing far too much on the product and far too little on creating a safe workplace environment for your biggest assets – your employees.

A start-up isn’t just the execution of a great idea that you have; if it grows, it will be a workplace for many employees to execute various projects. A thorough consideration of the type of work environment you want to create is needed. Regardless of the dynamic you choose, creating a safe work environment entails the enforcement and maintenance of different procedures with great regard for the industry you wish to operate in.

As an employer, you will be required by law to produce adequate employee-related policies. These will include occupational health and safety, human rights policies, anti-discrimination, and anti-harassment policies. We help start-ups create policies which are specifically tailored to your industry.

  1. Creating an unenforceable employment contract that fails to respect your employees and fails to protect your start-up’s intellectual property

To avoid this mistake, it’s important to spend some time reviewing your offer letters as well as your employment agreements. Even as a start-up, without properly drafted documents, it is a matter of time before someone, somewhere, tries to benefit from a clause you included or failed to include. Compliance with provincial and federal Canadian law is paramount. Be aware of the minimum compensation, overtime benefits, and vacation entitlements to employees. Additionally, be mindful of the fact that your contracts may be unenforceable if they contain unclear terms or violations of the Employment Standards Act, 2000. Please consider seeking help from a legal professional when drafting employment contracts for your start-up.

  1. Neglecting to dedicate proper time and efforts to foster a healthy working relationship with your employees

Drafting an employee handbook in which you welcome your employees aboard and express the desire to form a lasting relationship with them can go a long way. Respect your employee’s privacy rights by creating practical measures and document them in a privacy policy.  Equally, having a pay equity and employment equity policies in place to demonstrate your commitment to worker’s rights.

Having the right policies in place can protect both employers and employees, while fostering a healthy work environment. As many employers also come to know, a happy employee is a productive employee.

  1. Neglecting to create a compliance plan

As an employer, you will be held to high compliance standards, both by the federal and provincial governments. This includes a range of areas such as remittances (i.e. deductions at source from your employee’s compensation) as well as workers compensation plans and pay equity. Your compliance plan should cover all aspects of hiring, onboarding, employee relations and terminations. For instance, there are questions that you should not be asking your prospective employees during job interviews. We can help overcome these hurdles and create a comprehensive compliance plan.

  1. Not getting proper legal advice

To cut costs, far too many entrepreneurs resort to the internet for legal advice. This is dangerous and ill-advised. Your business is unique, and the internet cannot appreciate your specific circumstances. A legal professional can help you spot important issues that you may not even have considered looking up on the internet. They can also provide guidance at each step of your business’s growth.

Consider these investments as part of your start-up costs. Investing in proper legal advice is not only responsible; it can save you a lot of money and troubles down the line, all the while increasing your business’s success rate. Remember that with growth will come restructuring, and this is where our employment lawyers can help you with planning restructuring solutions.

Whether you are an employer or employee, a start-up business can initially have many hurdles. However, with our guidance, you can better understand, prepare for and even avoid many of these obstacles. Contact us at (800)771-7882, or email [email protected] and we would be happy to assist.


Disclaimer: This blog is not intended to serve as, or should be construed as legal advice, and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call (800)771-7882, or email [email protected].