HR Consulting HR Outsourcing

7 Steps to set up HR Department for small business

A well-organized HR department is an important part of running a small business.

It can help you attract employees, keep them happy and productive, and manage their benefits.

In this post, we’ll look at the steps to setting up your own HR department.

Asses your business requirement

Before you start the process of setting up an HR department, it is important to assess your requirements and then decide on the best way for you to proceed.

Here are some points that will help:

  • a. What is the size of your business?
  • b. What are your HR goals?
  • c. How much time do you have available to dedicate towards hiring employees?

Also, Determine if you want an in-house or outsourced approach:

Assess your current HR requirement

Before you start setting up an HR department for your business, you need to know what you want it to do for your business.

The first step of setting up an effective HR process is knowing what kind of functions and responsibilities you want out of it.

There are certain questions that can help start identifying your requirements:

What is the size of your business? How do you want your HR department to contribute to business growth, and How do you need to manage your employees?

You may need to hire someone who is responsible for hiring and training new employees, or managing existing ones.

You also may want someone who can handle legal matters such as payroll and benefits administration.

HR Services Ad

Find out what HR help you need

You should start by determining what type of help you need. You might need some assistance in recruiting, but not necessarily someone to handle payroll and benefits.

Or perhaps you have a great candidate for an HR role internally, but do not want to hire someone who will be an executive director at this time.

HR help that can be outsourced includes:

  • Recruiting (headhunting/staffing) – find and retain top talent;
  • Payroll/benefits administration – manage payroll processing and benefits administration;
  • Employee relations (ER) – manage any relationship issues between employees or managers;
  • Performance management – ensure that performance expectations are clear and monitored regularly;
  • Training & development – provide training opportunities for employees so they can grow professionally.

Define your HR Budget

Your human resource department is a long-term investment and it’s important to set aside a budget for it.

The budget will depend on the size of your business, the kind of people you are hiring, and the kind of business that you are in.

For example, if your company is in manufacturing or retailing sectors where there is less need for skilled workers then it makes sense to have an HR manager who only focuses on recruitment and selection processes.

However, if you run a start-up or tech company then having an HR manager who can manage all aspects of employees’ lives like benefits management would be ideal.

Recruit a Right HR Resource

Identify the right HR resource who can help your business with its HR needs. Here are some features you should look for:

  • Your HR partner: Your relationship with your hired resource should be one of partnership and trust, rather than just a transactional one. You will need to share information with him/her in order to get things done, so he/she must be able to keep it confidential. You also want someone who has strong communication skills. Communication is key in any relationship; this applies even more so when you’re working with an external party like an HR consultant or advisor because they will be communicating on behalf of the company as well as interacting directly with employees and other stakeholders (e.g., customers).
  • Your advisor: The second characteristic that makes up a good candidate for this position is experienced in their field; even if they don’t have all the answers, they should be able to recommend other resources where you can find them—that’s what makes them valuable!

Select a right HR tool

HR software is a great way to manage your HR functions. With the help of HR software, you can streamline your entire process and make it more efficient for you and your employees.

You should select the right tool that suits your need and budget.

Define HR deliverables

It is important to define HR deliverables in a very specific, measurable and attainable way. The following is the list of HR deliverables that you need to define:

  • Employee Engagement Score
  • Employee satisfaction
  • Turnover rate (annual turnover rate)
  • Hiring process time (time taken for hiring)

Once you have defined these, you can start working on achieving them.

You can set up your own way of measuring them by using surveys or other such means.

This will help you measure your progress over time and also determine whether what you are doing is working or not.


A successful HR department should have a clear understanding of the deliverables it needs to provide to the business.

This will ensure that HR can measure its own success, and report back on how well it is aligned with company goals.

The deliverables are defined by the business requirements, which in turn can be identified by looking at where your current gaps are.

For example, if you want to improve employee engagement among your staff then you need to look at what measures are currently used by your employees and what they would like added (or removed) from this list.

Once this has been done then it’s time for some brainstorming!

Virtual HR Solution Ad



Leave a comment

Your email address will not be published. Required fields are marked *