What is HR?
As well as traditional duties like recruitment and training, HR teams are increasingly responsible for company culture and strategy. Learn more about this essential element of organisations
Human resources (HR) can refer to both the people who make up the workforce of your company, as well as the team within an organisation that manages the relationship between employer and employees.
In the beginning, you may have only one or two team members responsible for HR in your business. As your company develops, this team could grow to include individuals who specialise in a particular area of HR.
With anything people-related coming under the scope of an HR team, there’s a lot of information to take in. What is human resources exactly? How do the different aspects of HR work? What are the options available to you to manage HR in your business?
In this article, we’ll cover:
- What is human resources?
- HR outsourcing
- Pay staff
- Manage pensions
- Manage health and safety
- Record time and attendance
Click on the links above to be taken straight to that particular section. Or, read the entire article for a complete overview of HR for small businesses.
Alternatively, if you’re ready to compare quotes for HR now, fill in the form at the top of the page.
1. What is human resources?
In this section, we’ll introduce what HR does, focusing on it as the department that deals with people-related matters and issues.
Essentially, HR is responsible for designing and maintaining the functions and processes for an organisation to run effectively, which helps to keep a business competitive within the job market and the sector it operates in.
What does HR do?
Typical HR functions include:
- To pay staff
- To set up and manage workplace pensions
- To manage health and safety at work
- To record time and attendance
Beyond this traditional remit, the function of HR in contemporary business has expanded to include strategising a company’s culture and inspiration, with a view that people are the value of an organisation.
HR managers are also increasingly responsible for team building, inspiring the workforce and promoting an organisation’s culture. Social events and charity work for staff may also be run by the HR team.
Some more examples of HR responsibilities include:
- Managing staff disputes
- Conducting performance reviews
- Taking on staff
- Making a position redundant – or if a person leaves their role
In bigger businesses with multiple teams, line managers are also likely to be involved in recruiting and training, so are likely to take on some HR functions too, alongside the HR team.
Increasingly, HR professionals are seen as partners and are expected to take a leading role in developing an organisation, as well as working with business owners and leaders on key areas such as strategy and metrics.
This can also involve offering advice to senior team members about the people impact from organisational changes, such as those to the budget or strategy.
As HR is all about people management, this includes creating company policies, as well as providing training and development. Plus, creating and measuring competencies for each job role and then conducting performance reviews based on them.
2. HR outsourcing
Most HR functions can be outsourced – ranging from basic admin tasks for payroll or documents, through to fully outsourced services that can include recruitment (temporary, contract or permanent) as well as specialist advice and consultancy work.
Outsourcing is usually done so that HR teams can focus on strategy and adding value to an organisation. Depending on your business size and strategy, some or all of the 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 focuses on a specific area of HR.
Or, you could opt for a general HR outsourcing company that could offer full or part services across a wide range of functions and levels. This could be on an ongoing or case-by-case basis.
HR outsourcing is flexible – some elements could be outsourced and some retained in-house, depending on your business’ requirements and budget.
3. Pay staff
When paying employees in the UK, you’ll need to follow PAYE (Pay As You Earn), which is the system HMRC uses for collecting taxes and NI contributions from employees’ pay. This is your duty as an employer. You’ll also need to provide a payslip that shows the amount of pay and deductions.
In most cases you’ll need to register as an employer with HMRC before the PAYE payments begin, which is usually up to four weeks before the new team member is paid.
Payroll tends to need to be run monthly, with certain dates to meet, although other options (e.g. quarterly) may be available, depending on how much you pay each month. Running payroll correctly is the responsibility of the HR team.
Payroll software is available to help manage pay and meet deadlines, or you can outsource payroll, as discussed in the section above.
Payments need to be correct and on time – not only for HMRC compliance but also for maintaining a good relationship with your staff members and team spirit.
Some key considerations for the HR team when paying staff include:
- Choosing a payment system
- Sending the payments through
- Creating payslips
- Managing deductions
- Pay during periods of absence
- Final pay at the end of employment
After successfully recruiting a team member and deciding on the type of contract and salary amount, you have to inform HMRC about the new employee on or before the first pay day.
4. Manage pensions
The HR team will also be also be responsible for meeting your business’ pension obligations to its employees.
You can read more about planning your pension here.
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.
In this scheme, both the employee and the employer make contributions. How much employers are required to contribute is determined by minimum earnings.
With this scheme, eligible staff join automatically, with options to opt out and rejoin. Ineligible employees may still join if they wish, and as an employer, you have to allow this.
You may also set up a workplace pension that provides employees with certain benefits at retirement. A workplace pension scheme has to meet certain requirements.
Workplace pension schemes and the auto-enrolment scheme have strict rules governing what employers are and aren’t allowed to do. Visit the Gov.uk guide about setting up and managing a workplace pension scheme to learn more.
5. Manage health and safety
Ensuring that your team members have a safe environment to work in is essential, whatever size business you run.
Health and safety is a broad-ranging topic, covering everything from smoking at work through to the correct temperatures for staff to work in, for example. Some potential consequences of not having adequate HR procedures in place in this area can be accidents, injuries and sickness caused to staff.
A 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 well-being
- Providing the correct chairs and workstations to work from
- Preventing and avoiding sickness or accidents from work-related causes
Health and safety in UK workplaces is independently regulated by the Health and Safety Executive (HSE).
Read our guide to health and safety for small business owners for more detailed information.
6. Record time and attendance
It’s possible to use software and systems that are specifically designed to monitor your team members working hours and attendance rates.
An electronic ‘clocking in/out’ service can help manage the following aspects of your business operations:
- Paid time off
- Absences and lateness
Depending on the type of system you use, it can be possible to manage reasons for absence too (e.g. sick or holiday leave).
With automated systems, you could connect the system to your payroll service, as well as use it to create reports and analyse data related to time and attendance. Some may be able to offer real-time monitoring.
The different types of systems and ways of collecting data can include:
- Machines with cards
- Mobile apps
Find out more about time and attendance software and providers.
What are the next steps?
From reading this article, you’ve learned more about what HR is, including the various components involved.
Now, read our pages on the specialist areas for more in-depth information:
- Small business HR outsourcing
- How to pay employees
- Small business pension guides
- Health and safety guide
- Time and attendance
Another option is to get more specific information based on your business’ requirements – simply complete the form at the top of the page to compare quotes for HR now.