What is HR? A complete guide to human resources

It may just be two words – or even two letters – yet human resources (HR) involves so many aspects that are important to running a business. From ensuring that your employees get paid correctly, to developing training programmes, to monitoring compliance with the latest rules and legislation (such as Covid-19 guidance), the scope of HR & Payroll is both broad and constantly evolving.

By the end of the article, you’ll have learned what exactly HR is, and why it’s so crucial to businesses. This includes learning who the key team members are in an HR department, and what they specialise in.

We’ll also provide insight on HR software and how it could help your business, along with answering some of the key questions you may have about HR in our dedicated FAQs section. Plus, we’ve gathered comments from HR experts to help you further expand your knowledge.

What is HR, and why is it important?

The HR team ensures that your business is compliant with all the legislation and guidance that surrounds employing people, including contracts, health and safety, payroll, and recruitment.

Essentially, HR is responsible for designing and maintaining the functions and processes that allow an organisation to run effectively, which helps to keep a business competitive within the job market and the sector in which it operates.

While these ideas may form the foundation of HR, its scope goes beyond this. HR needs to meet both British and international standards, and includes areas such as diversity and inclusion, as well as employer branding and employee benefits.

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What does HR do?

What is the role of HR? Well, first of all, it’s important to note the term encompasses a huge variety of tasks. Below, we offer a breakdown of some of the most common aspects of HR.

Kate Palmer, HR advice director at Peninsula, states: “An in-house or external HR professional’s role is extensive, and spreads wider than recruitment, onboarding, and resolving staff disputes.

“HR can be incredibly useful for different aspects of the business, including keeping the vast number of employment law provisions in mind when tackling everyday elements of the working relationship, as well as awareness of the different tribunal claims that can be brought by an employee and how this may come about – especially since tribunal fees were abolished in July 2017.”

Auto enrolment and pensions

The HR team is responsible for meeting your company’s pension obligations to its employees.

The government’s automatic enrolment scheme has made it mandatory for employers to automatically enrol staff (that are eligible, based on certain criteria) into a pension scheme, and to make contributions into it.

Workplace pension schemes and the auto-enrolment scheme have strict rules governing what employers are and aren’t allowed to do.

Managing the systems for enrolments and pensions is a task for HR. If you or any members of your HR team are unsure about employers’ pension duties, The Pensions Regulator has a tool that could help you.

Diversity and inclusion

Another aspect of running a business that HR is responsible for is ensuring compliance with all relevant anti-discrimination laws. However, creating a truly diverse and inclusive working environment goes beyond this, and that’s where HR professionals can further offer their expertise.

Although diversity and inclusion isn’t the sole responsibility of HR, the HR team can champion and lead the way in promoting best practice in this area. This includes helping a business work with a diverse range of vendors, suppliers, and other third parties.

As well as this, it can include creating the space for employees to discuss inclusion more widely. Increasingly, organisations have groups where individuals from a range of communities can connect and raise awareness within the business. These may be set up by HR, although this isn’t always the case.

Health and safety

Health and safety is a broad-ranging topic, covering everything from workstation set-ups to ensuring staff are taking necessary breaks.

An HR team can manage this important aspect of business operations. An organisation’s health and safety responsibilities include:

• Conducting risk assessments
• Protecting staff from fire or other hazards
• Looking after staff welfare and well-being
• Providing ergonomic chairs and workstations to work from (to ensure safe posture and avoid injuries)
• Preventing and avoiding sickness or accidents from work-related causes
• Having the correct insurance, e.g. employers’ liability insurance

Health and safety in UK workplaces is independently regulated by the Health and Safety Executive (HSE). HR can ensure that your business stays compliant with the latest relevant legislation, and that your business is providing its team members with a safe environment in which to work – whatever your business size or industry.

Payroll

Employers are required to follow certain procedures when paying staff, and this falls within the remit of HR.

In the UK, this means following PAYE (Pay As You Earn) – the system that HMRC uses for collecting taxes and NI contributions from employees’ pay.

This includes ensuring that your business is registered as an employer with HMRC, usually before any PAYE payments have started. Payroll is generally conducted on a monthly basis, but other timeframes (such as weekly payrolls) are also possible.

When it comes to managing payroll, HR can choose which payment system to use, as well as actually sending payments through it. They’ll also create payslips and manage any necessary deductions, as well as handle pay while staff are absent, or at the end of a contract.

This helps your business stay compliant with HMRC regulations, as well as keeping your team members happy.

Performance management

Performance management isn’t an easily defined area of HR, as there are various approaches and methods that can be used.

However, in general, performance management aims to monitor the behaviour and output of team members against set criteria and objectives.

These are often created in consultation with a combination of managers, employees, business leaders, and HR professionals, and are ultimately in place to drive success across the organisation.

This includes both managing promotions and rewards, as well as providing additional support to staff if needed.

Recruitment

HR can handle the entire process of hiring new team members, beginning with writing the job advert, through to interviewing candidates, through to overseeing the onboarding process of a new hire.

This includes ensuring that a job description complies with relevant laws, and attracts the widest range of qualified applicants.HR will also help with interviews and manage communication, including between candidates and hiring managers.

Once the successful candidate is selected, HR is responsible for ensuring that the new team member has everything they need to get started in their role, such as contracts, handbooks, and other essential information.

Time and attendance

HR includes managing rotas, paid time off, as well as absences and lateness. But time and attendance isn’t only about who is working, and when, on a daily basis – it also takes into account managing parental leave, long-term sickness, sabbaticals, reduced hours, and any other form of leave or changes to shifts.

Not only is all this essential for maintaining business operations, but for complying with legislation (such as employment law and holidays) – and an HR team can manage all of this.

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A training manager is just one type of HR role

What is the HR department, and which roles does it include?

As highlighted, the HR department is the team that manages employees and freelancers who work for an organisation. We explain the key roles that you’re likely to find in an HR department, along with their responsibilities.

Some of the key roles in an HR team include:

• HR director – has overall leadership of the HR team and oversees the various functions, as well as ensuring the department’s plans align with wider company strategies and consulting with the board of directors
• HR manager – manages the HR team; offers practical support across a range of HR activities, depending on the organisation and the position
• Payroll manager – manages the team’s payroll systems and functions, ensures compliance with the relevant legislation around pay and benefits, and manages other payroll staff, if any
• Talent acquisition manager – responsible for the overall recruitment process, from creating job adverts, to sourcing and screening potential candidates, as well as managing the recruitment strategy and employer branding
• Training manager – creates and implements training programmes that meet staff and business aims; oversees the company’s training budget
• Diversity and inclusion manager – delivers training, reviews current practices and procedures while conducting analysis to ensure equality
• HR assistant – supports other HR team members with associated admin tasks, including maintaining accurate records

In-house departments vs outsourced services

HR outsourcing ranges from basic admin tasks, or managing specific functions such as payroll, through to fully outsourced services that can include recruitment (temporary, contract or permanent) as well as specialist advice and consultancy work.

Outsourcing can help small businesses that don’t have the capacity, staff, or budget to support a dedicated in-house HR team member. For bigger and growing businesses, outsourcing allows HR teams to focus on strategy and adding value to the organisation.

Depending on your business size and strategy, some or all of these HR functions may be outsourced.

You’ll need to consider the various factors and reasons for outsourcing. Some outsourcing companies may be able to offer an assessment of your business to tell you which aspects of HR to address in particular.

You could use an agency that specialises in working with small businesses, or which focuses on a specific area of HR.

Or, you could opt for a general HR outsourcing company that offers full or partial consultancy services across a wide range of functions and levels. This could be on a retained or ad hoc basis. Read our guide to the top HR consulting firms to discover a selection of excellent providers.

Speaking with HR consultants could help you to better understand where to begin in terms of HR, or which areas of your company’s existing HR function could be improved. Simply let us know a few details about your business, and you’ll be able to compare quotes from a range of providers. In just 60 seconds, you could have filled in the form and begun the process of getting matched with HR consultants.

HR outsourcing is flexible – some elements could be outsourced and some retained in-house, depending on your company’s requirements and budget. In the table below, we compare the different options.

What is HR software?

HR software and systems offer a way to automate and digitally record key HR tasks and data. They can be used for monitoring time and attendance, conducting employee surveys, managing shifts and payroll, and more.

Using HR software can ensure HR admin is completed quickly and more efficiently. It also offers enhanced security and protection when storing potentially private and sensitive data about your staff. This is an important aspect of HR – learn more with our guide to employee privacy laws.

With many HR software products and services available via the cloud, it’s possible to access these platforms from anywhere – so long as you have an internet connection and a compatible device, which is ideal when working remotely.

Plus, the software is often provided on a subscription basis, offering flexibility and affordability that can come in handy when budgeting for resources.

If HR software seems like it could benefit your business, then we can match you with HR software providers – just let us know a few details about your business to compare quotes.

HR: A summary

HR is a key aspect of running a business. It can ensure that you’re compliant with employment law, as well as health and safety regulations. Plus, it can help you to find the best talent to help your business grow, and develop a culture that’s reflective of your company’s brand and values.

There are many areas within HR. It covers processes like managing payroll and keeping staff records, activities like recruiting new team members, as well as overall initiatives, such as creating inclusive environments.

HR can be managed internally, or it can be outsourced to an external provider – which one is the right option for you depends on your company’s current circumstances, as well as your plans for the future.

Although HR is an element of business operations that’s focused on people, it’s possible to use dedicated HR software to manage many day-to-day HR functions.

If you’ve read this far, you’re clearly interested in how to best manage HR in your business. So why not consider comparing quotes for HR consultants? By providing a few details about your business and its HR requirements, we can connect you with a selection of top providers in a few quick and easy steps.

FAQs

In this section, we provide answers to some of the key questions concerning HR.

What is the simple definition of HR?

HR stands for human resources, and refers to the team that manages everything to do with an organisation’s staff. This includes recruitment, well-being, payroll, and training, to name but a few. The HR function also involves ensuring compliance with employment legislation, and adhering to health and safety regulations.

Overall, HR encompasses all of the tasks that relate to the people who work for an organisation. It can be managed in-house, outsourced (either fully or partially) to an external provider, or done via a combination of both approaches.

Do small businesses and startups need an HR department or staff?

While you don’t need to have a dedicated department or team member, you do need to have someone managing HR.

Initially, this might be a director or another senior team member, as there are some areas of HR (such as employment law, health and safety, payroll, and pensions) that need to be in place from the beginning.

However, if your business expands considerably – or managing these duties becomes too time-consuming, or more specialist expertise is required – then this is when you might need to consider hiring an HR team member, or using an external HR outsourcing provider (our HR services and software comparison tool allows you to compare quotes for HR outsourcing options in minutes – for free!).

What is the cost of HR?

If HR is managed in-house by a senior team member as part of their role, then naturally there aren’t any additional costs.

The average internal HR manager currently has a salary of around £42,000 per year, along with any training costs that they need for their role.

For HR support that’s completely outsourced to an HR agency, you can expect to pay in the region of £100-£200+ per month. See our page on HR outsourcing costs for more in-depth information.

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