Building a Human Resources Department on a Budget

Human resources (HR) is the portion of a company that deals with finding, screening, recruiting, and training job applicants as well as administering employee-benefit programs. The term “human resource” was first used by John R. Commons in his 1893 book The Distribution of Wealth, yet the concept was not integrated into actual job positions until the early 20^th century as a way to manage disputes between employers and their employees.

Though HR departments are utilized differently depending on the type of business they serve, they are essential in adding value to companies. Research conducted by The Conference Board, an economic think tank, describes the ways that an HR department can benefit an organization, including utilizing employees effectively; developing competencies that enhance performance and creating incentives to achieve those competencies; modifying organizational workflow; and integrating training and other resources to remain technologically advanced and competitive.

Types of Human Resource Employees

Human resource departments follow similar hierarchical reporting structures that businesses do. The lowest level of HR employees are specialists and recruiters. Specialists complete administrative tasks and process payrolls while recruiters post job ads, conduct preliminary interviews to screen out candidates, and coordinate background checks for potential employees. Above specialists and recruiters are HR managers and executives.

HR managers are typically the next level up in the hierarchy. In addition to overseeing the progress of specialists and recruiters, they look for ways to modify and improve employee conduct procedures, benefit plans, and employee complaint processes. HR managers often hold a bachelor’s degree in human resources, and their median salary is $67,000.

HR executives are a level above HR managers. They are responsible for finding new ways to attract the best talent and ensure that current employees are satisfied and set up for success. HR executives can earn anywhere from $128,000 – $600,000, and they typically hold a bachelor’s or master’s degree in human resources.

Executives complete both small-scale and large-scale analysis. Small-scale tasks include addressing staff complaints and making sure businesses are staying in compliance with local and federal laws. Executives also develop company benefit programs and negotiate with unions. Depending on the size of the company, there might also be numerous HR executives who specialize and divide tasks based on the needs of the organization.

Another component that HR executives manage is looking broadly at company policies and examining if they are working effectively for employees. Executives need to have a deep understanding of the company’s goals and analyze how employee policies are helping to reach those goals. They must also be able to synthesize a variety of information and provide concise information and strategies on how to move forward.

Hiring Human Resources Employees

Though there is no doubt that a human resources department offers many benefits for employees and businesses alike, startup companies often neglect to hire these employees due to high costs or not recognizing the importance of an HR department.

Companies struggling to keep costs low can turn to Professional Employer Organizations, or PEO’s. Sometimes referred to as employee leasing companies, PEO’s act as a co-employer and handle administrative tasks such as payroll, taxes, and employee benefits. They are contracted by the company who outsources these tasks to the PEO. These secondary companies typically offer services for companies with anywhere from 16 to 80 employees, and it is estimated that 2.7 to 3.4 million employees are covered by a PEO.

While the decision to hire a PEO might make more financial sense, there are drawbacks to working with a third-party. One disadvantage is that hiring a PEO lessens the control that the primary company has over its employees, since the company is legally required to follow the policies set up by the PEO.

Further, PEO’s are not concerned with defining and maintaining the company’s culture. Culture refers to the attitudes and behaviors of the employee, and it establishes what employees value and how they will work to contribute towards the vision of a company. A clear culture helps employees understand their role in the company and shows them how their actions make a difference within the company. Third-party vendors such as PEO’s are a completely separate entity from the company and should not be responsible for such important aspects of a company.

Consultants as a Hiring Alternative

On a similar pay scale to PEO’s, consultants can help build a strong human resources foundation without actually hiring human resources employees. Consultants are responsible for setting up the framework of a human resources department which includes working with the company to create a mission statement, writing an employee code of conduct, deciding on company policies, and other tasks necessary for startups to be successful.

Consultants are also beneficial because they can act as an “on-call” resource after the groundwork has been setup, helping with hiring and maintaining employee satisfaction. Best of all, the consultant will already be familiar with the company’s mission and vision and can recruit more effectively based on the company’s needs.

Bhr Consulting

With Bhr Consulting, you have a trusted partner focused on helping you succeed. Bhr is a new, innovative HR practice designed to address the needs of growth-oriented companies and small businesses. Free from crushing overhead, Bhr enables businesses to focus on their core competencies while reducing legal and reporting risk.