Human Resources—also called people operations, or simply HR—plays an integral role in your business’s success, helping structure your operations, promote employee productivity and engagement, and stimulate business growth. Its functions involve safeguarding and supporting both your company (through risk management, compliance, and payroll accuracy) and your employees (via effective engagement and management).
To understand fully why human resources is important, we’ll go through its functions and provide pointers on when you should start building out your team.
Key Takeaways:
- Having an HR employee or team is crucial for most businesses.
- If you haven’t hired one, consider hiring your first HR employee when your company reaches around 15 to 25 employees.
- HR is an essential part of your business, and neglecting it means neglecting your business.
Importance of HR Management—Functions
HR is the backbone of any business, even more so for small businesses where every role significantly impacts the organization. It manages the entire employee lifecycle—from hiring to exit—and ensures the company has enough skilled talent to maintain operations. It also keeps you compliant with government regulations, reducing your legal liability.
Read on for a more detailed breakdown of what your HR team can do for you.
1. Administration & Compliance
HR administration is crucial for ensuring your business abides by complex employment laws. Managing payroll, maintaining personnel files, and overseeing employee benefits are key areas where compliance must be strictly observed.
Payroll sounds simple: It’s the process of paying your employees for the work they’ve done. It also involves detailed processes like balancing payroll reports, depositing taxes, and handling wage deductions according to federal and state regulations. Across all levels, compliance with tax withholdings and employee payment schedules is mandatory. Incorrect payroll processing can result in fines and lawsuits. Check our what is payroll guide to learn more about it.
One of HR’s most important responsibilities is to maintain and protect employee personnel files, which should include resumes, references, general employment information, and any progressive disciplinary actions. Employee personnel files contain sensitive information that must be managed carefully to comply with legal requirements and protect your company from potential litigation.
HR is responsible for administering the benefits you put in place. From healthcare and retirement plans to time off and flexible work schedules, your HR department keeps track of all employee benefits, some of which have laws that must be followed. This includes monitoring benefit plans, introducing new ones, and making cost-efficient updates. Learn more about the major types of benefits that you can offer to your employees.
There’s an abundance of employment laws your company needs to adhere to, from at-will employment to various federal, state, and local regulations. It is simply an enormous task to ensure your company is compliant with all relevant laws.
Your HR team will conduct a compliance audit to ensure your company complies with:
- Minimum wage laws
- Rest and lunch break laws
- Sick leave laws
- Maternity leave laws
- Equal employment opportunity laws
- Fair Labor Standards Act (FLSA)
- Family and Medical Leave Act (FMLA)
- Age Discrimination in Employment Act (ADEA)
- Affordable Care Act (ACA)
The team will also need to ensure you have the required certifications and licenses in your locality. If you have enough employees, HR will need to source workers’ compensation insurance. All these duties fall to your HR team to ensure compliance and keep up to date on any relevant legislation, which may require changes to your company policies.
2. Hiring & Onboarding
A core component of your HR team’s duties, finding the right candidates is crucial to filling open positions quickly and accurately. Following a structured hiring process will help your HR team find the right talent. Meanwhile, providing strong new hire training will leave a positive impression on the employee and set them up for success.
Using tools like resume scanners and pre-employment tests, HR representatives ensure that candidates fit your needs as well as possible while also avoiding any legal pitfalls throughout the process. Also, whether HR conducts interviews or your hiring managers do, your HR team will at least track each stage and ensure interviewers aren’t asking illegal questions or succumbing to hiring bias.
HR plays a key role in crafting compelling job offers. They balance salary, benefits, and perks to attract top talent, leveraging their knowledge of market standards and unique company offerings.
A smooth and transparent onboarding process, managed by HR, is crucial from the moment a new hire signs the offer letter. It covers everything, from legal compliance and background checks to tailored training that boosts early productivity and engagement. Learn how to set your new hires up for success with our onboarding best practices article.
3. Employee Retention & Development
Training employees starts during onboarding but it doesn’t end there. Workers require constant training to help them stay on top of their duties. It’s also an opportunity for HR to provide upskilling opportunities to employees, helping them adapt to and change with the company’s evolving needs. This is a prime chance for employees to advance their careers within the organization, a key element of employee retention.
HR should also ensure that employee development programs exist to help every department meet its goals. In collaboration with department managers and team leaders, HR develops programs to assist every employee in advancing their skills to improve company productivity and efficiency. This helps the team and company achieve stated goals.
These training and development programs can also help your managers improve. Management training, which should include people management skills training, is an important development program to ensure you have the right people leading your teams.
Training is vital for your HR staff, too—especially for those dealing with employment laws, regulations, payroll, taxes, and sensitive employee information. Ensuring those HR team members remain up to date on existing employment laws will help your business stay compliant.
4. Employee Management
Employee management is a collaborative effort between your management team and the HR department, focusing on performance evaluations, discipline, and overall employee guidance.
This involves regular check-ins, structured reviews, and necessary discipline, like performance improvement plans. HR plays a crucial role in developing these systems, ensuring fair and consistent evaluations across the board to mitigate discrimination claims. While managers handle day-to-day performance tracking, HR guides the process and maintains records. Altogether, this is a performance management system.
Intended as a supportive measure, progressive discipline helps steer employees back on track through escalating steps of discipline, each designed to address and correct performance issues. HR’s involvement from the outset is key to developing a fair policy and navigating the complexities of disciplinary actions, safeguarding your business against potential legal challenges.
5. Workplace Safety & Conflict Resolution
It’s essential to implement safety protocols, even in seemingly low-risk environments like offices. Prohibiting actions like lifting heavy items or running can prevent injuries and workers’ compensation claims. Adherence to Occupational Safety and Health Administration (OSHA) regulations is imperative, safeguarding employees and minimizing the risk of common workplace accidents.
Conflicts at work may be inevitable, but poor outcomes are easily avoided. While managers play a crucial role in addressing issues promptly, complex situations may require HR intervention. HR professionals, equipped with mediation training, can facilitate discussions between conflicting parties, aiming for a resolution that maintains workplace harmony and employee satisfaction.
6. Workplace Culture & Employee Engagement
Getting culture right is a never-ending process. It requires constantly analyzing what the marketplace is offering and what employees want and making adjustments based on that data. And HR is at the helm of this process. Its role is to ensure your company culture aligns with the needs and wants of your employees so they remain engaged members of your workforce.
A strong company culture is more important for today’s workforce than ever before. An inclusive and attractive culture drives employee engagement and retention. Too many companies get culture wrong, however, and end up with a disengaged and unmotivated workforce.
When to Build Your HR Team
Deciding when to build your HR team is critical for small business owners. A common benchmark is an employee count of around 15 to 25. At this size, the administrative and compliance requirements start to become more complex and time-consuming for the business owner or managers to handle alongside their primary responsibilities. This is an ideal time to hire an HR manager.
When your employee count reaches closer to 50, the need for a more comprehensive HR team becomes apparent. Expanding your HR team at this stage ensures your business can effectively manage a larger workforce, maintain compliance, and build a positive company culture. It also positions your small business to attract, develop, and retain employees for continued growth and success.
Recognizing the need for HR functions doesn’t immediately mean needing to hire full-time HR staff. A viable alternative is outsourcing HR tasks to a professional employer organization (PEO) or an HR consultant. These options allow small businesses to access expert HR services and tools without the overhead of a full-time employee.
It IS possible to keep your business afloat at its starting stages without HR staff. However, this does pose significant risks and challenges. Apart from potential non-compliance issues, you can miss out on hiring trends, building solid retention and professional development programs, and incorporating a strong foundation for your company culture—all of which would be the focus of your HR staff from day one.
Frequently Asked Questions (FAQs) About HR
HR identifies talent gaps, forecasts hiring needs, and develops training programs to ensure your team possesses the skills necessary for your company’s growth and adaptation to market changes. This is a pivotal role in aligning workforce planning with your business’s strategic goals.
Absolutely. By optimizing recruitment processes, improving employee retention, and managing benefits efficiently, HR can significantly lower turnover costs and reduce expenditure on hiring. Streamlined HR processes also lead to better utilization of employee talents, contributing to the overall efficiency and profitability of the business.
HR initiatives directly impact employee satisfaction by ensuring a positive work environment, fair compensation, clear career progression paths, and recognition of achievements. Satisfied employees are more engaged, productive, and likely to stay with your company, reducing turnover and fostering a strong company culture.
HR ensures your business complies with labor laws and regulations, protecting it from potential legal action. This includes managing employee records, ensuring fair labor practices, and staying updated on laws that affect the workplace. By effectively navigating these complexities, HR safeguards your business against costly litigation and fines.
Bottom Line
Historically, HR has been seen as the place for employee discipline and termination. More recently, HR has been trending in a different direction—building and engaging workers with an employee-centric focus. The role has expanded to include all facets of employee relations and engagement.
The importance of human resource management is key to small business growth. HR must adhere to employment laws, create and implement effective employee management procedures, and handle payroll and tax remittance—all while ensuring your company is a great place to work. HR touches every part of your business, so make sure you hire HR staff that you can trust to help you grow your company.
