The 8 Key Functional Areas of Human Resources Management

By Indeed Editorial Team

Updated June 30, 2022 | Published December 12, 2019

Updated June 30, 2022

Published December 12, 2019

A human resources department is responsible for creating administrative procedures to support organizational employees. In fact, there are many key areas that human resources is developing, such as payroll, health insurance, employee discipline and staff recruitment.

In this article, we will define the functional areas of human resources and how they affect a company’s operations.

Related: Learn About Being an HR Manager

What are the functional areas of human resources?

A human resources professional must understand the functional areas of their department so they can assist employees as needed. At the same time, they must also develop plans to expand human resources practices so they can have a positive impact on the rest of the organization. Here are eight of the functional areas that a human resources team can focus on:

  1. Recruiting and staffing employees

  2. Employee benefits

  3. Employee compensation

  4. Employee and labor relations

  5. Human resources compliance

  6. Organizational structure

  7. Human resources information and payroll

  8. Employee training and development

1. Recruiting and staffing employees

Hiring employees is usually the job of the hiring manager, but the human resources department usually sorts through job applications to find suitable candidates for the hiring manager. An applicant tracking system (ATS) uses keywords to help human resources pull applications that meet the job listing’s criteria. As suitable applications are identified, they’re forwarded to the hiring manager for further review. Once the hiring manager has made their decision on who they want to interview, they contact human resources to set up the interview. 

After a new hire is selected by the hiring manager, human resources helps determine the new employees’ starting date, set up the new hire paperwork and provide other relevant materials applicable to the position they’re onboarding. It is the responsibility of human resources to give new hires an orientation, show them their new workspace and explain the company’s benefits and policies. 

An HR representative writes job descriptions to match the qualifications for open positions. They also might need to edit a description for accuracy or to make sure that it meets legal guidelines. They can attend job fairs to meet potential candidates. They’ll usually accept resumes or give out their business card and discuss what positions the company is currently hiring for. 

Related: How To Succeed in Your New Job: The First Week, Month and 90 Days

2. Employee benefits

Employee benefits include health insurance, retirement accounts, health care flexible spending accounts, vacation time, sick leave, family leave and any other benefits an employer offers. A good benefits package helps an employer attract and retain talent. That means human resources has to know the different types of employee benefit programs, what insurance company offers the best benefits at the right cost in addition to ensuring the plans are compliant with federal laws. Human resources holds open enrollment educational meetings for employees regarding their benefits, along with making sure they update their plans for the next year.

3. Employee compensation

It’s the duty of human resources to decide how much someone will be paid, performance bonuses, raises and if someone is salaried or hourly. To that extent, they supply the payroll department with the information it needs to pay employees the correct amount if vacation pay is due, when a sick day was taken and if a bonus has been issued. 

When it comes to compensation, HR researches to find the current competitive wage for a position, if the company can afford to offer that amount and what benefits can be offered in lieu of money if the company can’t meet the competitive wage. This is done as part of compiling a benefits package that’s offered to a candidate all while maintaining the salary structure for employees through all levels of the organization.

4. Employee and labor relations

Human resources must adhere to procedures despite the fact if their employees are in a union or not. For union employers, humans resources needs to understand collective bargaining practices while non-union employers may have contracts for employees who are considered subcontractors. 

In either situation, it’s within human resources’ realm to draw up the contracts, negotiate details with knowledge of what the company can offer in terms of compensation and understand what the employees are seeking in terms of benefits. Human resources professionals must also be skilled in the negotiation process and play the neutral party, balancing the needs of all parties involved. Nevertheless, human resources has to stay abreast with changes in laws, employee needs and compensation despite the fact they’re a union or non-union employer. 

When an employee is hired, human resources explains the office code of conduct and makes sure that the employee understands boundaries as to what is acceptable workplace behavior. The human resources representative also makes sure that the employee knows the information is in their handbook and may also have the employee sign a document acknowledging that they have read and understand the consequences of breaking the code of conduct. 

However, every company is different in how they handle disciplinary actions with employees. Some may have a zero-tolerance policy while others give a warning for the same type of infraction. Human resources is in charge of enforcing company policy when an employee commits an offense. 

Human resources moves ahead with disciplinary action when an infraction occurs on the company’s premises or when employees are engaged in inadvisable activities while representing the company. Some employee policies may clearly outline that employees are representatives of the company inside and outside of the workplace and may be subject to further consequences. For example, if an employee posts insensitive content on social media, then human resources would intervene with the employee, providing the suitable course of action that best represents the company’s core values. 

Related: Core Values: Overview and Examples

5. Human resources compliance

Federal and state laws govern how many hours employees can work, define how an employee can be terminated, anti-discrimination protections and how much unpaid time an employee can take for family leave. Thus, an employer must work within the confines of the law to respect and observe these laws at all times. 

One example includes posting the applicable information in relation to workers’ compensation in case an employee gets injured on the job. Other examples consist of keeping the employee handbook updated to meet federal labor guidelines as well as employee eligibility and verification (I-9) for when an employee first begins their tenure with the company. There may be other state and local regulations to follow when it comes to compensation, benefits or the building codes in which your office operates.

6. Organizational structure

Although this may be the responsibility of the management team, human resources assists them in formulating the business goals and the mission of an organization. They can conceptualize how an organization’s chart is built and the flow in which projects run through each department. If changes are needed after further evaluation, human resources can suggest recommendations for management to enact in order to achieve goals such as decreasing employee turnover, create career paths for existing employees and promote individuals who reach the desired metrics of management. 

There are many be times when human resources needs to reiterate to employees the overall purpose of the organization, and help employees perform at their best in support of the company. Furthermore, human resources must be trained to perform multiple duties that overlap with other departments to help employees improve their performance.

7. Human resources information and payroll

In addition to monitoring payroll activity, human resources employees are accountable for keeping track of the working environment of the company. They also must receive feedback from employees on their individual working environments to see if they can do more to service external clients. Overall, working conditions are essential in determining the reputation of the organization and if customers will buy from them. In this case, human resources professionals must take inventory as to what they need to upgrade in the building where they operate and what systems can help increase the productivity of their employees. They’ll need to check in with management on the budget they’ll have to make necessary changes and purpose the benefits it gives the company.

Related: Human Resource Management and Their Role in Your Job Search

8. Employee training and development

In collaboration with management, human resources generates professional development programs to help employees succeed in their respective line of work. They’ll monitor how many employees are in each program, their performance, their manager’s feedback and the results to see if more training is required. Some programs include:

  • Diversity and inclusion

  • Business communication

  • Customer service training

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