How to Start an HR Department From Scratch

HR department sign that reads: this must be the place

An HR department is the backbone of any functioning organization — and wise employers know that a strong team of human resources professionals can be the difference between unhappy employees and a positive team culture.

Don’t have an HR team at your company? Don’t panic! I’ve put together this guide to build an HR department from the ground up — and I’ve tailored my plan to smaller businesses with fewer than 50 employees.
In this guide:


Why Do You Need an HR Department?

Not sold on adding a new department to your organization? Hear me out! Without a functioning HR department, it’s hard to develop, execute, or maintain much in the way of company policy. What’s more: The need for an HR department reaches all aspects of your company, including the following:

An HR department is crucial to hiring talent.

Hiring has gotten complex in recent years — you can’t simply hang a help wanted sign in the window. HR pros can lead recruitment efforts, write job descriptions, project manage the interview and references process, and negotiate offers. An HR team can also ensure that your hiring efforts follow local or federal laws — which will protect your organization in the long run.

HR professionals are skilled at helping you maintain compliance.

Speaking of following the law, running a business is tons of compliance: You need someone on top of I9’s, state employment code, changes to minimum wage, and local and federal COVID ordinances.

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An HR team can handle salary negotiations with existing employees.

It’s reasonable to expect your employees will ask for raises, and you’ll need some sort of system for doling out those enhanced paychecks.

HR professionals can partner with leadership to help the growth and development of the company — and set growth goals for employees.

If you have big aspirations for your company’s growth, an HR team can help you get there. They can work with you to set company, team, and individual goals for your employees, which gives your whole company a framework for defining their success.

HR teams create and maintain company culture — which always starts from the top.


Your HR team can create benefits and choose from complex healthcare options.

To maintain a competitive edge that will help you recruit and retain talent, you’ll need someone to sift through the hundreds of benefits and healthcare options available. These options are often complex, and a trained professional who can make sense of them is a critical tool.

HR can implement and manage company safety programs.

As an employer, it’s your job to keep your employees safe when they’re at work. Whether you operate a warehouse, a vineyard, or a call center, an HR team can set safety programs and policies to keep everyone out of harm’s way.

HR departments can set the company culture.

What do you want your company culture to be? Do you want a culture of consistent feedback? A culture of collaboration? A culture of having each other’s back? Leave it to HR teams to create and maintain company culture — which always starts from the top.

HR teams ensure equity in the workplace.

When you’re running a business, you want to set up all of your employees for success, whether that’s through transparent promotion plans, standardized salaries across levels, or just a seat at the table where decisions are made. HR teams are there to ensure all of these factors — which are necessary for an equitable workplace — are in place.
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How to Start an HR Department at Any Business


Step 1: Set the bare minimum HR tasks

Depending on your company size, industry, and goals, you’ll have different needs to be handled by an HR team. At the very least, you’ll want people in your organization who can handle the following:

  • Hiring
  • Benefits
  • Training and development
  • Safety and wellness
  • Culture


Step 2: Decide What to Hire For — and What to Outsource

Now that you have a sense of the non-negotiables, you can decide what needs to be handled internally versus externally. Some things, like payroll and benefits administration, can be managed through third-party services.

What to Outsource

If you’re looking to keep your HR team small and plan to use a third-party service for specific HR duties, you’re in luck. Take a look at these 10 payroll services:


What Not to Outsource

One thing that you shouldn’t outsource: Culture. Your company’s culture will be unique to your organization and team members, which should get a human touch.

Step 3: Build your team of one. Hire an HR manager.

The good news about building an HR team is that you can get a lot done for a company of under 50 employees with a single HR manager acting as the whole HR team.

An HR manager is a perfect position: They can handle administrative work but are also empowered to make decisions and address problems directly.

I’ve seen companies go for a more junior role and hire an HR generalist or HR administrator. I understand the impulse to start small, but a person in that role simply doesn’t have the authority to make decisions, handle employee relations, or execute on what the employer needs from that HR professional. When that happens, the hard work of human resources almost always falls back on the company owner, and as the owner, you likely don’t have the time — or even the skill set — to deal with HR issues. An HR manager is a perfect position: They can handle administrative work but are also empowered to make decisions and address problems directly.

Suppose you’re looking to grow your company. In that case, you can consider a team of two: an HR manager who handles training, employee relationships, employee development, and benefits paired with a recruiter who will focus exclusively on bringing in talent and hiring.

What to Include in the Hiring Manager Job Description

When you list your job description for an HR manager on a job board — including iHireHR, a job board for HR pros — you’ll need to be super transparent about your expectations for this person. In the job description, be clear about:

  • The size of your company and plans for growth
  • The current state of HR at your company
  • Expectations with clear deliverables (e.g., “write our employee handbook”)

I always tell people to list both needs and wants. A need might be experience building HR policies, while a want could be relevant experience in your niche. Be clear about this in your listing, delineating requirements versus nice-to-haves. When selecting candidates, remember they can learn most of the things in your wants category on the job.

Step 4: Get your team the tools they need.

Now that you’ve made an offer and — hooray! — they’ve accepted, you’ll need to set up your HR manager with the proper tools they’ll need to do their job.

Your first bet is a tried and tested applicant tracking system (ATS) to help with recruitment/hiring efforts, like:

Your HR manager must have a sense of talent and performance at your company — they’re often factors toward raises, bonuses, or other rewards. These talent management services will go a long way:


Step 5: Set goals for your HR team’s first year.

Once you have your team — even if it’s a team of one — in place, you’ll need to sit with them and make goals for their first year at your company. This is excellent practice for you and them because, eventually, they’ll want to sit with your employees and make individual goals for them, too.

4 HR Projects That Should Happen in the First Year

I always say that deliverables should be extremely clear, so let’s look at what your new HR team should deliver to you by the end of their first year with your company.

Employee handbook

Every business should have an employee handbook outlining company policy, codes of conduct, and more. Employees should never be left to wonder how things work at your company — that’s how miscommunications and conflict arise. It should be a top priority for your HR manager to get everything organized into one place.

Standardized benefits package

Your HR manager should be an expert in wading through benefits package options for you to offer your employees. Have your HR manager put together options for you to compare different plans, and make sure that each plan they select has various options for your employees to choose from.

Competitive PTO program

If your company wants to remain competitive to acquire top talent, you’ll need an excellent paid time off benefit. Have your HR manager set up a plan for sick leave, personal time, and vacation time — and a policy for requesting time and getting time off approved or covered.

Career development program

Your employees should be able to count on you for support in their growth, and one of the best things you can do for your employees is to invest in their future success. That means setting clear goals to hit to get promoted and — this part is critical — helping them achieve those goals. Your HR manager can create a clear advancement policy and go further by creating programs to educate or foster your employees’ skills. Sending employees to conferences, making time in their schedule for webinars, or paying for a class are excellent ways to set them up for growth, and your HR manager can take the lead.
Setting up an HR department doesn’t have to be a trial. With the addition of even one more team member to your company, you’ll quickly start to see real changes at work. HR protects employees and the employer, and it’s a way to show care for your organization — it seems like a win for everyone.

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