The 12 Key Functions of Human Resources

HR has a number of important functions in the organization. These include recruitment, performance management, learning and development, and many more. In this article, we will explain the 12 key functions of HR.

But first, a definition. If we want to understand the functions of Human Resources, we need to understand what Human Resource Management (HRM) is.

According to Storey (1995), HRM is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques.

In this article, we will go over the 12 functions of Human Resources and explain how they help move the organization forward. These functions are:

Let’s dive right in.

1. Human resource planning

The first function of HR is all about knowing the future needs of the organization. What kind of people does the organization need, and how many? Knowing this will shape the recruitment, selection, performance management, learning and development, and all other HR functions.

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Human resources planning is similar to workforce planning. Both focus on where the organization is today and what it needs to be successful in the future.

2. Recruitment and selection

The second HR function involves attracting people to work for the organization and selecting the best candidates.

Attracting people usually starts with an employee brand. Being an attractive employer has plenty of advantages – just as it is the other way around. A good example of the latter is the tobacco industry which struggles to attract talent due to its tainted reputation.

With a strong employer brand and the right sourcing strategies, you’re already halfway there. Once candidates apply, selection is an HR instrument to pick the best qualified and highest-potential candidates. Technological developments in recruitment have gone very fast and as a result, there are different types of recruitment tools for each part of your recruitment funnel.

3. Performance management

Performance management is essential in ensuring that workers stay productive and engaged. Good performance management involves good leadership, clear goal-setting, and open feedback.

Performance management tools include the (bi)annual performance review, in which the employee is reviewed by his/her manager. It also includes 360-degree feedback tools in which peers, managers, subordinates, and sometimes even customers review the employee’s performance. These kinds of tools can be very helpful in providing feedback.

Performance management is also an instrument to close the gap between the workforce you have today and the one you want to have tomorrow. One of the best ways to build your future workforce is through learning and development (L&D).

4. Learning and development

Enabling employees to develop the skills they need for the future is an essential responsibility for HR. This is also related to the first HR function we listed, in which HR bridges the gap between the workforce today and the workforce needed in the near future.

Traditionally, organizations have a set budget for learning and development. This budget is then distributed among its employees. In some countries, this fee is mandatory. In the UK, for example, companies with an annual pay bill of more than £3 million pay a mandatory rate of 0.5% designated for the professional education of their employees.

In other countries, like Belgium and the Netherlands, L&D falls under the employer’s responsibility to take care of its employees. In a third group of countries, like the US, this is an almost unregulated territory.

Despite the differences in regulation, almost all employers understand the value of investing in the (future) skills of their employees. It’s the responsibility of the HR department to lead these efforts in the right direction.

5. Career planning

The fifth function of HR is career planning, guidance, and development for employees, together also referred to as career pathing.

Showing employees how their personal ambition can align with the future of the company helps to engage and retain them. For the organization, there are the benefits of better succession planning, higher productivity, and a stronger employer brand.

6. Function evaluation

Function evaluation is a more technical role of HR that involves comparing various functions in terms of qualification, the quality, and availability of workers, job location, working times, the economic situation, job responsibility, and how much value this job adds to the organization. The idea behind function evaluation is that similar jobs should be rewarded similarly.

There are different ways of internally ranking functions.

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Ranking method: a method in which subject matter experts rank functions in terms of how much they contribute to the organization as a whole. Functions are paired and raters have to decide which one is more valuable. This is done with all functions and based on the outcome, a ranking is established.
Classification method: jobs can also be classified in different categories using classification methods. In this case, jobs are categorized and then ranked within these categories to come up with a ranking. Categorizations can include education, experience, the degree of specialized skills needed to do the job, the degree to which these skills are in-demand, and so on.
Points method: jobs are categorized according to the factors the organization believes contribute most to its success. Points are then awarded to each category for every job. These categories can include key competencies, like problem-solving, technical knowledge, communication and influencing skills, innovative capability, business acumen, and so on. These competencies will differ per organization
Personal method: in this method, the job itself is not evaluated but the person doing the job is. Here, employees are rewarded based on their personal skills and competencies.

7. Rewards

Rewarding employees for their work is a function that is impossible to miss. Rewards include salary but also growth and career opportunities, status, recognition, a good organizational culture, and a satisfying work-life balance.

The total rewards framework shows that rewards are more than just money. They can also be relational and psychological outcomes. For example, fantastic colleagues and meaningful work are also rewarding to employees. The monetary reward of the job consists of financial rewards and other (secondary) benefits.

AIHR-Elements-of-Total-Rewards (1)

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Rewards are thus much more than just financial. Here is a non-exhaustive overview of total rewards:

Base salary
Performance-based-pay
Bonuses
Social environment
Job security
Status
Alternating work
Autonomy
Growth opportunities
Feedback
Formal and informal development opportunities

Functions 1 to 7 all fall within the scope of what’s called talent management; they aim to attract, develop, motivate and retain (high-performing) employees.

8. Industrial relations

Another function of HR is maintaining and cultivating relationships with labor unions and other collectives, and their members.

Unionization is still very prevalent in Europe. In 2015, 92% of employees in Iceland were a member of a union, followed by Sweden (67%), Belgium (55%), Italy (37%), Ireland (27%) and Canada (27%).

Maintaining good relations with unions will help to spot and resolve potential conflicts quickly and will also be beneficial in more difficult economic times when layoffs or other actions are required.

9. Employee participation and communication

According to Dave Ulrich, one of the key roles of HR is to be a credible activist for the employees. Employees need to be informed and heard on different topics that are relevant to them. Communication relates to spreading information relevant to employees.

10. Health and safety

HR plays an important role in creating and implementing health and safety regulations. Making these regulations part of the company culture is one of the main functions of HR.

A famous example is oil company Shell where it is forbidden to walk the stairs without holding the railing – also in the company’s HQ. This is part of Shell’s ‘Goal Zero’, which stands for zero accidents. Although holding the railing is much more important on an oil platform, safety is such a big part of the company culture that safety roles are applied everywhere.

11. Personal wellbeing

HR has a function in assisting and taking care of employees when they run into personal problems. Personal wellbeing is about supporting employees when things don’t go as planned.

12. Administrative responsibilities

The final function of HR is its administrative responsibility. These include personnel procedures and Human Resource Information Systems.

Personnel procedures involve the handling of promotions, relocations, discipline, performance improvement, illness, regulations, cultural and racial diversity, unwanted intimacies, bullying, and so on.

For each of these situations, policies and procedures need to be developed and followed to successfully comply with the requests, or overcome these challenges.

Human Resource Information Systems (HRIS) store employee data. These systems need to be purchased, implemented and managed so the data can be used for better decision making.

Scope—This toolkit provides an overview of staffing the human resource function to align it with the organization’s overall business strategy. Whether the HR function is staffed in-house or outsourced, this article addresses key considerations in developing a framework for implementing and evaluating the effectiveness of both approaches to HR staffing.

Overview

In the past several decades, the human resource (HR) profession has evolved to become an integral component of the organization. As the HR department's role and the value HR brings to the organization continue to change, the way in which HR is staffed should also evolve.

This toolkit addresses actions necessary to develop a framework for strategic HR staffing:

Understanding the characteristics of a strategic HR function.
Creating an aligned HR structure based on HR strategy.
Considering internal versus external HR responsibility sourcing.
Staffing internal HR functions.
Outsourcing HR functions, such as selecting providers and managing outsourcing relationships.
Assessing the effectiveness of HR staffing.

Background

The role of the HR professional has changed dramatically along with the workforce and economy, and that evolution will continue as machines and technology replace tasks once performed by humans. Tomorrow's HR leaders will need to think bigger and broadly, and they'll have to be tech-savvy and nimble enough to deal with an increasingly agile and restless workforce. See HR 2025: 7 Critical Strategies to Prepare for the Future of HR.

HR departments are increasingly mobilized to offer organizations more than the transactional HR activities of record-keeping, payroll and employee benefits administration. According to Human Resources Management Policies and Practices in the United States, a report produced by the Cranfield Network on International Human Resource Management in collaboration with the Society for Human Resource Management, 70 percent of responding organizations said HR has a place on the board of directors, and 66 percent reported having a written HR management strategy. Responses also indicated that HR is taking sole responsibility for major policy decisions.

See: Engaging in Strategic Planning and Practicing Strategic Human Resources.

Staffing the HR function to enable the HR department to play a strategic role requires an organization to do the following:

Establish a framework for staffing that encompasses that objective.
Decide which HR functions should be staffed internally and which should be handled externally.
Select or develop internal HR staff members with the competencies needed to perform well in a strategic HR environment.
Select and manage HR outsourcing partners who will provide HR functions efficiently.
Evaluate key indicators of HR staffing effectiveness.

Developing a Framework for Strategic HR Staffing

To staff the HR function strategically, an organization needs to be aware of the essential elements of a strategic HR department in order to select an appropriate department structure and to determine which HR responsibilities are to be sourced internally or externally.

Understand the characteristics of a strategic HR function

Organizations that have integrated their HR functions to address the business strategy—and are considered to be world-class in HR—typically:

View the transactional aspects of HR as an important—but not a core—competency.
Outsource administrative and transactional HR work to focus on strategic HR work and reduce costs.
Make significant investments to attract and retain top talent using effective employee recruitment and training programs.
Use emerging technologies to facilitate integration with employees, customers and suppliers.
Install web-based self-service for greater personalization and more efficient integration.
Recognize the importance of consistent data availability for faster, more informed decision-making and improved service levels.

Create an aligned HR structure based on HR strategy

There are numerous ways to structure an HR department to meet its goals. The choice of structure should be based on a variety of factors, including the desired degree of strategic impact, the speed of change in the industry, the resources available to the HR department, the level of talent in the HR department and the HR strategies used by competitors.

Centralized: A strong corporate HR office that serves as a central decision-making authority and supplies HR services throughout the organization.
Decentralized: Autonomous HR functions housed in separated business units (e.g., by product line or geography) that operate and make decisions mostly independently of the other units.
Mix of both/matrix: A shared, centralized corporate HR body combined with other relatively independent, localized HR functions that benefit from both centralization and decentralization.
Outsourced: HR structures that primarily use external brokers and networks to perform the HR function.

Within the first three structures, common HR service delivery methods include:

Centers of excellence. Specialists in areas such as staffing, compensation, training, benefits and labor relations offer services across the organization upon request to executives in business units.
Shared services. Self-service or call center operations promote HR expertise and deliver improved services across the organization. This model relies on the division of HR tasks and expertise.
HR business partners. HR professionals operate as internal consultants assigned to heads of divisions or otherwise embedded within business units. Arguably, this approach can have the greatest influence on the organization's strategic success.

Research from Mercer indicates that high-performing HR functions incorporate facets of all three of these delivery methods.1

See How Centralized and Decentralized HR Department Structures Influence HR Metrics and 'Knowledge Is Power' for HR Business Partner

Consider internal versus external HR responsibility sourcing

HR department staffing decisions should align with business operating plans and should be analyzed on a risk-versus-reward basis to determine what activities should be retained or outsourced.

Those activities that add the greatest value should be handled internally using highly qualified HR professionals, whereas "high-risk, low-reward" HR tasks are good candidates for outsourcing. World-class organizations combine HR outsourcing with internal HR design, invest heavily in designing new HR roles, and place emphasis on selecting, orienting and training staff.

Although conducting business and managing a workforce involves many human resource activities, some HR functional areas are more critical than others to the organization's business strategies and operating plans. Organizations often prefer to maintain control over the following HR responsibilities, rather than outsource them to a third party:

Performance management.
Employee communication plans and strategies.
Policy development or implementation.
Strategic business planning.
Compensation and incentive plans administration.

These HR tasks may require the most in-depth understanding of the organization's workforce and may be the most difficult for a third party to perform competently on the organization's behalf.

Conversely, HR activities that are primarily transactional or administrative are prime candidates for outsourcing:

Payroll administration.
External recruitment.
Relocation.
Benefits administration.

See Outsourcing the HR Function and Small and Large Employers Outsource HR Duties Differently.

Staffing Internal HR Functions

Turning internal HR into a strategic asset is a top priority for organizations. To ensure that HR functions are handled effectively, internal HR leaders and staff should already possess or should acquire competencies associated with strategic HR performance. Accordingly, those in charge of staffing the HR function should carefully consider the pros and cons of retraining existing HR staff and hiring additional staff with the needed level of HR competency.

Identify HR competencies for strategic human resource management

Competencies are individual characteristics, including knowledge, skills, abilities, self-image, traits, mindsets, feelings and ways of thinking, that achieve a desired result when used with the appropriate roles. With its unique focus on the global HR community, SHRM developed and extensively validated, with input from more than 32,000 subject matter experts, a model that identifies the competencies needed to be a confident, successful HR professional.

According to the SHRM Competency Model, nine competencies are most correlated with high-performing HR professionals. Although HR professionals will vary in their proficiency at these competencies based on their level of experience, expertise and opportunity to develop, they must develop and demonstrate each competency when staffing the HR function.

The identified competencies are listed below, along with a brief explanation of what proficiency in this competency may look like:

Human Resource Expertise. The knowledge of principles, practices and functions of effective human resource management. Individuals at the highest level of this competency have a strong working knowledge of critical HR functions and incorporate an attitude of continuous learning, the application of best practices and the delivery of customized HR solutions.
Relationship Management. The ability to manage interactions to provide service and support the organization. Individuals at the highest level of this competency demonstrate the ability to establish credibility in a wide range of interactions, develop healthy relationships that promote individual and organizational success, and build an effective internal and external network.
Consultation. The ability to provide guidance to organizational stakeholders. Individuals at the highest level of this competency apply creative problem-solving to address business challenges and invite others to approach them with career and organizational concerns.
Leadership and Navigation. The ability to direct and contribute to initiatives and processes within the organization. Individuals at the highest level of this competency build a collaborative environment where solutions are generated while conforming to organizational culture. This competency requires leadership that builds consensus while making progress toward change.
Communication. The ability to effectively exchange information with stakeholders. Individuals at the highest level of this competency have a full range of well-developed communication skills that they use to effectively deliver critical information, gather information, and communicate with others of like and different perspectives. Communication is not limited to HR topics but rather encompasses the issues and concerns of the core business functions.
Global and Cultural Effectiveness. The ability to value and consider the perspectives and backgrounds of all parties. Individuals at the highest level of this competency are culturally aware and demonstrate nonjudgmental respect for other perspectives. The ability to work cross-culturally is well-developed, as is the ability to improve others' openness to varying opinions and mindsets.
Ethical Practice. The ability to integrate core values, integrity and accountability throughout all organizational and business practices. Individuals at the highest level of this competency have developed trusting relationships and are seen as credible because of their judgment related to confidentiality, consistently ethical behavior and ability to hold to a core set of values while making decisions under political and social pressures.
Critical Evaluation. The ability to interpret information to make business decisions and recommendations. Individuals at the highest level of this competency have developed the objectivity and critical-thinking skills that allow them to make sound judgments based on keen analysis, best practices and an understanding of preferred outcomes.
Business Acumen. The ability to understand and apply information to contribute to the organization's strategic plan. Individuals at the highest level of this competency have a strong understanding of the strategic relationship between HR and the core business functions. This understanding, combined with an understanding of the overall business environment and the various levers that affect the organization's success, make this HR practitioner a valuable contributor.

These competencies can be developed and demonstrated by HR professionals at all levels, from entry to executive. SHRM provides vital information for measuring and improving these competencies in the Competency Model, as well as a more complete list of the subcompetencies supporting each, which will be valuable to any HR professional.

See SHRM Competency Model FAQs.

Decide whether to retrain or hire new HR staff

When an organization has identified the competencies needed by internal staff to enable the HR function to operate strategically, the next step is deciding whether to retain and reskill some or all of the existing staff. HR leaders commonly use formal competency assessments and interviews to decide which staff members to keep during a transformation of the HR function. Sometimes organizations determine that retaining the HR function in-house requires external recruitment, and it may necessitate staff reductions and severance to install new recruits with higher-level skills in areas such as talent management and workforce planning.

Typically, high-performing organizations have set higher competency standards, have been more likely to use formal assessment processes to evaluate internal staff and have been more willing to hire externally. These employers also consistently invest more than their counterparts in HR skills training, including consultative skills training, which includes teaching staff how to diagnose problem areas, assess the scope of the problems and contract with internal customers to facilitate change.

Outsourcing HR Functions

Many organizations use outsourcing as a key element in staffing a strategic HR function. Although most organizations in this model outsource discrete HR activities, some organizations have outsourced the entire HR function. Obviously, employers should not outsource HR responsibilities just because the staff does not like a particular aspect of the overall job. However, the many compelling reasons to outsource HR functions include:

Enabling the retained HR department to eliminate transactional responsibilities and focus on more-strategic HR activities.
Reducing HR costs.
Jump-starting HR best practices that would take significantly longer if started from scratch internally.

See Outsourcing the HR Function and SHRM Human Resource Vendor Directory.

Despite the popularity and advantages of outsourcing, some organizations put a high value on the "human factor" in conducting their HR functions. Top reasons given by HR professionals for not outsourcing include:

A preference for developing expertise in-house.
A desire to retain control of HR functions.
Concerns that outsourcing would negatively affect customer services to employees.
Concerns that it would negatively affect company culture.

To avoid possible problems and achieve maximum value from outsourcing, organizations should:

Create an overall HR service-delivery model that integrates outsourced and retained HR.
Redesign HR processes and roles while upgrading retained HR staff's knowledge, skills and capabilities.
Increase line manager and employee readiness to capitalize on HR's new roles and capabilities.

Selecting providers

Providers of outsourced HR services should be carefully selected and managed. When evaluating potential HR outsourcing partners, each candidate should be assessed at a minimum on the following criteria:

Financial stability, to ensure that the service provider will stay in business over the long term.
Service record, so that the organization can depend on the outsourcer to address challenges and issues satisfactorily and in a timely manner.
Cost, while always recognizing that initial savings should not come at the expense of long-term service and support or increased expenses later on.
Technology leadership, to ensure that the outsourcer will be able to accommodate the organization's changing needs due to increased staff or geographic expansion.
Legal compliance, to ensure the outsourcing entity meets all legal requirements, including privacy and security of personal employee data.
Disaster recovery, to protect the data entrusted to the outsource partner and ensure that the data will be available to the organization, even if a technology malfunction, natural disaster or facility damage occurs.
Training, to ensure the success of conversion to an outsourced solution.

Managing the outsourcing relationship

Outsourcing to the right vendor—and using that vendor correctly—can save the organization money in the long run. The key to successful outsourcing of HR functions is to successfully manage relationships with outsourcing partners, which involves working with vendors collaboratively to establish trust and open communication. This can be accomplished by creating a formalized statement of expected benefits that includes quantitative and qualitative targets and by using established practices that have demonstrated good outcomes.

Some of the practices that help organizations obtain value from their outsourcing relationships include:

Having a formal, written vendor-governance strategy. This document should detail what activities should take place at each stage of the vendor life cycle and provide a step-by-step escalation sequence of actions designed to resolve issues when they arise.
Meeting vendors in person. This is especially critical at the beginning of the relationship but important throughout the life cycle. In-person meetings foster relationships and demonstrate the level of organizational commitment and investment.
Defining service-quality criteria clearly. A service level agreement (SLA) is a part of a services contract that formally defines the level of vendor service. An SLA should contain individual metrics for evaluating service quality. Organizations should limit the metrics to a manageable number, identifying the most essential and reviewing them frequently.
Striving for a mutually beneficial relationship. Vendors are in business to make a profit. Negotiating very low fees will almost certainly lead to poor service. Sometimes clients put themselves in an adversarial position with their vendors, which decreases the prospects for a harmonious and productive relationship.
Sharing information openly and taking actions as needed. Clients often maintain an "issues log" describing problems, what caused them and how they were resolved. Sharing such information with the intent of preventing problems can minimize the risk of developing more-serious difficulties.
Checking invoices for accuracy. Many HR outsourcing contracts have complex fee calculations, and consequently, billing errors may occur. Regular and thorough review of invoices reduces misunderstandings, errors and disagreements.

Evaluating HR Staffing Effectiveness

A key indicator used to measure the effectiveness of HR staffing is the HR-to-employee ratio. The staffing of an organization's HR function can also be evaluated by HR cost metrics, the return on investment (ROI) on outsourced HR functions, benchmarking comparisons or analysis of the competencies, and diversity of retained HR staff. See SHRM Benchmarking Services.

HR-to-employee ratios

The ratio of HR employees to all employees, referred to as the HR-to-employee ratio, is fundamental in understanding the relationship between the HR department and the rest of the organization. It can be a useful indicator of overall efficiency of HR services. This ratio measures the numbers of HR full-time equivalents (FTEs) for every 100 FTE employees in the organization and is useful when comparing the HR functions in organizations of differing sizes.

Organizations using the HR-to-employee ratio should keep the following points in mind when evaluating an HR department's efficiency:

HR outsourcing typically drives an improved HR ratio.
HR staff should identify nuances when comparing ratios across organizations.
HR professionals should compare the HR-to-employee ratio in their organization with similar organizations. Larger organizations typically have smaller HR-to-employee ratios. Smaller organizations may need proportionately more HR personnel to cover the baseline of HR's critical functions.
Different HR-to-employee ratios can be expected depending on the scope of the specific HR department in question. For example, an HR department that uses extensive HR practices, such as succession planning, training and organizational development to drive business results throughout all levels in the organization, may have a larger ratio than an HR department with a smaller range of responsibilities.
The percentage of HR staff occupying different roles can be affected by several factors. For instance, when an increased focus on talent management, organizational learning and change management exists, companies may need more employees in supervisory roles. And fewer HR employees may be in professional, technical or administrative support roles based on the extent of decentralization within the HR department.

Other metrics

In addition to the HR-to-employee ratio, HR staffing effectiveness can be assessed in the following ways:

HR costs. Calculations of HR costs take three forms: cost per FTE employee, costs as a percentage of revenue and costs as a percentage of total operating costs. Most computations of total HR costs include the complete compensation and benefits of HR FTEs, supplier costs, HR technology costs and corporate overhead costs. Though many companies still have costs of up to $5,000 or more per employee in HR administrative processes, world-class organizations are at or below $1,100 per employee.
Outsourcing metrics. Some of the potential qualitative benefits of outsourcing include improved response times and increased employee job satisfaction. In contrast, the quantitative benefits of outsourcing focus on money saved by outsourcing compared with performing HR functions in-house. These benefits should be expressed in dollar figures and will ideally contain an ROI realized over a period of time. Calculating the ROI can help determine how long it will take to achieve a 100 percent return on an initial outsourcing investment.
Benchmarking comparisons. An organization can compare its staffing effectiveness with similar HR functions in comparable organizations and with top-performing HR departments.
Competencies of the HR department's staff. An understanding of the competencies that contribute to an HR professional's effectiveness allows an assessment of the strengths—and the gaps—for each member of the HR staff. This assessment then identifies opportunities for professional individual growth and increased impact of the HR department across the organization.
HR department diversity. An HR department that reflects the diversity of its organization's workforce is better able to understand the differing perspectives and behaviors affecting the business.

People are a company’s most valuable resource. They’re also one of the hardest resources to manage successfully. Every employee comes to work with a unique set of abilities, needs, and expectations, yet they all need to pull together to drive success.

The role of human resource (HR) management is to assess the work required to achieve a company’s goals, put the right people in the right positions to do the work, and empower them to perform at the highest possible levels.

As anyone who has worked in HR will tell you, that’s as much an art as a science.

Overview: What is human resource management?

Human resource management is the recruitment, management, and development of employees to serve an organization’s goals. In most businesses, this function is overseen by an HR manager or director.

Larger organizations may employ a department of specialists in specific human resource functions such as recruitment, benefits administration, and training. Many organizations manage one or more of these tasks with HR software. Others may outsource HR functions, such as recruiting or payroll, to a vendor.

The science of employee management involves using people analytics to evaluate how well your company is leveraging its talent. By tracking key HR metrics such as job applications and acceptance rates, quality of work, attendance, and employee turnover, people analytics provide objective data to guide HR strategy.

The art of HR involves relational aspects of a company’s culture such as team dynamics, communication styles, autonomy, and transparency. HR managers are often called on to provide a sounding board for employees, resolve conflicts between co-workers, and help employees navigate change.

The 8 key functions of human resource management

Human resource management encompasses eight key functions.

Function #1: Recruiting and Hiring

Recruiting and hiring talent is one of the most important HR functions, and it goes far beyond attending job fairs and going through resumes. Workforce planning, writing job descriptions, advertising openings, screening and interviewing applicants, and helping managers make the best hiring decisions are all part of this critical HR function. HR managers need to do this while accomplishing the company’s wider goals of attracting a diverse, multigenerational workforce.

HR managers generally also provide support through the hiring and onboarding process, including making job offers, negotiating salary, and enrolling new hires in benefit programs.

Best practices for recruiting and hiring:

To get the right people in the right positions, observe the following best practices:

Distribute and sign handbooks: All personnel policies should be clearly spelled out in an employee handbook, and it should be required reading for all new employees. Communicate the important points in person and have employees sign a document confirming that they have read the handbook and agree to abide by its terms.
Sign a comprehensive contract: Contracts should clearly state the terms of the hiring agreement, including whether employment is at-will and whether the hire is a contract employee.
Reevaluate job descriptions with every hire: Every employee who holds a position changes it. Treat job descriptions as works in progress to ensure that the employees you hire today are a good fit for the job they’ll actually be doing.
Pursue diversity: Bias is often systemic rather than intentional. If you’re not getting diverse applicants, you probably need to cast a wider net. Look for job fairs, schools, and marketing platforms with diverse audiences.
Conduct exit interviews: Whether they were a bad fit or a great one, talking to employees who are leaving a position can give you perspective on the nature of the job and the kind of person who will succeed in it.

Function #2: Compensation Management

Compensation management includes establishing salary ranges for positions, placing employees within the ranges based on their qualifications, and adjusting pay to recognize milestones and accomplishments. It also includes managing performance incentives such as year-end bonuses and sales commissions. The HR manager may be responsible for setting corporate strategy and working with front-line supervisors and managers to ensure competitive, equitable compensation practices across the organization.

Best practices for compensation management:

Follow these steps to create an equitable compensation program:

Benchmark your compensation plans: To ensure that your pay is competitive, consult a reliable source such as the U.S. Bureau of Labor Statistics (BLS), which publishes wage data broken down by occupation and geographic area. You can also hire consultants or purchase surveys to use for salary benchmarking.
Audit salaries for bias: Setting policies and providing training isn’t enough to prevent bias from creeping into an organization’s pay. The only way to be sure your pay practices are equitable, and legal, is to conduct regular audits across gender, race, age, ability, and other characteristics protected by antidiscrimination law.

Screenshot of a wage data table from the BLS.

The Bureau of Labor Statistics provides salary data for all occupations and geographic areas in the U.S. Source: BLS

Function #3: Performance Management

Performance management is a continual process of evaluating how individual employees are performing, identifying areas of improvement, and recognizing achievement. Many organizations conduct performance reviews on a regular schedule, often annually, with additional reviews as desired by the employee or manager.

If an employee is underperforming or violating policy, employers may impose discipline or create a performance improvement plan with goals to achieve within a specific time period. For serious infractions, employees may be fired or placed on probation subject to firing. All disciplinary policies should be spelled out in the handbook, and managers should be trained to implement them accordingly.

Best practices for performance management:

A performance management plan helps all employees work to the best of their abilities. These practices will help:

Set clear expectations: Every employee should be working toward concrete, measurable performance goals. For example, if attendance is a key performance indicator, define good attendance. Is it fewer than three absences a year? Does it mean scheduling vacation more than two weeks in advance?
Include an initial performance review within 60 days: In most positions, sixty days is enough time to settle in and begin performing. Checking in with new hires gives the employee and manager a chance to assess the job fit, address any concerns, and make adjustments as needed.
Make performance appraisals a give-and-take: Use check-ins to gather feedback as well as give it. Is the employee happy in their position? Where do they see themselves going in the next year? What would they like to see improved?
Appraise continually: The contents of a performance appraisal should never come as a surprise to the employee. Front-line managers should be communicating regularly with their employees to correct deficiencies and recognize achievements.

Function #4: Benefits Management

According to the BLS, benefits make up approximately 30 percent of total employee compensation. Benefits that are provided as part of an employee’s compensation are known as fringe benefits. Fringe benefits have monetary value and are generally subject to taxation. Some examples include education benefits, child care assistance, and use of a company car. Administering employee benefits is a substantial part of the HR management function.

When evaluating your benefits package, it’s important to understand small business health insurance requirements and other mandates for employers.

Best practices for benefits management:

The following tips will help you cut benefits management down to size:

Take advantage of software: Many platforms exist that can reduce the administrative burden of benefits administration, including payroll software and comprehensive HR software such as Zenefits.
Ask employees what they want: You might assume that salary is your employees’ chief concern, while your employees might be willing to trade some of that compensation for flexibility. The best way to know is to ask. You’ll never please everyone, but at least you can assess your employees’ priorities and tailor your package to match.
Communicate the full value of your offerings: It’s easy for employees to forget that your investment runs deeper than the bottom line in their paychecks. Some employers provide annual benefits statements spelling out the full compensation costs for each employee.

Function #5: Professional Development and Training

It’s human nature to want to grow and learn new things, and employers who capitalize on that desire can reap substantial benefits. On-the-job training may include orientation training to introduce employees to company policies, procedures, and resources; training in job-specific skills and tools; safety training; company strategy meetings; and compliance training. Some companies provide education benefits to fund learning opportunities outside of work. These can range from conventions and seminars to college courses.

Developing employees requires an investment of employee time or benefit dollars. Yet education and training can pay off in higher quality, productivity, engagement, and retention. Deloitte recently identified the need to improve learning and development as the top-rated challenge among its 2019 Global Human Capital Trends, thanks to a tightening job market and the transformation of jobs due to technology.

Best practices for professional development and training:

To provide development opportunities that deliver results, consider these HR best practices:

Invest in critical skills: Some training is essential to your company’s performance. Safety and compliance training, for example, are key to protecting your employees. Skills training may be critical to production and quality. Make sure your company is covering all the basics required to properly equip employees for their work.
Consider program goals: Do you want to invest only in on-site training or open the doors to wider opportunities? Do you want to limit benefits to skills required for an employee’s current job, or broaden education to include training for future opportunities? Will benefits be available to all employees? Design your training program to meet specific company goals.
Measure results: Training assessments and employee surveys can help you evaluate training needs and the success of your offerings.

Function #6: Employee Relations

Employee relations are all the activities that influence a company’s relationships with its employees. Positive employee relations create a happy workforce, which can provide a major competitive edge. A recent study by the World Economic Forum found that happy employees were 13% more productive than unhappy ones.

So what makes employees happy? The best way to find out what your employees want is to ask.

Best practices for employee relations:

These practices lay the foundation for a positive employee relations program:

Look beyond pay: Numerous studies have shown that while pay is important, it’s not the primary driver of employee happiness. Prudential's recent Pulse of the American Workforce survey found that aside from compensation, employees valued flexible work schedules, opportunities to move into different roles, and supportive managers as the top motivators to stay with their employers.
Reward candor: You can’t give employees everything they want. And your employees can’t always tell you what you want to hear. Creating a culture where difficult messages can be heard and handled constructively is key to a high-performing work environment.
Use surveys: Employee surveys and other anonymous communication channels can help you gauge employee relations and identify areas for improvement. Responding to the results can further boost morale by showing that you took the feedback to heart.
Live your corporate values: Like any relationship, employee relations are founded on core values such as honesty, loyalty, fairness, and authenticity. Make sure your company’s values are embodied in your policies and practices.

Function #7: Worker Safety and Health

Providing a safe, healthy work environment is a critical function of human resource management. It includes tasks such as creating safety guidelines, providing employee wellness programs, and conducting emergency planning. Many insurers provide discounts on workers’ compensation and other business coverage to employers who implement safety programs. Wellness programs may reduce your healthcare premiums. Be sure to talk to your agent and take advantage of these benefits.

The U.S. Occupational Safety and Health Administration (OSHA) regulates workplace safety. They provide resources for small businesses such as an online hazard identification tool, safety program guides, and free on-site consultations.

Best practices for worker safety and health:

To enhance safety in your workplace, consider the following:

Appoint an employee safety leader: No matter the size of your company or the nature of your work, it’s important to have a point person for workplace safety.
Conduct emergency planning: From first aid stations to evacuation drills, your safety program should include measures to mitigate risks to your employees’ safety.
Address safety in every position: While jobs in industries such as construction and manufacturing require extensive safety training and protective equipment, even desk jobs involve physical hazards that should be addressed through formal safety guidelines.
Require 100% reporting: All accidents, no matter how minor, should be reported immediately to a supervisor and medical attention sought when appropriate. Some safety and accident data must be recorded and reported to the Equal Employment Opportunity Commission (EEOC).

Function #8: Labor Law Compliance

Finally, ensuring that your practices comply with state and federal regulations is critical to safeguarding your employees and your company. Your compliance program should include policies to prevent harassment or discrimination based on race, religion, sex, pregnancy, national origin, age, disability, and genetic information. These characteristics are protected under federal law. Many states also protect employees from discrimination based on sexual orientation and gender identity.

Harassment and discrimination complaints often center on hiring and firing decisions, pay equity, promotions, employee conduct, employee leave administration, relationships among staff, and retaliation for complaints.

In addition, there are laws requiring employers to provide leave for needs such as jury duty, military duty, pregnancy, illness, and disability, as well as laws governing employee breaks. The laws that apply to your business will vary based on its size and location. Check with your legal team to ensure that you’ve covered all of the requirements.

HR Functions