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HR explained: what it is and why it matters
HR is so much more than just hiring and payroll. We break down its key functions, how it supports everyday operations, and considerations for your own team.
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It may be just two words — or even two letters — yet human resources (HR) involves so many aspects that are important to running a business.
From ensuring your employees get paid correctly to developing training programmes to staying compliant with employment laws, HR is something that’s both broad and constantly evolving. As your business grows, so too does the complexity of managing people — which is why having the right systems and support in place is crucial.
In this article, we’ll break down the key functions of HR, how it supports your business’s day-to-day operations, and what to consider when choosing the right HR and payroll software.
In this article, we’ll cover:
What is HR?
What is HR? It is the part of the business that manages everything related to its people. This includes the recruitment process, onboarding, training, paying employees, employee relations, performance management and company benefits.
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 it operates in.
HR also needs to meet British and International Standards, adapt to changing employment laws, and support a diverse and inclusive workplace.
Key HR responsibilities
As you’ve probably guessed, there are a lot of responsibilities that fall under the HR umbrella. It might not always be front and centre, but it’s a critical engine that keeps the business running smoothly. Here are some key responsibilities of HR:
Recruitment and onboarding
This includes finding the right candidates, managing interviews, and helping new hires settle in. It also involves creating job descriptions, coordinating with hiring managers, conducting background checks, and designing an onboarding process that introduces new employees to the company culture, policies, and their roles.
Payroll and benefits
Making sure everyone gets paid accurately and on time, as well as handling pensions, bonuses and other benefits. This also includes managing payroll taxes, employee leave entitlements (such as annual leave, sick pay and sabbatical leave), and working with benefit providers to offer competitive packages that attract and retain talent.
Training and development
Creating opportunities for employees to grow their skills, advance in their careers, or learn newly introduced best practices. For example, assessing training needs, designing tailored training programmes, offering workshops or e-learning courses, and measuring the impact of development initiatives on performance and engagement.
Performance management
Helping people managers to set KPI goals, give feedback, and support ongoing improvement. Additionally, those in performance management oversee regular performance reviews, and give managers a framework for identifying high-potential employees, addressing underperformance, and aligning individual goals with company objectives.
Employee relations
Managing workplace issues, promoting a positive culture, and handling grievances or disputes fairly. This covers conflict resolution, fostering open communication, implementing employee engagement initiatives, and ensuring diversity, equity and inclusion (DEI) in the workplace.
Compliance
Ensuring the business meets legal requirements, such as health and safety and employment law. It also involves staying up-to-date with changes in legislation, managing risk through clear policies, conducting audits, and providing training to keep everyone informed about their rights and responsibilities.
Types of HR jobs
As previously mentioned, the HR department is the team that manages the employees at an organisation. These are the key roles you’re likely to find in HR, and the responsibilities they have.
- HR director: has overall leadership of the HR team and oversees the various functions, as well as making sure the department’s plan aligns with wider company strategies.
- HR manager: oversees HR functions, leads the HR team, and ensures policies and strategies align with business goals — acting as a key link between leadership and employees to help drive engagement and compliance.
- 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 (including creating job adverts and sourcing candidates), as well as managing the recruitment strategy and employer branding.
- Training and development specialist: creates and implements training programmes that meet staff and business aims, and oversees the company’s training budget.
- Diversity and inclusion manager: leads initiatives that promote a diverse and inclusive workplace, such as delivering training, reviewing existing policies and practices, and analysing data to identify gaps and ensure fairness and equality.
- HR assistant/coordinator: handles day-to-day administrative tasks like scheduling interviews, maintaining employee records, and supporting HR projects.
If you’re thinking of hiring an HR team for your company, there are several skills you should be on the lookout for. Being effective in HR takes more than just knowing the rules — it’s also about balancing people skills with business insight. Here are some core skills you should consider:
- Communication: clear, empathetic communication is crucial for tasks like interviews and conflict resolution.
- Organisation: HR involves juggling tasks, records and deadlines, so staying organised is a must.
- Problem-solving: whether it’s resolving disputes or improving the hiring process, HR professionals need to think on their feet.
- Attention to detail: even small mistakes in payroll, contracts, or compliance can lead to big issues.
- Data analytics: understanding HR metrics (like turnover rates or employee engagement) helps make smarter decisions.
- Decision-making: whether it’s hiring or policy changes, HR often needs to make tough calls quickly and fairly.
- Business acumen: knowing how HR fits into the bigger picture helps align strategies with business goals.
Should you outsource HR?
When it comes to managing HR, businesses have two main options — build their own in-house team or outsource some (or all) HR tasks to a third party. Each approach has its own advantages and disadvantages, depending on your company’s size, budget, and needs.
What is in-house HR?
In-house HR is a company’s internal team — in other words, people who are directly employed by the business to handle HR tasks. They work within the organisation and are fully integrated into the company’s culture, goals, and everyday operations.
- Better alignment with company culture
- Faster response times from on-site HR
- More control over HR processes
- Policies and strategies can match business goals, values, and growth plans
- Being part of the day-to-day builds a better relationship with staff
- Higher costs (salaries, benefits, software, etc.)
- Smaller HR teams may struggle to keep up with changing laws
- More time-consuming, as they're bogged down by admin tasks
- May struggle to handle complex issues (such as international compliance or legal disputes)
- May need to hire more staff or invest in new systems as the business grows
What is HR outsourcing?
On the other hand, HR outsourcing involves bringing in an external provider — such as a consulting firm — to handle some or all HR tasks. This can be a cost-effective option for small businesses or companies without the resources to build a full in-house team.
- Cost-effective (saves money on salaries, benefits, and training)
- Access to specialists who are up-to-date on employment laws and best practices
- Easy to adjust service levels as your business grows or changes
- External providers help ensure compliance with regulations
- Lets you focus on business growth instead of HR admin
- Less direct oversight and influence on HR processes
- External teams may not fully understand your company culture or values
- Working with an external provider can sometimes mean slow response times
- May lack tailored support for unique business needs
- Sharing sensitive employee data with a third party can be risky
Choosing between in-house and outsourced HR can really impact how a small business runs day-to-day. Here are some important considerations to help you make the right call:
- Know your business size/stage: early-stage or small teams (under 20 people) don’t need a full HR department, so outsourcing basic tasks like payroll or compliance can be more efficient and cost-effective.
- Consider your budget: outsourcing usually costs less upfront and saves on overheads like salaries, benefits, and training costs.
- In-house HR might be more expensive, but it gives you full control and tailored support.
- Think about what you need help with: outsourcing might be enough for just payroll or compliance. If you’re looking for someone to build culture, handle hiring, or support employee development, you may want to opt for in-house HR.
- Evaluate legal and compliance risks: if you’re unsure about laws and regulations, an outsourced HR provider can be a safer option.
- Think long-term: if you’re aiming for fast growth or a strong internal culture, in-house would be a good choice.
- If you need flexibility and lower costs, outsourcing can scale with you until you’re ready to build a team.
- Consider a hybrid approach: you can start with outsourcing core tasks like payroll and compliance while keeping more personal or strategic tasks, like hiring and performance reviews, in-house.
Why is HR software beneficial for businesses?
HR software helps businesses manage their human resources tasks more efficiently. Many businesses are using it to make things like payroll, hiring and day-to-day admin quicker and easier. A good HR software can help you:
- Save time: automates repetitive tasks like approving leave, processing payroll and onboarding new hires.
- Reduce errors: keeps records accurate and up-to-date, which is especially useful for things like taxes, contracts, and performance tracking.
- Improve organisation: centralises employee information, documents and reports, making it easier to manage and access when needed.
- Boost compliance: helps ensure you’re following employment laws and storing sensitive data securely.
- Support employees: many platforms let staff check their own time off, as well as their pay information or training.
Need help finding the right software? Check out our article on the best HR and Payroll software platforms for small businesses, growing teams and everything in between.
Conclusion
HR is a key aspect of running a business as it ensures you’re compliant with employment law. It can also help you to find the best talent to help your business grow, and develop a culture that’s reflective of the company’s brand and core values.
On top of that, HR plays a key part in keeping employees engaged, happy and productive — whether that’s through clear career paths, training opportunities, or solid support systems.
A strong HR function doesn’t just solve problems when they arise — it helps prevent them in the first place and sets your team up for long-term success.
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