Small Business HR Department Tips

10 Tips for Small Businesses to Start an HR Department

Recently, I wrote about making your first hire, but I probably should have prefaced it with this blog which asks the question…how should your small company approach creating a human resources department?  Eventually any growing business will have an HR department so here are some items to think about when starting up a company or expanding your HR needs:

Compensation structure

Know ahead of time what your payroll budget is and how raises or bonuses will be handled. This will make negotiating salaries less stressful when the time comes.

Benefit packages

What benefits will be offered to the employees? Keep in mind 401k, sick days, flex spending accounts as well as health, dental and eye care.

Staffing plan

It can be helpful to lay this out in such a way that you can view the management hierarchy of the company.  It’s important to know for which departments managers are responsible and who reports to the upper management. Having a clear, scalable design for future growth in mind is also important.

Keep an up-to-date profile of jobs

When hiring for jobs, keep accurate descriptions of the job requirements for each position within the company. This information will be useful to the overall structure of your organization in the future.

Performance measurements

Decide how job performance will be measured…it could be through peer assessments or manager reviews or measures of sales performance – or perhaps a combination. Regardless of the way, set these standards up right away and then set the proper expectations with employees well in advance of review time.

Travel or expenses

This might not pertain to every company, but it’s important to think about and document your processes. If you have lots of people that travel or turn in expense reports, it is important to have an expense policy stating what will and will not be reimbursed, and how the company needs documentation of the expenses that have incurred.

Time and attendance

Depending on the type of company, having a strict time and attendance policy can be vital. If it is a production facility, “clocking in” on time to make product is important. Make sure employees know their expected times and what penalties there are for being tardy or absent. Other organizations may be more flexible but there is still a need to keep employees informed of the expectations.

Employee referral program

This is a great opportunity for the employee and the company when hiring. The employee is incented to recommend others that would be a good fit within the organization and the company is able to find potential candidates more easily. Make sure to document the referral bonus and time requirements necessary to earn the bonus…and then promote the program frequently to your employees!

Training & future development

Even if you have a relatively flat organizational structure and a small company, thinking about the future of the organization is imperative. Ask yourself what kind of development plan you have for your future employees for training and growth purposes.

Vacation days

Ask yourself if these will be handed out in a standard amount to all employees or if they will be “earned” as the employee works longer with the company. Also, document how vacation days are to be requested to allow for efficiency on the job (i.e. avoid too many people being out of office on the same day).

I know this is a long list and it may seem overwhelming to the new entrepreneur, especially. The good news is that all of this does not have to be decided upon immediately, but it’s good to have a general idea of where the organization will stand on all these topics. As the company grows, these items will evolve and change to meet the needs of you, your staff and the company overall.  Knowing in advance how the company will handle situations that fall into these categories will save a lot of work and stress in the long run.

For more information about ExactHire and our hiring software products for small business, please visit our resources page or contact us today.

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