What are the 5 main areas of HR
Smart founders recognize that there is simply one component of their business that they could not exist without: their people. In return for their time and talent, employees expect their employers to pay them on time, supply meaningful benefits, and provide development opportunities and career growth. Human Resource functions exist to manage and facilitate every aspect of the working relationship between employees and their employers.
While every unique business requires unique HR department structure and functions, there are 5 standard functions of any HR department that work to support the way businesses and their employees connect and thrive, and these are the same 5 types of hr that are commonly outsourced. If you’re wondering, “What are the major HR activities and what do they involve?”, then you’re in the right place.
The 5 main areas of Human Resources
Human Resource departments exist to maintain many of the functional areas of HR like recruiting and maintaining talent, providing growth and development opportunities for the current team, and ensuring competitive compensation programs. Of course, there are many HR areas of specialization, but the core HR functions can be broken down into 5 distinct pillars:
1. Employee Recruitment
Whether a young business is looking for its first employee or a global organization is actively filling hundreds of open positions, recruiting the right candidates can be a time consuming challenge. On average, companies can expect to spend up to 36 days searching for talent. Well-equipped HR groups will have an organized process that can include:
- Finding potential talent via recruitment tools and networks
- Conducting phone screens and coordinating interviews
- Keeping records of conversations and candidate feedback
- Checking references, running background checks, and facilitating assessments
- Extending and negotiating offers
- Onboarding and training
Of course, not every company can justify employing an entire team dedicated to finding talent. In fact, only about 19% of companies are able to use in-house recruitment efforts. This is why many small to midsize businesses choose to outsource hr services like employee recruitment to companies dedicated to connecting talent with employers.
2. Compensation and Benefits
A good compensation and benefits strategy maintains sound wages for employees in cost-effective ways. Typically, professionals working within compensation and benefits will be responsible for developing and administering policies around:
- Salaries and compensation rates
- Bonus structures
- Sales commission rates
- Company-provided equipment, like vehicles and phones
- Medical, dental, and life insurance plans
- Retirement plans and contribution matching
3. Training and Development
As one of the most crucial functional areas of hr, this work includes managing the processes involved in developing employee skills and competencies. Companies can develop existing talent to broaden their skillset, expand their occupational expertise, and be prepared to assume more impactful roles at the company in the future. There are also critical costs to hiring external candidates; the average cost to fill an open position is roughly 6 to 9 months of the position’s salary.
Professionals in this area may dedicate their time to facilitating employee training and seminars, maintaining budgets for conferences and higher education, and even identifying deficiencies within existing talent to improve their productivity and increase effectiveness.
4. Performance Management
As a company’s roster grows, so does the need to maintain a solid grasp on employee performance in order to identify and foster internal talent, pinpoint areas for development, and even signal low performing employees that might be hurting the business.
Performance management refers to the continuous process of measuring and developing employee performance by setting individual goals that align to the overarching business strategy of the company. This is usually done through a clearly defined, multi-step review cycle that includes one-on-one interviews, midyear reviews, peer feedback, and self-assessments. Most companies that have a defined performance management process utilize third party tools that collect and organize assessments, manager reviews, and more.
Many leaders only manage performance when there is an employee issue or barrier, but employees also rely on performance management strategies to help them become better equipped and more effective in their roles. In fact, 70% of US employees say that they are likely to leave their current company for a new company known for investing in employee development.
5. Compliance and Legal
Every employer must maintain safe work environments for their employees and abide by applicable state and federal labor laws. Without expertise in these subjects businesses not only may be at risk of legal consequences, but they are also failing to provide a safe and fair workplace for their employees. HR departments own the responsibility to keep up-to-date with changing laws and regulations, benchmark against them, and implement changes to remain in compliance.
As compliance standards and legal requirements are constantly updated, this isn’t a simple task. Many compliance and legal professionals are barred lawyers, with intimate knowledge of their area of legal expertise. For small and midsize businesses, keeping headcount for these professionals isn’t easy to justify. This is when outsourcing third party HR services that stay up-to-date about changing compliance and legal standards can benefit companies without dedicated internal resources.
The many functions of Human Resources groups contribute to the complex range of tasks and responsibilities that every business is expected to provide their employees. That’s a large task to accomplish, especially for small and midsize companies without large HR teams. This is one of the reasons Milestone Business Solutions exists – to provide companies with exceptional outsourced HR service support through dedicated HR teams, high-end talent management systems and tools, compensation and benefits oversight, and more.
We provide our clients with a service that enables them to focus on the successful operation of their business at a fraction of the cost of maintaining an entire internal team. Reach out today to learn more about how Milestone Business Solutions can make your company and employees better!
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