The main functions of Human Resources center on the lifecycle of the employee. From recruitment to compensation and benefits, ensuring company policies and laws are followed, to dealing with labor relations issues, HR is a core function of any company. However, as essential as its functions are, HR responsibilities are often treated as secondary issues.
“In some cases, finance might handle payroll, workers’ compensation, unemployment or even benefits administration when that’s typically an HR function,” says Robin Throckmorton, Shareholder, strategic HR, Clark Schaefer Business Advisors. “Other times, HR takes on responsibilities outside of their main focus, such as accounts payable or facilities. HR is often the second thought to a person’s job — they just assumed HR responsibilities but are really an office manager.”
Smart Business spoke with Throckmorton about the role of HR in a company, how best to manage those functions, and the consequences of under-resourcing it.
Who typically carries out HR functions in a company?
The rule of thumb in the HR space is one full-time HR person for every 75-100 employees. Sometimes, however, even as a company grows, the business owner, controller, a family member or office manager will roll up HR responsibilities into their primary function.
Companies don’t necessarily need a full-time, internal HR professional. They could contract with an outside HR provider, outsourcing those functions to get HR help or supplement existing HR personnel. Whether HR is handled by someone internal versus external depends on a few factors, such as the makeup of the organization and state of the business. For instance, a small but growing company could benefit from a combination of an outsourced solution with an in-house person. An organization with a strong culture, on the other hand, might want a dedicated, internal HR person making decisions along with the other executives.
What issues arise when HR is improperly handled?
Turnover can become an issue when it’s not clear who is handling HR responsibilities. That can be a big concern because losing an employee can cost an employer 50 to 150 percent of the outgoing employee’s salary. Further, if someone is not effectively managing HR functions, it can lead to higher costs for unemployment and workers’ compensation claims if the person handling HR didn’t properly contest an unemployment claim or didn’t work with an MCO to properly manage a workers’ compensation claim.
Lack of dedicated HR also can lead to employee morale issues, which can sometimes lead to lawsuits since people who are disgruntled are more apt to sue. Whether they’re right or wrong, a lawsuit will cost a company both time and money. Similarly, an upset employee could file a claim with the Department of Labor or OSHA, which could result in a fine.
When should a business reconsider how they handle HR?
Businesses should re-examine how they handle HR when they grow significantly or experience tremendous turnover or change, such as in a merger, acquisition or sale. In each of these occasions, it’s good to have dedicated HR helping because business leaders in other departments can be more effective when they’re focused on managing their core responsibilities.
Another trigger could be when business leaders begin to feel that they’ve taken on more than they can handle. When companies sense they don’t have the grip they’d like on these responsibilities, an HR audit will take the business through a checklist of HR functions to determine how well they’re being handled. That audit can also offer tips on what to do to improve in areas where there are deficiencies, and identify compliance issues.
A company could also talk with other similarly sized businesses in their industry to make an apples-to-apples comparison on how best to handle the HR role. A CEO or business group could also be a resource to determine what is working for others.
Companies, however, shouldn’t wait until there is a problem to address their HR function. Being proactive can prevent expensive mistakes from happening later on.
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