Is your business growing?
It is not as small as it used to be?
When you have a small business say as small as you and your friend, the thought of building an HR department never even crosses your mind probably because the duties of an HR are easily outsourced.
So, what is the right time to take an HR plunge?
Ideally, it should be when your business is growing and is no longer limited to the two of you. As your business grows so do its operations and functions. This is where the need for an HR department arises.
Before we go through the process of setting up an HR department, let us learn what is HR and why is it important for any business no matter how small or big it is!
What is HR
Human Resource refers to a person or a group of people in a company undertaking all the activities pertaining to recruitment, on-boarding, paying, maintaining a budget, managing, keeping a note of the benefits, etc. An HR manager oversees various aspects of employment ranging from hiring to firing. It helps in establishing and cultivating the employer-employee relationship.
Why is HR important
A Human Resource Department is important because it takes care of the company’s most valuable asset- its human capital.
You can call the HR department the lifeblood of the organization because instead of the traditional cookie-cutter role of hiring and firing, HR aligns human capital with organizational goals. It also plays an essential role in formulating a strategy for the company along with handling all the employee-centered activities which were otherwise overlooked. Thus developing a healthy employer-employee relationship.
Hence, it is very important to set up an efficient HR department for the organization as is rightly quoted by Steve Wynn
Human Resources isn’t a thing we do. It’s the thing that runs our business.
Steps to Build an HR Department From Scratch
1. Devise a Staffing Plan
In order to build an efficient HR department, the first and foremost step is to create a company-wide staffing plan as it is the HR department’s responsibility to track and manage employees. A staffing plan will help to answer the following questions - What positions are vacant and need to be filled? How much salary can the company afford to give to these new recruitments? How many people can the company hire based on its budget?
An apt staffing plan can also help in deciding which employee needs to be shifted to some other department or to remove him completely from the company.
2. Set-Up a Budget
Before developing an HR department, the company has to accord a budget. They have to decide how many resources can be put to use by the company helping them decide how small or big the HR department can be. This budget includes the cost of building and the cost of hiring people in the HR department. It also includes the cost of the activities that the HR will undertake such as the HR may organize relationship-building activities in the organization and so on and so forth.
3.Write suitable Job Descriptions
Job Descriptions are written statements that describe the responsibilities, duties, and all other important details that a company requires for the vacant position. Include as much information as you can in this document as it will help in future hirings.
This document can be used to make a comparison between internal and external job positions which help in determining fair market value and the corresponding salary for the job position.
A candidate is selected based on this description. Therefore it is very important to write job descriptions for each of the positions that need to be filled in. It also gives a clear idea of the requirements of the company, helping them select suitable candidates for the HR department.
4. Devise a Salary Structure or Payroll
After writing a suitable job description, the next step involves developing a fair and highly competitive pay structure to attract and retain talent.
The company should create the salary structure in a hierarchical form so that each of the employees can get a clear understanding of the hows, whens, and whats of the amount they will be getting. Deciding on a payroll well in advance will make negotiating salaries far less stressful and time-consuming.
There are numerous Payroll Developing Softwares which can help you create an effective salary structure. Research thoroughly before selecting one based on your requirements.
You can also download this Complete Payroll Deck titled- Payroll Management PowerPoint Presentation Slides
5. List Employee Benefits
In order to retain and attract competent new recruitments, the organization should determine what all benefits they would like to provide and whether they are mandatory benefits or voluntary benefits.
These benefits may include mandatory benefits such as workers' compensation insurance, unemployment insurance under state laws. Some states also offer some added benefits to their employees such as disability insurance, sick leaves, etc. The organization should abide by all the mandatory laws stated by their state.
Voluntary benefits may include medical insurance, retirement pension and retirement plans etc.
6. Design an Employee Handbook
An Employee Handbook is a ‘rule book’ that shows the code of conduct for the new employees. You can consider an Employee Handbook to be a snapshot of your company’s guidelines.
It explains all the companies programs, policies and procedures which have to be followed. It also clarifies what a company expects from the new employee saving itself from unnecessary questions.
Establishing an Employee Handbook is mandatory because the HR department uses it to protect itself from lawsuits such as wrong claims.
7. Establish Healthy Work Culture and Set Safety Measures
An employee will be highly productive if he is physically and mentally sound. Therefore, the company should aim at providing a very healthy work culture. Also since the employee will be working for longer hours any threats to his physical and mental health should be checked and appropriate measures should be taken to avoid such hazards.
Ideally all these safety measures should be included in the employee handbook.
Also set safety measures for all the possible threats that an employee might face in the organization to avoid any unnecessary accidents.
8. Set standards to measure Performance
Determine how you will measure the job performance of the employee.
Success and employee satisfaction are the two most important factors that help a company to flourish. Hence they should be checked and regulated. Without these two components retaining competent employees is almost impossible. Therefore, proper regulation of these is of utmost importance.
There is no set standard to measure performance, however, it should be set in such a way that the employee not only strives to work hard but is also satisfied in every way possible.
Human Resource Complete Decks to Download-
I know this list is quite intimidating, but it is surely worth your time and effort.
So, use this startup checklist to create a competent and efficient HR department for your organization from ground up.
Efficiency taking a plunge? Check out our 2021 productivity guide that every HR manager should follow.