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What does human resources do? How does it help startups?

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In the early stages of a startup, founders are cost-sensitive, taking on as many roles as possible. But at a certain point, the time it takes you to manage vital functions—like recruiting, hiring, training, benefits, and conflict resolution—outpaces the cost of hiring someone dedicated to these tasks. This may leave you wondering, “What does human resources do? And when is it time to hire an HR professional?”

Before scaling up to a human resources department (or just one HR person), most business owners divide priority tasks and revenue drivers between employees and business service providers. 

For instance, they might have department directors write job listings and handle interviews to fill key positions, while they use an online payroll service to manage wages and tax filing.

In most cases, this ensures everything operation-critical gets done. But it’s not the most effective—or legally protective—way to manage your human resources.

We’ve rounded up the core responsibilities that make HR professionals a valuable addition to startups at any stage of growth. Learn when it makes sense to hire an HR person and how to select the right one. 

What does human resources do?

“Human resources” is your company personnel, as well as the department that oversees work-related assets, policies, and initiatives.

In turn, the human resources department is responsible for creating a safe, organized, and development-driven environment that keeps employees enjoying their work and meeting company objectives. HR professionals also ensure that employers are attracting the best talent, abiding by all employment laws, and avoiding legal trouble

HR duties can range from administrative tasks to big-picture initiatives. Generally speaking, the smaller the business, the more often an HR staff member is assigned day-to-day duties like data entry or record keeping.

On the other hand, the larger the business, the more often HR is responsible for high-impact decision-making around employee well-being, growth, and organization.

These are some of the responsibilities you might assign to an HR professional:

  • Craft job descriptions and post job openings
  • Coordinate the recruiting, interviewing, and hiring processes
  • Oversee new-hire orientation, onboarding, and training
  • Manage payroll, health insurance, and other benefits
  • Share employee satisfaction surveys and team-building initiatives
  • Resolve conflicts and issue disciplinary action
  • Build a comprehensive performance plan and termination policy
  • Inform employees and management of law and policy changes
  • Create and maintain employee records

As the central intermediary between employers and employees, HR professionals can also play a significant role in instilling company culture, recognizing achievements and milestones, and increasing employee satisfaction. 

Now, we’ll walk through the key ways in which a human resource generalist, specialist, or full-on team can support a startup.

Provide guidance on worker health and safety practices

In 2018, there were 2.8 million nonfatal workplace injuries and illnesses reported by private industry employers, according to the Bureau of Labor Statistics (BLS). 

You don’t have to operate a construction site for there to be major hazards in the workplace. Too many devices plugged into a power strip, cords crisscrossing pathways, and fumes or excessive noise can negatively affect employees. 

An HR professional will make sure you’re following all the required rules and regulations of the Occupational Safety and Health Act (OSHA). They’ll also train your staff on emergency procedures and continually assess risks.

Ensure you’re abiding by employment laws 

Overseeing compliance with federal and state regulations is a large portion of an HR professional’s duties. Most employers need help understanding the myriad work employment laws and anti-discrimination acts, like the Americans with Disabilities Act (ADA) and Equal Pay Act. 

The recent passage of AB 5 in California, for example, shifted the burden to employers to prove when someone is and isn’t an independent contractor. Failure to comply could result in severe civil penalties and back wages. 

With the frequent changes to health care and labor laws, each time you take an employee-related action—like issuing work visas or firing someone—there’s an opportunity for a legal mistake. HR departments and company lawyers often work together to update company policies and help you avoid lawsuits. 

Recruit, vet, and hire new employees

When U.S. unemployment is at record lows, and high-performing individuals have ample opportunities for employment, optimizing hiring processes is a must for startups. 

Much of an HR professional’s focus is establishing a top-quality recruitment and retention strategy. They’ll work closely with small business owners and hiring managers to write accurate, attractive job descriptions.

They’ll use integral hiring materials like candidate evaluation forms and develop employee referral processes. 

From there, it’s HR’s job to integrate new hires into the company—community, culture, policies, and more—with a coherent onboarding process. From the offer letter to the first introductions, HR is responsible for equipping employees for long-term success.

Prioritize employee skill development

Two of the most crucial HR functions are to develop human talent and maintain employee morale, and they often go hand in hand. 

Skill-building is a vital component of any macro-level HR strategy. In one survey, only 55% of employees said they were satisfied with opportunities for growth and development. Furthermore, 46% said the lack of opportunities was a source of work stress. 

HR serves as an essential bridge between organizational goals and employee-level aspirations. HR managers are responsible for charting growth over the entire employee life cycle and advising business owners on areas of opportunity. That might include instituting five-year career plans and 360-degree performance reviews for all workers. 

Employee surveys and focus groups are also go-to tools for HR managers to understand where employees want support.

Create employee engagement opportunities

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Employee satisfaction isn’t just skill-related. Some 79% of employees said it’s important to have fun at work, according to Ultimate Software’s National Study on Satisfaction at Work. An HR manager’s ongoing dialogue with employees allows them to craft social initiatives that specifically address requests—and complaints. 

In addition to preventing burnout and creating work-life balance, events breathe life into your company culture and keep employees engaged with it. Here are some ideas an HR manager might suggest: 

  • Weekly employee recognition
  • Guide to local hotspots for new hires
  • End-of-week happy hour
  • In-office areas for socializing
  • Team-wide celebrations
  • Free yoga classes 
  • Time off to volunteer

Resolve employee disputes

In the previously mentioned survey, 75% of employees said they’d stay longer with a company that listens to their concerns. Startups are naturally feedback-welcome environments, but it’s especially crucial that employees feel the same comfort level when it comes to workplace grievances.

Without a formal HR department, managers and employees create their own norms and self-regulate behavior, which can easily lead to interpersonal disputes. At worst, the lack of oversight can open the door for abuse, discrimination, or sexual harassment.

In matters of employee relations, HR serves as a neutral third-party within your small business. Human resources creates and controls the conflict resolution process. As mediators, they’ll take the necessary actions to make sure all perspectives are heard and outline a comprehensive disciplinary system.

Create and monitor performance reviews and improvement plans

Performance management is another critical aspect of an HR strategy. You may work closely with an HR manager to craft an in-depth performance review template or allow the manager to handle the process entirely. Regular performance appraisals are key for both new and long-term employees. 

If an employee is struggling with performance issues and small steps haven’t helped, a performance improvement plan (PIP) is another HR tool. A PIP is a detailed list of performance goals—such as answering all customer support requests within two hours—with concrete ways the employee will achieve it.

The employee, manager, and HR professional often work together to craft a PIP. From there, it’s usually HR’s responsibility to check in with the employee regularly. 

Oversee employee pay and benefits

HR managers often oversee benefit management in addition to other tasks. They may administer payroll to full-time employees, as well as part-time workers and contractors. They're responsible for providing the correct benefit information to employees, and notifying them of delays or changes. 

At the strategic level, HR managers will suggest additions to your benefit packages, like unlimited paid time off or covering commuting costs. They can also help trim your labor costs by negotiating better health insurance rates. Regularly assessing wages against the labor market and industry average is another way to keep employees satisfied. 

Create and communicate clear workplace policies

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From dress code policies to vacation request guidelines, an HR professional clearly describes and communicates company policies. They'll likely compile all of these rules and procedures into one employee handbook that’s reviewed regularly.

They'll also ensure that federal and state laws are reflected in your employee handbook, and updated accordingly. Policy documents can be created from scratch or built using templates from the Society for Human Resource Management (SHRM). 

Maintain accurate HR records

There are certain records that businesses must maintain to comply with federal, state, and local laws. You'll entrust an HR professional with creating, documenting, and securely storing your employee paperwork. This is especially important for filing payroll taxes correctly and avoiding IRS penalties.

Here are some commonly implemented HR forms:

  • New hire reporting forms
  • Business expense reimbursement forms 
  • Company policy acknowledgments
  • Business tax forms
  • Receipt of company property
  • Performance and discipline documents

Questions to consider when selecting an HR manager

We’ve now answered the question, “What does human resources do?” You may have decided it makes sense to hire an HR professional for your business.

As we’ve detailed in this article, human resource management requires many different skill sets. It’s common for HR professionals to specialize in one area of expertise, such as talent development or health care law. 

You may see titles like HR generalist, HR specialist, or chief HR officer. They may have a bachelor's degree or master's degree, or no formalized training.

Here are several questions to help you match your business needs with HR roles: 

  • Is your business quickly growing? Look for someone who has HR management experience with a workforce larger than yours.
  • Will you have enough work for them? If you only need someone to take data entry off your hands, the role is more appropriate for a junior HR generalist. 
  • How much can you afford to pay them? The average salary for a human resources manager is over $78,000. Will the benefits of adding a strategic planning partner balance out? 

HR professionals offer a range of skill levels and specializations. How they fit into your business depends on the gaps you’re looking to fill.

Building a better, modern workplace

Startup founders might not see the need for formal human resources management. In a fast-moving, revenue-driven environment, self-accountability and culture preservation may take priority over cementing workplace processes into place. 

But changing employer requirements and employee expectations call for a thoughtful and strategic way of approaching human resources. There's no one way to integrate HR management into your business. If you're unsure of where to start, it's worthwhile to contact an HR consultant for direction.

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