How To Start An HR Department?

Establishing a human resource (HR) department is a multidimensional task. It is not limited to hiring personnel to manage payroll and benefits administration; it also involves overseeing the development of workplace policies and the recruitment and onboarding of new employees. While the overall process can be time-consuming, understanding its fundamentals will enable you to manage it more efficiently. Let’s start by breaking down what is HR department and how to establish one. Learn all this and more in the following article: 

Key Takeaways

• Considering your organizational requirements and goals helps save time and resources.
• Creating a list of essential processes, such as payroll structure and workplace policies, provides valuable insights and streamlines HR tasks.
• Timely audits enable HR departments to achieve transparency and address existing gaps.
• Outsourcing your HR functions can be beneficial, so evaluate which tasks you wish to delegate to external parties.

Even if you are starting small, your firm is going to expand in the future, right? Think big, and plan accordingly. Gauge your future needs and consider the following options for hiring HR staff: 

• In-house HR: Ideally, this should be your go-to approach, especially if your organization is small as employees would prefer having a person to cater to their queries 
• Outsourced HR systems: By collaborating with outsourced human resources teams, it is possible to transfer responsibility of the whole department or just certain processes, such as recruitment 
• Professional Employee Organizations (PEOs):  PEOs handle various administrative tasks, including payroll software for efficient processing and benefits management, allowing businesses to focus on their core operations and strategic growth. By using advanced payroll software, PEOs streamline payroll functions, ensuring accuracy and compliance while freeing up company resources for other priorities.

Do a cost-benefit analysis and choose your method based on the needs of your company. The most important part is to ensure the team understands your needs and has the ability to grow the team accordingly. 

The significance of the HR department within any organization cannot be trivialized. From crafting policies that help the business grow to keeping employees’ data secure and meeting their requirements – human resources does it all. 

Importance Of An HR Department 

Let’s dive into some common yet crucial tasks managed by HR that consolidate its position and make it a vital component of any organization. 

• Company Culture: The workplace environment significantly affects the overall functioning of the company and influences employee engagement and productivity levels. HR plays a crucial role in upholding values and ethics within the organization, ensuring that uncivil incidents do not occur 
• Law Compliance: Employment laws are constantly changing, making it essential to stay informed about them. The HR department ensures compliance with these laws and implements necessary changes to company policies 
• Policy Changes: Nothing is set in stone, especially organizational policies. The human resources department evaluates the effectiveness of these policies and implements changes that promote organizational growth and help maintain a competitive edge 
• Benefits Administration: The HR staff works closely with the accounting team to streamline benefits administration including payroll processing, calculate compensation, and addressing employee concerns 

All these tasks and much more are managed by the human resources department, highlighting its importance to any company. If you have been managing your business without an HR staff, now might be the right time to set up a framework for this department and take it from there. 

As important as the human resources department is for a company, building it from scratch can be an overwhelming task. Let’s break down the entire process into small steps in the following section:

1. Specify Your Organization’s “Why” 

You do not necessarily need a detailed plan sketching the entire layout of your human resources department, but you do need a strategy that helps you get started. This fundamental idea is imperative for building a robust HR department and assigning it the tasks you have envisioned. 

The following core HR functions are usually managed in-house: 

• Employee incentives and compensation 
• Transparent workforce communication 
• Crafting and implementing policies 
• Analyzing different business strategies 

The rest of the administrative functions, such as payroll processing and employee benefits, can be outsourced to external companies. 

2. Leverage Human Resources Information System (HRIS) 

HR platforms are designed to manage payroll, employee benefits, performance management, and talent acquisition. An integrated HRIS software streamlines administrative tasks, saves time and resources, and efficiently centralizes core HR functions in one location. 

For instance, BambooHR has a built-in comprehensive HRIS functionality and can simultaneously assist you with multiple tasks. It scales with your company's growth without compromising efficiency, effectively removing another task from your checklist. 

3. Basic Laws Compliance 

Local and federal law compliance are essential in keeping potential legal risks at bay. Let’s look into some plans to follow the regulations: 

• Employees’ health plan must adhere to the Occupational Safety and Health Act (OSHAct) 
• An emergency action plan for workers’ safety, including the identification of emergency exits within the premises, availability of first aid supplies, and safe workplace environment 
• Equal employment practices and sexual harassment policies 
• Place of employment is free from all potential life-threatening risks and recognized hazards

It is important for organizations to build a human resources department that handles all such regulations and ensures legal safety. Laws and regulations are subject to change, and the dedicated HR department helps you stay up to date. 

4. Payroll And Benefits Administration 

Moving forward, you should have a clear understanding of your company’s basic payroll structure. Additionally, it is important to review policies related to paid time off (PTO), vacations, sick leave, maternity leave, retirement benefits, and mor. 

Here are a few other points, you should consider, to streamline your payroll and benefit administration: 

• Determine a base salary for each position that is both market-competitive and lucrative for employees in the current economy 
• Analyze employee benefits in detail and determine your way around them. Some benefits are mandatory by law, while some are voluntary and vary from company to company. Mandatory benefits include employees’ compensation, disability and unemployment insurance, and paid time off, while voluntary benefits comprise vision, dental, and medical insurances. Retirement accounts also fall under voluntary benefits, which are solely a choice of how you want to compensate your employees 
• Do thorough research on different payroll management software and look for the one that falls within your budget while meeting all your requirements. Some efficient payroll platforms are GustoHR and ADP Workforce Now 

5. Establish A Talent Acquisition Process 

To ensure a smooth recruiting process, ensure to have the following paperwork ready for the new hires: 

• Offer letter 
• Payroll and company’s guidelines documents 
• Equity paperwork 
• Employment agreements 

Apart from the documents mentioned above, analyze your onboarding process and add new requirements. An informative onboarding process equips the new candidate with all the information they need to get along with the organization. Preparing them for their responsibilities from day one makes them a quality asset. 

6. Foster Employee Relationships 

A dedicated human resources department ensures the implementation of all workplace values and can tackle problems with a proactive and positive approach. Know your employees and ensure their satisfaction with their environment and their team.

Once they are comfortable with each other and develop strong interpersonal relations, it will boost their productivity and enhance work performance. 

7. Utilize Performance Management Systems 

Regular performance evaluations help maintain work quality and foster progress. An all-in-one performance management system assesses not only an individual's job-related competencies but also their overall personality. Team members should be guided to strengthen their weaknesses in a way that is constructive and encouraging, avoiding any discouragement or offense. 

Some of the parameters of an effective performance appraisal include: 

• Ability to understand the assignment 
• Effective time management 
• Ability to comply with regulations 
• Verbal and written communication skills 

Communication should always be two-way. Employees may have unresolved grievances that need to be addressed so they can move past these challenges. 

8. Create An Effective Auditing Schedule 

While managers continually oversee processes, having an audit schedule establishes a systematic method for ensuring that each process is reviewed at regular intervals. Part of this schedule might include steps to conduct an HR audit, allowing organizations to evaluate HR practices, identify areas for improvement, and ensure compliance with relevant regulations.

Some of the processes that can be audited include: 

• Recruitment audits to assess whether candidates are hired based on merit and in compliance with legal requirements 
• Compensation audits to ensure that employee salaries align with national labor laws 
• Benefit audits to verify that medical benefits are current and in accordance with organizational policies 
• Performance audits to ensure that all employees are assessed using a standardized format and that documentation is completed on time 
• Training audits to evaluate the department’s commitment to providing regular sessions for employees' personal and professional growth 

Create a schedule to audit one aspect each week to enhance your employees' workplace experience and improve performance quality. 

9. Implement Adequate Measures

Whether issues are identified during performance appraisals or audits, action must be taken. Deciding on the appropriate response is just the first step; following up to ensure implementation is the real task. An effective HR professional is tactful when it comes to employee management. Instead of repeatedly asking employees for updates, they go for alternative methods to monitor progress. 

One solution is to gain access to online employee documents to track their progress directly. Alternatively, you can use a project management tool like Trello, where employees can update their own progress. 

It's equally important to introduce preventive measures to avoid repeating the same issues. This can be done by incorporating warning pop-ups into your software or organizing additional training sessions for staff. The aim isn't to penalize employees, but to refine the system with a balance of guidance and discipline. 

The answer to this question lies within the organization, as there is no one-size-fits-all response. Many factors must be taken into consideration. One option to explore is outsourcing HR to specialized firms, which can manage administrative tasks, streamline processes, and reduce overhead. Instead of making hasty decisions, consider researching all possible options, including HR outsourcing, to find the best fit for your organization’s needs.

Establishing an HR department lays the foundation for your future workforce. While hiring dedicated and diligent employees is crucial, it is equally important to establish clear and fair policies. Rather than relying on generic guidelines, stay informed about the latest trends in administrative practices. 

Whether HR personnel are in-house or outsourced, they must be well-versed in labor laws and the intricacies of employment. They should possess a blend of competence and compassion to effectively bridge the gap between management and staff. After all, the HR team represents the organization when inviting others to join the workforce, and first impressions often last.