Human resources, or HR, is the department responsible for handling employee matters. HR manages virtually all aspects related to your business’s human capital, or personnel. The department’s duties are diverse, ranging from onboarding and paying employees to performance management and termination.
As you grow your business, you may find yourself wondering whether you actually need a human resources department or provider. HR services are essential to any business with employees. Between helping your company remain in compliance with labor laws and managing employee relations, HR is a key component to long-term success.
To help you implement an effective human resources solution at your business, we’ve put together a comprehensive overview. Read on for an in-depth explanation of HR and why it’s important to your business, or use the links below to go directly to a specific section.
- Why is human resources important?
- What are human resource services?
- What is human resources responsible for?
- HR laws and regulations
- Common human resource management mistakes
- How to manage HR as a small business
- Ways to manage HR
A primary function of human resources is to manage employee relations. But can’t you just handle that as the business owner? Not necessarily. The role of HR isn’t as simple as just handling the hiring, firing, and paying of employees; there’s a lot of specialized knowledge needed.
For instance, HR must remain up to date on all the latest employment laws on both the state and federal level. Not only that, but they need to stay current on industry trends, learn dispute resolution skills, and know how to respond to workplace issues.
Attempting to handle these tasks on your own without the necessary experience could open you up to a lot of liability. Plus, you may be limited on time, and as your company grows the functions of HR only become more demanding. That is, unless you have human resource services to assist you.
Human resources and human resources services are not the same. While HR typically refers to an internal department or personnel, HR services are a substitute for traditional HR roles.
HR services are an external solution that leverages the latest technology to help you manage HR responsibilities. Human resource services combine all the aspects of HR into one tool, making it easier for small businesses to handle these responsibilities. In a nutshell, HR services make it possible for you to handle HR tasks via an organized online platform with minimal time commitment.
With QuickBooks HR services, not only do you get access to online HR tools, you can also consult with a certified HR advisor. It’s like having your own HR department for only a fraction of the cost.
HR is responsible for a broad range of tasks. These responsibilities encompass various aspects of supporting employees and their success, performance, and satisfaction at the company. Some of the primary responsibilities of HR include:
- Recruiting and hiring employees
- Employee onboarding
- Processing payroll
- Enforcing personnel policies
- Creating and updating policies
- Maintaining employee records
- Developing and implementing employee benefits
Let’s dive a little deeper into each of these responsibilities so you can get a better sense of the function HR serves.
Recruiting and hiring employees
HR is responsible for talent management, meaning that they help you find (and keep) high-quality candidates for your company. This includes:
- Helping refine job descriptions and duties
- Creating and managing job listings
- Screening applicants
- Setting up interviews
- Facilitating job offers
- Gaining approval for and running background checks
- Providing hiring documentation
While this might seem fairly straightforward, there’s a lot of time and effort that goes into managing the recruiting and hiring process.
HR typically handles employee onboarding, which can include the following tasks:
- Planning an onboarding schedule
- Preparing onboarding materials
- Collecting necessary documentation from new employees
- Setting up an employee file
- Welcoming new employees
- Establishing training programs
Enforcing personnel policies
An HR professional should have a solid understanding of appropriate policies and how to implement them without crossing boundaries. To enforce personnel policies, HR may need to:
- Research the latest legislation pertaining to each specific policy
- Set guidelines for enforcing policies
- Handle dispute resolution
- Determine how and when to implement disciplinary actions
- Follow the correct steps for termination of an employee
HR is responsible for ensuring employees get paid on time and in full. Conducting payroll generally entails:
- Processing payroll
- Distributing paychecks or facilitating direct deposit
- Handling payroll disputes
- Managing retroactive payments
- Documenting pay raises
- Updating employee pay so payroll is processed correctly
Creating and updating policies
HR also typically handles establishing personnel policies. This is because putting policies in place and enforcing them can get complicated quickly due to strict, ever-changing laws that pertain to personnel. This can include setting:
- Sexual harassment policies
- Nondiscrimination policies
- Meal and break policies
- PTO policies
- Employee conduct policies
- Dress code requirements
- Pay policies
- Attendance requirements
It might seem easy enough to create policies for your business—after all, if you’ve built your business from the ground up, you already have. However, there are many factors, such as fairness, legal precedents, and standardization, to consider when developing new policies. That’s where HR-specific knowledge comes in handy.
Maintaining employee records
Companies should have comprehensive employee records for every individual who works or has worked (within the past three years) for the company. HR tasks related to employee records include:
- Creating an employee file
- Updating the file as needed with new documentation
- Having employees sign necessary documents
- Recording pay raises
- Keeping track of any disciplinary actions
- Adding employee performance documentation after each review
Developing and implementing employee benefits
Benefits are a major factor in job offer acceptance or rejection. Since HR is responsible for recruiting, it only makes sense they’d be involved in establishing the benefits package—with your input and final approval, of course. Responsibilities related to employee benefits administration may include:
- Ensuring employees are given the required amount of leave required by law (this generally pertains to sick time and bereavement)
- Determining PTO offerings
- Organizing healthcare plan options and 401(k) plans
- Facilitating benefit enrollment and renewal
- Keeping employees updated about changes in benefits
- Making recommendations on changes to benefits that can improve recruitment or employee retention
HR laws and regulations are in place to protect employees and ensure employers uphold these obligations when hiring or during employment. One of the most important aspects of HR is having a good working knowledge of these laws. Otherwise, your company could face serious consequences, including fines and employee lawsuits.
Workplace discrimination laws
Workplace discrimination laws ensure that all individuals are given equal opportunities. For example, companies are not allowed to discriminate based on:
- Race, color, religion, sex, or national origin when making staffing decisions
- Gender when it comes to equal pay for equal work
- Disabilities if the individual is qualified to do the job
It’s essential that you have a thorough understanding of what practices are considered discriminatory.
Most employee benefits are not required and may depend on the worker’s classification, hours, and other factors. However, certain benefits are required on the federal level or in certain states, such as:
- Workers’ compensation
- Sick days
- Social Security and Medicare contributions
- Disability insurance
- Family medical leave
Look into your state’s employee benefits laws to determine which benefits you’re required to provide.
Immigration laws prevent employers from discriminating based on nationality or citizenship status when hiring. They also require employers to ensure that anyone they’re employing is able to legally work in the U.S.
Workplace safety laws
The Occupational Safety and Health Act of 1970 (OSHA) requires employers to provide “safe and healthful working conditions.” This includes training, providing the right protective gear, notifying workers about potential hazards on the job, and keeping records of workplace injuries. Failing to meet these standards could result in severe workplace injuries that you can be held liable for.
Wage and hour laws
Wage and hour laws dictate the required rate of pay for employees and how workers are classified. This can include minimum wage regulations, when overtime is due, when breaks are required, and which employees are entitled to fringe benefits. Violating these laws even just once could result in fines of up to $10,000. Wage and hour laws may vary by state, so be sure to check your state’s regulations.
As we’ve mentioned, HR functions are entangled with all kinds of best practices, legal requirements, and complex tasks. So, inevitably, mistakes are going to happen—especially if you’re trying to tackle these duties on your own. Mistakes happen, but when it comes to your employees’ rights, pay, and employment status, there isn’t a lot of room for error.
Some of the most common human resources management (HRM) mistakes include:
- Missing important deadlines
- Not keeping accurate employee records and information
- Neglecting employee onboarding
- Making payroll mistakes
- Misclassifying employees
- Using poor recruiting practices
To provide context for how these mistakes can impact your business, let’s explore them a little further.
Missing important deadlines
A major aspect of HR is complying with the requirements of different regulating bodies. This also means adhering to many different deadlines all year, which can be hard to keep track of—especially for a busy small business owner.
From depositing your payroll tax payments on time to sending out W-2 forms to employees by January 31, there are a lot of dates to remember. Missing these deadlines can result in penalties, disgruntled employees, or even legal action against your company.
Not keeping accurate employee records and information
Many businesses keep poor employee records or dispose of them prematurely. This is a problem for several reasons. First and foremost, keeping employee records gives you a history to refer to when making decisions about the employee. From details like their start date and pay to performance information, keeping organized information about each worker is invaluable.
Not only are employee records important for your own purposes, but you’re actually required to hold on to them. In general, employers are expected to keep basic employee records for at least a year and payroll records for at least three years. However, these requirements can vary based on the state you operate in, so make sure to double-check before deleting employee records.
Neglecting employee onboarding
Onboarding is an important step in the hiring process. It can be tempting to do a quick introduction, have them fill out a few pieces of paperwork, and turn them loose on the first day. However, that’s not a very effective way to get them acquainted with your company.
An employee’s first day and how they’re integrated into the team can actually have a major impact on their experience—and your bottom line. The cost of replacing an employee can be as much as one-half to two times their salary. However, 69% of employees are more likely to stay with a company for at least three years after a great onboarding experience. So it’s in your best interest to make your onboarding process a priority.
Making payroll mistakes
Even if you only have a few employees, payroll involves a lot of moving parts. From keeping track of hours worked and pay rates for each employee to completing payroll, it’s not as easy as it may sound.
Payroll services can make a world of difference for a small business owner who’s in over their head with no HR help. With this online solution, you can automate most aspects of processing payroll and breathe easy knowing your employees are getting paid correctly and on time.
Classifying all employees properly is essential to correctly running payroll, enforcing policies, and setting expectations, but it’s often overlooked. There are several ways to classify employees, such as full time vs. part time and exempt vs. nonexempt, and the guidelines for doing so are strict. Misclassifying an employee could be grounds for an employment lawsuit, so it’s essential to ensure all employees are categorized correctly.
Using poor recruiting practices
Recruiting the right candidates is no small feat; however, it’s one of the biggest HR challenges small businesses face. From placing job ads that lack key details to failing to screen prospective hires, there are a lot of little mistakes to be made. These small missteps can add up to hiring people who are a poor fit or, worse, are a threat to your company.
Small businesses can manage HR internally or externally. In the early stages, you as the business owner are probably handling these responsibilities. However, it can be increasingly difficult as your business grows and you have more employees to manage.
Fortunately, there are a variety of solutions to help you manage your small business’s HR needs.
Managing HR with outsourcing or software allows you to remain compliant and minimize the burden of HR on you and your business. The best way to manage HR depends on your budget and the extent you want to outsource.
HR software services
With HR software services, you can manage all of your HR tasks online. With HR software like QuickBooks, you get access to innovative tools and technology that can automate a lot of your processes. Not only that, but we’ve partnered with Mammoth so you can receive guidance directly from an HR advisor.
Are HR software services right for your business? Let’s take a look at the pros and cons.
- Automation takes care of many of the small, repetitive, time-consuming tasks that eat up your resources each month.
- Sophisticated technology provides you with tools and a streamlined platform to make managing HR as simple as possible.
- With QuickBooks, you’ll gain access to HR advisors who can provide guidance, help you establish policies, and even create a handbook for you.
- You’ll need to take the time to set it up and learn how to use the software or train HR staff to do so.
- With software, there is always the potential for security threats. However, QuickBooks has implemented advanced cybersecurity measures to protect your data.
HR software is an easy, comprehensive solution that makes handling these responsibilities much more manageable for small businesses. Plus, it’s often much more affordable than outsourcing to another firm.
Professional Employer Organization
A Professional Employer Organization (PEO) is a company that provides HR outsourcing. You can outsource all aspects of HR to a PEO so it’s completely off your plate.
- It’s a comprehensive solution that takes over HR responsibilities on behalf of your business. This will free up your time and provide peace of mind that everything is being handled correctly.
- Since PEOs are a more robust firm, they can often secure more competitive benefits, such as lower-cost health care plans, for your employees.
- With a PEO, you have to relinquish some control. This is because they must become your employer of record, meaning they’re virtually your co-employer and you run payroll under their tax ID number. This means they can dictate some of your workplace and employee policies.
- The cost may be higher for a PEO. PEOs will typically require an administrative fee plus an additional percentage of your total payroll.
PEOs are a good solution for small businesses that don’t have the time, experience, or resources to handle HR internally.
Human Resource Outsourcer
A Human Resource Outsourcer (HRO) is a service provider who can take over all or some of your business’s HR responsibilities. HROs are usually a better option if you have an HR department or support in-house. An HRO can complement their efforts.
- Since HROs do not become a co-employer, they allow you to maintain more control over your HR policies.
- HROs offer flexibility and convenience by allowing you to decide which tasks you want them to take on and which ones you want to keep in-house.
- Some of the responsibilities of HR are still on your plate, which can sometimes lead to miscommunication or discord between internal and external HR staff.
- You’re responsible for liabilities when it comes to employment-related issues and handling employment taxes in-house.
HROs are typically recommended for medium to large businesses with the ability to support an internal HR department. However, that doesn’t mean small businesses can’t use an HRO; you just have to determine whether it’s the most plausible solution.
HR plays a vital role in your business. That’s why it’s essential to find the right HR solution to help you manage these responsibilities, remain in compliance, and keep your employees happy. With QuickBooks HR services, HR management becomes easy and affordable, allowing you to manage your HR tasks more efficiently and protect your business’s best interests.
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