How to Start an HR Department

Business executive with four colleagues, explaining how to start an HR department at their company.

Maybe your company was getting along just fine without a human resources (HR) department in the beginning. After all, much of the work that HR does can be outsourced and seems mundane in the grand scheme of things. However, as your company has grown, you’ve begun to realize you’ll need to learn how to start an HR department soon.

Tasks such as employee relations, compliance, employee training, payroll, and benefits administration are all vital functions of a business, not to mention onboarding, termination, and employee performance reviews. If you’re busy growing your business, it’s unlikely that you’ll be able to do all of these tasks on your own, or even that well.

Building an HR department should include (but isn’t limited to) these key steps:

  1. Develop your overall HR plan
  2. Determine recruiting and onboarding procedures
  3. Build the proper support networks
  4. Set up a plan for regulatory compliance
  5. Figure out a strategy for compensation and benefits
  6. Draft employee relationship policies and procedures
  7. Establish parameters for training and performance management

Before we dig into the particulars of how to start an HR department, let’s take a look at how this critical business function has changed over the years and the skills you’ll want to look for when hiring HR professionals.

The Evolution of Human Resources

Traditionally, HR’s purpose was to focus on determining who does what and to screen out the “undesirables” during the hiring process. Yet times are changing more rapidly than ever. HR began transitioning out of this cookie-cutter role in the 21st century and now there are huge variances in the tasks they handle. Some HR departments still perform standard roles, but many are responsible for other business functions.

Before you start an HR department, you must first decide what tasks you want to hold HR accountable for, and most importantly, what you want out of your potential HR professionals.

Skills to Look for When Hiring HR Managers

When searching for your human resources managers, you should put your focus on seeking out candidates who:

  • Are very detail oriented
  • Have strong written and oral communication skills
  • Have an open and pleasant disposition

A senior-level HR professional should possess all of these basic skills plus additional knowledge about the nuts and bolts of HR—compensation, employment law, benefits management and design, and problem resolution skills. A qualified senior-level HR professional should also be highly empathetic and possess strong public speaking abilities.

How to Start an HR Department: Step by Step

The tasks that your newly-hired HR professionals will be taking on may have been previously handled by your managers who have developed their own systems of hiring, firing, and counseling employees. That makes it imperative to speak with your managers about why you’re hiring HR professionals and stress that you need their full support. After all, this buildout will take a heavy load off of their shoulders.

Initially, you may find that introducing your new HR team members can wreak havoc on other departments. This is why you’ll want to take a measured approach, and these steps will help you get there:

1. Draft Your HR Plan

If you don’t know why you need a dedicated HR team, then the process of creating this new department is bound to be frustrating for everyone involved. Taking an audit of existing job roles and needs, forecasting your staffing needs as you grow, and outlining what you hope to achieve from your new department is an essential first step.

Every company’s HR needs are unique, so starting out with a basic understanding of how many HR professionals you need to hire, what each role will entail, and how you’ll measure success is key.

2. Set Up Recruiting and Onboarding Procedures

It’s important to take a strategic view of how you recruit and onboard employees, making it an ongoing process as opposed to something you throw together only when the need arises. Where and how will you post your jobs? What attributes are the most important when seeking candidates? How should you structure you onboarding procedures?

3. Lay the Groundwork for Support

Your new HR department will need financial, technological, and emotional support to get the job done. Financial support might come in the way of a budget that allows for continuing education, professional memberships, consultant fees, and funds for program supplies. Technological support may include a modern compensation management system and the training to go along with it.

Providing emotional support is also an important part of knowing how to start an HR department. Be sure to keep an open door policy and tactfully address any disruptions that arise.

4. Get a Handle on Regulatory Compliance

A large part of the work HR professionals do involves ensuring a safe and healthy workplace that complies with all applicable federal, state, and local regulations. For instance, the Occupational Safety and Health Act (OSHA) requires a minimum of protections for worker safety, while the Equal Employment Opportunity Commission (EEOC) requires a workplace that’s free from discriminatory practices and sexual harassment.

It’s important to compile an employee handbook that outlines your expectations as an employer, including shared responsibilities and procedures for filing complaints.

5. Determine Compensation and Benefits

By developing a detailed pay structure, you’ll be better positioned to make competitive offers and provide pay raises that fit within your budget. You’ll also want to determine personal time off policies, sick time, 401(k) retirement plans, and how you’ll manage payroll. It makes sense to spend a little extra on a good payroll management system, which can help you avoid costly payroll mistakes and help with recordkeeping.

6. Develop Employee Relationship Policies and Procedures

Don’t wait until an employee has a grievance to establish employee relationship procedures, do it as soon as possible. Truth is, employee complaints are quite common and can become huge problems if improperly handled, including costly lawsuits. Your employee handbook should clearly outline the type of behaviors that are expected, including those that are prohibited, and consequences for missteps.

7. Establish Training and Performance Management Techniques

Truth is, employees increasingly value on-the-job training and a clear career path. Your new HR department will want to develop training programs that both improve their skills and provide an opportunity for feedback. Equally important is a performance evaluation process, which not only helps keep them on the right trajectory, but also—when recorded in their personnel file—can help back your decision if you need to reprimand or terminate an employee.

There are many challenges, but with some effort, you will know how to start an HR department. If done correctly, it will allow your business to run much more efficiently.

Get Help Learning How to Start an HR Department, and More

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