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By Ling Wong Updated on October 11, 2021

Human Resources for Your Small Business: Why You Need It

“Human resources” might sound like a discipline exclusively for big corporations with hundreds, if not thousands, of employees. As a small business owner, do you really need an HR department?

Yes, you do! Even if you only have a handful of employees, HR can ensure that the many aspects of your business are properly managed.

A human resources department performs many functions that are critical to the smooth operation of businesses of any size. Let’s explore what is human resources, its role and responsibilities within an organization and why you need to set up an HR department for your small business.

What Is Human Resources?

Human resources (HR) is a department or individual specialist in a company responsible for screening job applicants, recruiting new employees, managing payroll, administering benefits programs and facilitating communications between the employer and employees. Human resources also plays a key role in maintaining a company’s core values and culture.

In the past, most companies have had an in-house HR department to perform all of the administrative duties. Today, many businesses outsource various HR functions (e.g., payroll and benefits, background checks, exit interviews and office policies) to third-party vendors to decrease costs and improve efficiency while freeing up their in-house HR team to focus on value-add, strategic programs with long-term benefits.

A man in a business suit hands off a paycheck to another person. A human resources department can handle your payroll.

What Is the Role of Human Resources?

The HR department executes human resource management (HRM) strategies, which is a comprehensive approach to managing and developing employees as well as the organizational culture and environment. HRM, also known as personnel or talent management, involves overseeing all things related to an organization’s human capital.

Due to the increasing complexity of HRM, it’s typical for HR professionals to specialize in one or more areas, such as recruiting and staffing, compensation and benefits, training and learning, labor and employee relations or organization development.

Some common HR job titles include training development specialist, HR manager, benefits specialist, employment service manager, compensation and job analysis specialist, training and development manager, recruiter, benefits counselor and personnel analyst.

Responsibilities of the HR Department

HR is an essential function in organizations of any size. It helps companies effectively recruit, manage and retain employees to optimize talent acquisition, employee productivity and resource allocation. It develops and implements programs designed to increase the effectiveness of the organization by creating, managing and cultivating the employer-employee relationship. It also helps protect the company from workforce-related issues by staying up-to-date with laws that might affect the company and its employees.

Personnel Management

  • Orchestrating new hire orientation and onboarding so new employees can become productive as quickly as possible.
  • Acting as a neutral party in settling conflicts between employees or between employees and their managers to ensure a harmonious working environment and avoid costly labor issues.
  • Managing resource allocation to balance the workload of all employees while ensuring that the right talents are assigned to the appropriate assignments to optimize ROI.
  • Managing the employee separation process (e.g., resignation, firing, layoff) to ensure that it’s completed legally. Some key activities include conducting exit interviews and overseeing employee off-boarding so all the paperwork is submitted, severance is negotiated, benefits are settled, security measures are followed and access to company resources is severed.

Administrative Responsibilities

  • Developing, administrating and improving benefit programs (e.g., health insurance, wellness programs, pension plans, employee investments) to meet employee expectations, which can help the organization retain talent.
  • Serving as the primary contact for worksite injuries or accidents and ensuring adherence to regulations.
  • Developing, promoting and enforcing personnel policies, as well as offering guidance on disciplinary actions, to ensure compliance with labor laws and regulations.

Personnel Development

  • Providing career development support and job training to boost productivity and job satisfaction, which can help improve employee loyalty.
  • Conducting performance appraisal and managing promotions of employees to ensure that compensation is tied to competencies.
  • Facilitating the implementation of new tools and technologies through improved staffing, training and employee communication.
  • Shaping and promoting a consistent company culture through candidate selection, employee communications and company-wide events.

A group of people listen to a speaker or presentation and take notes. HR can handle training for employee advancement.

Why You Need Human Resources for Your Small Business

An effective HRM strategy helps your company stay on top of the latest hiring trends so you can attract high-quality candidates, acquire the right talents so you can stay competitive and expand your business.

HR professionals can help you lower workforce management costs while ensuring competitive and realistic wage-setting based on the labor market, employment trends and salary analysis to optimize your budget. They have the expertise to help you navigate legal issues and regulations as your company grows to keep you and your company safe from costly lawsuits and the resulting workplace chaos.

The positive impact of implementing an HRM strategy goes beyond internal operations. By clearly communicating the company culture to all employees, they can uphold a consistent brand image in all customer interactions. This allows you to deliver an outstanding customer experience that will increase sales and retain more customers.

How to Incorporate HRM in Your Small Business

As a small business owner, you might have been handling HR tasks yourself. However, delegating what is usually considered human resources activities—such as managing payroll and administering benefits—will take a lot of administrative tasks off your plate so you can focus on high-value tasks that can grow your business and boost your bottom line.

For small businesses, it’s not always possible to hire a dedicated person or team to carry out HR responsibilities. In that case, you can:

  • Select an employee who has good people skills and provide him/her with the proper training to know what is human resources’ role and to take on those responsibilities.
  • Outsource HR tasks to an external contractor, which can be an individual or a company.
  • Automate and streamline various functions with HR software and then select an employee or use an external contractor to oversee the workflows.

The right HR processes can help you build a solid foundation that will support the growth of your business for years to come, so don’t overlook the importance of getting the support of HR professionals.

Ling Wong has more than 15 years of experience in the realm of online marketing. She writes about business-to-business marketing, customer experience, search engine optimization, the latest in market technology and online marketing for small businesses.
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