Why Is Human Resources Important? A Guide for Small Businesses

Payroll sounds simple: It’s the process of paying your employees for work they’ve done. But it also includes balancing and reconciling payroll reports, depositing and reporting payroll taxes for both your company and your employees, managing wage deductions, and reporting new hires to state agencies.

This process handled by HR is riddled with regulations. Your state or municipality may require you to pay employees on a certain schedule or by certain methods, and require overtime daily—looking at you, California.

Payroll also includes withholding money from an employee’s paycheck for different reasons. Every company needs to at least withhold payroll taxes and remit them to the appropriate federal, state, or local agency. Many localities have additional withholding requirements you need to follow.

If your company provides benefits like healthcare and retirement, you’ll need to deduct these and ensure payments are made to the right vendors. Each of these deductions needs to be properly recorded on the employee’s pay stub and in your human resources information system (HRIS).

Whether your company has a multi-member HR department or you are the HR department, it’s vital that you follow a structured process to ensure absolute accuracy when doing payroll and calculating withholdings. You may want to consider using free payroll software. Failure to pay your employees correctly and timely can lead to government fines and employee lawsuits.

One of HR’s most important responsibilities is to maintain and protect employee personnel files, which should include resumes, references, general employment information, and any progressive disciplinary actions.

Essentially, anything related to the individual’s employment with your company should be retained by HR so that they can ensure any relevant laws are being followed. Additionally, they will ensure that confidential medical information and employment verification data are kept in a separate location only accessible to certain HR staff and not by anyone else—something that could place your company at risk of litigation.

HR is responsible for administering the benefits you put in place. From healthcare and retirement plans to time off and flexible work schedules, your HR department keeps track of all employee benefits, some of which have laws that must be followed. They also regularly review the benefits offered and develop strategies to add new benefits and update existing ones, all while keeping new expenses to a minimum.

To attract and retain top talent in your industry, you need to offer a competitive and comprehensive benefits package. It’s on the shoulders of your HR team to figure out the benefits you need to offer and find budget-friendly options. Whether you have an existing benefits package and you need to update it or you need to start from scratch, your HR staff should be able to put together a package that entices candidates to join your company and employees to stick around.

There’s an abundance of employment laws your company needs to adhere to, from at-will employment to various federal, state, and local regulations. It is simply an enormous task to ensure your company is compliant with all relevant laws.

Your HR team will need to ensure your company complies with:

• Minimum wage laws
• Rest and lunch break laws
• Sick leave laws
• Maternity leave laws
• Equal employment opportunity laws
• Fair Labor Standards Act (FLSA)
• Family and Medical Leave Act (FMLA)
• Age Discrimination in Employment Act (ADEA)
• Affordable Care Act (ACA)

The team will also need to ensure you have the required certifications and licenses in your locality. If you have enough employees, HR will need to source workers’ compensation insurance. All of these duties fall to your HR team to ensure compliance and keep up to date on any relevant legislation, which may require changes to your company policies.

Recruiters use tools like resume scanners, pre-employment tests, background checks, and personality assessments to ensure that job candidates and, ultimately, employees are well-matched for open job roles.

Also, whether HR conducts interviews or your hiring managers do, your HR team will at least track each stage and ensure interviewers aren’t asking illegal questions or succumbing to hiring bias.

Another core part of why human resources is important is that it will help you target the right balance of salary and benefits to entice desired job candidates to join your firm. The HR team knows what a job should pay based on the duties, skills, experience, and education. It also understands regional pay ranges and shift differentials and even the cultural and intangible benefits—like flextime or casual Fridays—that can improve your chances of having a candidate accept your offer.

When you hire a new employee, you need to acclimate them to their job and your company. HR manages this through onboarding, which begins before a new hire’s first day. It needs to comply with rules and regulations to verify an employee’s eligibility to work, possibly run a background check, and collect other information for the employee’s personnel file. HR will also manage the employee’s first couple of weeks, ensuring they receive proper training both for their job and for safety.

By being thoughtful about onboarding and tailoring the experience to each new hire and their specific role, your HR team can help maximize employee engagement, increase retention, and work to get new hires productive in a shorter time. When HR doesn’t understand the importance of onboarding or simply attempts to wing it, new hires don’t have the direction and initial training they need to be productive workers. It can also leave new hires wondering if they made the right choice of employer.

Managers are expected to support their teams and ensure every employee has the tools necessary to do their jobs. Part of that includes performance management, the concept of using regularly scheduled check-ins, structured performance reviews, and disciplinary action to effectively manage employees’ performance. All together, this is a performance management system.

HR develops this system using performance review templates that help ensure fair and accurate assessment of each employee. It also ensures consistency across the organization, reducing the likelihood of discrimination claims. While the direct supervisor is usually responsible for collecting the information, documenting performance issues, and implementing performance improvement plans, HR should be involved in this process to guide the manager and retain the information in each employee’s personnel file.

The most important thing to remember about employee discipline is that it is intended to help the employee get back on the right track by giving them the support and resources they need, not setting them up for failure or termination.

We recommend using a progressive discipline approach. With each failure to meet a goal, an employee receives an increasing level of discipline. Because this can be an emotional and legally tumultuous area, it’s best to have HR involved from the start.

Your HR team can develop your progressive discipline policy and guide your managers through these difficult conversations. It’s important to involve HR so you don’t put your business at risk of lawsuits claiming discrimination or wrongful termination.