How Do I Set Up A New Human Resource Department?

If you were given the task of setting up a new Human Resource Department in a
small company where would you begin? Such a task would be extremely
daunting, but not impossible, if you follow a few tips. To begin, you need to
answer some basic questions:

  • Why do you want to set one up?
  • What’s changed to make you or the organization believe that an HR department is needed now?
  • What do you want the HR department to do? How will this function contribute to the success and bottom-line of the organization? Will it add value?

In other words, before you begin the task, you need to have a clear definition of
the mission and goals of the department and secondly, what role you will play as
“head” of the HR function. Once you have clear direction, there are some key
“audit” issues that you need to focus on.

  1. Do you have personnel files on all your employees? Are they current? Do you have all the legally required documentation? Do you have items in the files that don’t belong there?

  1. Do you have policies and procedures? Are they up-to-date? Are they followed?

  1. Do you have an employee handbook? Do you have the right language in it? Have you inadvertently created a contract between you and your employees?

  1. Do you have policies dealing with sexual harassment, workers’ compensation, safety, benefits, discipline, etc.?

  1. Are you in compliance with state regulations?

  1. Do you have a working knowledge of the law? Do you have all the required postings, forms, and documentation required by the respective governmental agencies? Are all the managers aware of their legal responsibilities and liabilities?

  1. Are you recruiting and selecting the right people? Are you aware of the talent and skills needed to move your organization forward? Do you know where to find these people? Are you recruiting in a cost effective manner? Are your managers trained in interviewing techniques?

  1. What kind of compensation plan do you have? Is it meeting the organization’s needs? Is it motivating your employees? Is it competitive and fair?

  1. How about your benefits? Are you getting the best coverage for your people at a price the employees and the organization can afford? Is your total compensation attractive enough to retain existing people and be an incentive to new people?

  1. What’s it like working at your company? Are people productive and motivated? Are you looking at the indicators of a productive and motivated workforce (absenteeism, tardiness, turnover, grievances, high workers’ compensation rates, poor quality, missed deliveries, and poor productivity)?

  1. What about your training? Are manager’s and employee’s skills current? Is training a “way-of-life”? Are you growing your people or do you have to go to the outside every time you need someone with a specialization? Are supervisors effectively managing their employees?

  1. Are managers and employees kept informed? Do they know what’s going on? Is the grapevine the main source of communication? What are the sources of communication?

As you begin the process, get some professional help, whether through networking with peers, other organizations, or outside expertise. It is a big task, but one that is critical to the organization.
When Is An HR Department Necessary?

How many employees should a company have before there is a need for an HR Department? As companies grow, there is a need to administer the HR function, but that doesn't necessitate an HR Department. In fact, 30 years experience has shown that until the company has at least 50 employees, that "department" -- really a function -- can consist of or be handled by one person.
Between outsourcing such things as payroll and the initial writing of an employee handbook, and with the plethora of software for HR today, one person should be able to develop and administer the function.
Of course, there are variations to this theme. In some companies where recruiting has been a major activity, there may well be a need to have an HR administrator or recruiter. But in most small companies an Office Manager can suffice.

The first step is to determine what the expectations are of the manager who realized the necessity of HR function.
After that, determine the compliance issues which pertain to your company. The most basic of these have to do with wages and hours of work, classification of employees, leaves of absence including maternity leaves, harassment, and others.
Then, determine whether or not you need to have an employee handbook or other formal policies and procedures manual to cover everything from establishing the company as an at-will employer to benefits. If a handbook already exists, be certain that it is in compliance with state regulations and that the policies and the way they are written are in the best interests of the company.
Are all the basic policies included? These can be thought of as grouped into conditions of employment, benefits, and disciplinary processes. Is there a balance between stated corporate and employee rights and obligations?
Take a look at existing employee files or, if no files exist, gathering all the papers into coherent personnel files. Minimally, you should have an Application for Employment form or resume, , any insurance forms that the employee may have signed, and performance appraisals.
Who takes care of payroll? There used to be an ongoing fight between HR and accounting as to who gets payroll.. So make sure of this point to have a clear picture on this.
One person should be responsible for new employee orientation. In order to inform new employees of their benefits and the policies of the company, you will very simply have to be the expert in benefits and policies of the company.
HR has an information function that you should think through. Changes in policies, changes in benefits, even changes in laws must be communicated to all employees. Major changes may call for training such as in harassment a few years back. Therefore, HR becomes a kind of pass-through in the information cycle.
To summarize the steps to set up an HR DEPT , the following things should kept in mind.
1) Recruitment and selection (i.e. job descriptions, selection tools, background checks, offers)
2) Compensation (i.e. methods, consistency, market)
3) Employee relations (i.e. labor agreements, performance management, disciplinary procedures, employee recognition)
4) Mandated benefits (i.e. social security, , worker's compensation, )

5) Optional group benefits (i.e. insurance, time off benefits, flexible benefits, retirement plans, employee assistance programs, perks)
6) Payroll (i.e. internal vs. external options, compliance)
7) Recordkeeping (i.e. HRIS, personnel files, confidential records, other forms)
8) Training and development (i.e. new employee orientation, staff development, technical and safety, leadership, tuition reimbursement, career planning)
9) Employee communications (i.e. handbook, newsletter, recognition programs, announcements, electronic communication)
10) Internal communications (i.e. policies and procedures, management development, management reporting)

Once you have carefully evaluated each of these areas, you are ready to put together your strategic human resources business plan. This will help you map out exactly what you need to do and how it impacts the bottom line, plus when you will need to do it. With a good grasp on this plan, you are ready to sell it to management