How to Set Up an HR Department in 5 Steps

Recruiting employees takes diligence and structure. From posting your job ad to conducting interviews, having a clear recruiting process will keep your HR team from reinventing the wheel each time they need to hire a new employee. Even if your business is small and you don’t plan to hire many people at once, you still need to consider how to make hiring decisions. Consider the following:

Where are you going to post job ads?

Your HR team member who’s responsible for recruiting can post on free or paid job boards, general or niche. Regardless of which job posting site your company uses, you can maximize your exposure by including keywords that will help applicants find your job ad quickly.

Will you take referrals?

An employee referral program encourages your existing employees to refer friends or former colleagues who they think would be a good fit for your open positions. This can cut down on your recruiting costs and increase your retention rate as referrals are much more likely to be a good cultural fit for your company.

How will you verify employment history?

While you want to trust every applicant on the accuracy of their resume, you need to do your due diligence. Employment verification can either be done manually by you or your HR team calling each previous employer or you can include it as part of your background check process.

How will you run background checks?

Running a background check isn’t necessary for every position—use your best judgment but be sure to run one if the employee will have access to confidential or sensitive information. Having a background check policy ensures your HR department follows a consistent and compliant process for checking your job candidates’ background; it also gives employees notice of your company’s intentions.

How will you conduct interviews?

HR may initially screen candidates but then managers may want to conduct a more thorough interview with applicants. Using a structured interview process ensures you treat applicants fairly and evaluate them on the same questions.

How should you onboard?

Your onboarding process must be set, and your HR manager should do regular check-ins with new employees and managers to ensure everything is going according to plan. If onboarding haphazardly, new hires will be afraid that’s how you operate your business, and they won’t have any direction, feeling lost and unsupported. If you have a clear onboarding process, you give your employees direction from day one, leaving no ambiguity about your expectations.

Your employees need clear direction on the work you need them to do. To achieve that goal, have a set process for managing your team’s performance and helping them get better if they fall below your expectations. A great performance management process ensures you keep thorough employee records, making reviews effective and corrective action targeted and helpful.

Documenting everything is key to HR compliance. Your HR department should review for any issues, check in with managers to provide support, and ensure employees stay on the right track. Defining your performance management process will ensure that everyone is treated fairly, avoiding the appearance of favoritism or discrimination.

Your performance management process should include clear documentation of at least the following information:

• Performance reviews
• Verbal warnings
• Written warnings
• Performance improvement plans
• Promotions
• Raises
• Terminations
• Resignations

Training new employees is crucial to ensuring your new hires understand your business, how their role fits into the organization, and how to do their daily work–your HR team should have a solid training plan in place that they can easily implement at scale as new employees come onboard.

When you’re first starting your business, training employees isn’t your top priority—you need them to get work done. But training is extremely important because it shows the employee what’s expected of them and gives you the ability to take corrective action if the employee fails to meet your expectations.

Training doesn’t stop after someone’s first week or month, however. Training and development continues for the entire time an employee works for you. Employees want to grow in their roles and in your company. Giving them the opportunity to and showing them the way is key to keeping top-talent.

There is no federal law requiring paid time off (PTO), but if you do offer it, your HR or payroll team will need a good way to track it—how much they’ve earned vs used. If your company offers PTO, some states require that you pay out accrued and unused PTO when an employee leaves your company.

You may also want to consider including additional leave benefits as part of your employee benefits program:

• Leave of absence
• Bereavement
• Sick
• Paid holidays
• Family and Medical Leave Act (FMLA)
• Parental leave

Please note that some states require you to provide family or parental leave. Check your state guidelines to see if you’re required to offer these additional leave options.

Part of attracting and retaining top talent is ensuring a safe workplace for everyone. Having an anti-discrimination policy, including sexual harassment, will provide clear direction for how employees should act with one another. It will include information about disciplinary action for employees who violate the policy. You should also have a simple way for employees to anonymously report violations. Your HR manager should stay abreast of any complaints and address them as soon as possible.

Prohibiting discrimination in the workplace will also keep your company safe and equitable for all employees, and ensure compliance with Equal Employment Opportunity guidelines. From the hiring and interview process to promotions and general workplace conduct, ensuring that your HR department has what it needs to maintain a discrimination-free environment helps all employees thrive.

To pay employees accurately, your HR department must have a simple way of tracking how many hours employees work. Whether they use paper time sheets or a software to record employee punches, your timekeeping policy should provide clear instructions for how employees should record their time. Even if you have salaried employees who are also exempt from overtime, it’s still a good idea to record hours because you can track attendance and punctuality.

Your attendance policy should state your work hours, what you consider tardiness, and procedures for calling out sick or for a late arrival. Describe why punctuality is important and how being late places extra burden on other employees. Include disciplinary actions for violations of the policy.

Running payroll isn’t as simple as just making a bank transfer. You need to register your business, record employee hours, ensure accurate tax and benefits withholdings, among many other items. Depending on the number of employees you have, you may need an employee devoted entirely to payroll—it can be a full-time job. Also, keep in mind that not all HR professionals have payroll expertise, and not all payroll professionals have a ton of general HR experience. This means, at minimum, you may need to start with at least two people in your HR department.

Regardless of whether you hire someone with payroll experience or promote an internal employee without it, you’ll need to ensure they have opportunities to stay up-to-date on compliance training, software, etc.; they’ll also need to know some specifics on payroll processes that are unique to your business. Payroll training may include:

• How you pay employees: paper paycheck or direct deposit
• Frequency of payroll
• Procedure for running payroll if pay date falls on a weekend or holiday

Depending on the industry in which your small business operates, you may be subject to Occupational Safety and Health Administration (OSHA) regulations. If you are subject to OSHA, make sure you have specific safety regulations in place to keep your employees safe on the job. Some companies even have an in-house safety manager who is OSHA-certified. Typically, this would be those strongly subject to safety regulations, like manufacturing companies, businesses dealing with hazardous materials, construction companies, etc.

Even if your small business is not subject to OSHA, it’s a good idea to have safety procedures in place. If an employee suffers an injury, what steps should a supervisor take? They’ll need to record the injury and report it to your workers’ compensation insurance provider. They may also need to prepare for the employee to be out of work. Detail each step that both the injured employee and their manager should take following a workplace injury.

Federal law does not require employers to provide breaks or rest periods to employees. However, breaks lasting less than 20 minutes should be paid—be sure your payroll and HR team are aware of this. You should also pay your employees for their lunch break if they cannot leave their desks and are able to be called back to work while on their break. Other breaks can be unpaid. Your policy should describe with detail the types of breaks you offer and whether they’re paid.

Some states and cities have more restrictive rules. Review our ultimate guide on rest and break laws to make sure your small business stays compliant with your local and state laws.