Starting an HR department (1)

Last week, we spoke about the importance of having an effective HR Department and the general role of HRM in an organisation. Today, we will be looking at how to set one up.

Many people just get somebody to take responsibility for HRM. In many cases, these people have no idea on what to do. They can only do personnel administration at best.

The process of setting up HRM in an organisation is different based on whether it is a brand new or already existing organisation. The way HRM is set up is impacted by the current size and expected growth of the organisation, the amount of support and infrastructure already in place, the industry, and the organisational vision and culture. The following should be taken into consideration.

HR manpower plan, budget, tax obligations, payroll system and administration, companywide manpower plan, job descriptions, pay structure, benefits plan, employee handbook, health and safety procedures, recruitment strategy, personnel files and performance management system. There are also HR process maps, succession planning and career pathing.

For an existing organisation, the steps to implementing an HR department may overlap with creating the function from scratch, depending on compliance concerns, existing HR policies and what is driving the need to establish a formal HR department.

The first step in forming an HR department in an existing organisation is an assessment of the current state of the HR-related activities. This assessment, or HR audit, helps determine an appropriate prioritisation and action plan. We will look at setting up in an existing company later.

Usually, small organisations start out with the owner or a non-HR executive handling employment issues. Someone oversees admin duties and policies concerning pay and benefits, unemployment compensation, withholding taxes and administering workers’ compensation, if necessary.

As organisations grow, department managers may handle general employee issues, while accounting or finance handles payroll. Start-ups sometimes use outside consultants to address temporary needs.

Having an HR professional onsite is more efficient to address issues such as hiring, firing, leave management, training, discipline, policy development and enforcement, and benefits. At this point, a small organisation may want to think about establishing a dedicated HR department.

HR professionals as we now know, serve many roles within an organisation, compliance advisor, employee relations counsellor, benefits administrator, recruitment consultant and safety coordinator (a qualified health and safety co-ordinator is most effective), to name a few.

You should start when the organisation is in its evolution stage. For example, if you are in a high-growth phase, then establishing benefits and determining the most appropriate recruitment strategy would be high priorities.

HR would determine what to prioritise next, based on organisational strategy, direction, and compliance requirements. There is no one best way to implement an HR department but establishing a plan that best meets the organisation’s goals while maintaining legal compliance is necessary.

Hiring a qualified and experienced HR professional is not an easy task and it is a good idea to turn to an external recruiter, or outsourced HR organisation to help with the staffing. Usually at the start, a solo practitioner would be staffed with an HR manager.

When screening candidates, you should consider the number of years of HR experience they have and the level of responsibility in those years of experience. Experience working with organizations of similar industry or size.

Their education level and HR-related certifications. Knowledge of employment laws and other compliance issues. Ability to conduct research, access resources, prioritise and juggle multiple projects, adjust to the quickly changing needs of a start-up, and communicate directly with upper management.

Read also: Why is HRM crucial?

As the HR department is being developed, which includes the development of forms, HR policies and procedures, it is crucial to keep an eye on employment laws.

HRM’s responsibility is to align the HR department’s budget with the organisation’s strategic goals while following organizational guidelines and procedures. Budgeting involves the systematic collection of information and data so that the monetary resources needed to support the organisation’s objectives can be projected.

New organisations usually have no prior budget to use for comparison, therefore, projecting and estimating are required for the initial HR budget.

The data needed to create a new budget include, the number of employees projected for the year, benefits cost projections, projected turnover rate, costs already incurred in the current year, new benefits or programmes planned, anticipated legal expenses, recurring or new training needs and other policies, business strategies, laws or regulations that may affect costs.

Projections may be simple or complicated and will heavily depend on the nature of the expenses and the data available. HR managers preparing a budget for the first time will need to gather every source of available data to make educated projections.

Next week we will be bringing the second and concluding part to this information. I just want to reiterate here that I do a lot of research to come up with these articles and some also come from what I have experienced as an HR Consultant.

Have a great weekend.