Human resources is a department that manages an organization’s employees and supports compliance efforts. Some of the tasks central to that mission include processing payroll, administering benefits, communicating and enforcing company policies, resolving workplace conflicts, keeping up with regulations, hiring and training employees, and setting compensation levels. These responsibilities may be fulfilled by one person or many trained professionals, but regardless of size, HR is critical because people are an employer’s most valuable asset.

What is a human resource?

A human resource is any person who is compensated for supplying skills or knowledge to help an organization achieve its business goals. Compared to other resources, such as equipment or facilities, people tend to require the most management, which is why many employers have dedicated HR services.

What does human resources do?

An employee might associate HR with new hire orientation and open enrollment periods, but it’s actually far more encompassing. Some of HR’s core functions include:

  • Payroll and tax administration
    Processing payroll and depositing and filing payroll taxes according to best practices is how HR helps employers satisfy obligations to their employees and the government.
  • Regulatory compliance
    HR must keep up with ongoing changes to employment regulations and develop proactive compliance management strategies to protect the business from costly penalties.
  • Talent management
    Strategic recruitment, learning and development, compensation benchmarking, and performance management are just a few of the ways HR helps organizations attract top talent and further their growth.
  • Onboarding and new hire orientation
    HR professionals have to make new hires feel welcome and give them the tools they need to succeed or risk poor productivity, engagement and retention rates.
  • Benefits administration
    If an employer decides to offer benefits, HR is generally tasked with open enrollment, COBRA administration, invoice reconciliation, reporting and employee support.
  • Policy creation
    It’s HR’s responsibility to create and enforce policies that ensure work environments are not only safe, but also equitable and inclusive.
  • Employee relations
    In addition to fielding inquiries from employees about their pay, benefits or career path, HR must resolve workplace conflicts when they arise.

How does HR add value to a company?

HR can help employers maximize their return on investment (ROI) in people. It achieves this goal by:

  • Recruiting and hiring top talent to gain a competitive edge
  • Embracing integrated HR solutions that improve efficiency and productivity
  • Supporting compliance to help reduce the risk of fines, penalties and lawsuits
  • Fostering workplace cultures that keep employees engaged
  • Leveraging people analytics and benchmark data to make more informed business decisions
  • Making employees change-ready and adaptable with ongoing training programs

Types of human resources support

When it comes to managing HR, employers have two options – hire an internal team or partner with a third party. Which one they choose largely depends on the size of their workforce and individual needs.

Internal HR departments

Employed HR professionals get to thoroughly know the business, including its processes and policies, and develop relationships with its employees. As a result, they’re often able to field questions and address issues in the workplace quickly.

External partners

When necessary, organizations sometimes turn to third-party vendors for specialized or full-service HR expertise and assistance. These services may supplement or substitute an in-house HR person or team:

  • Administrative services offering (ASO)
    Employers might opt for an ASO if they need additional HR support. The vendor usually provides a technology platform with a help desk or may handle certain HR duties on the employer’s behalf.
  • HR outsourcing
    Sometimes employers don’t have the expertise or the resources to handle HR in-house. In such cases, it may make sense to outsource some or all of the responsibilities to a third party that specializes in HR, payroll, benefits administration and talent management.
  • Professional employer organization (PEO)
    In a co-employment relationship, employers gain a full-service HR partner and access to a technology suite. PEOs also make it possible for small and mid-sized businesses to offer their employees the type of high-quality benefits that are typically only available at larger companies.
  • Human capital management (HCM) managed services
    Managed services provides proven best practices and standard operating procedures that can help large businesses improve the way they work and focus more attention on strategic growth. This fully integrated outsourcing solution includes end-to-end HR, payroll and taxes, talent, benefits, and time and labor.

Frequently asked questions about human resources

Why is it called HR?

Human resources is aptly named because people, similar to equipment or supplies, are an asset that businesses depend upon to achieve their objectives. In fact, of all the resources available to employers, employees are usually considered the most valuable.

Why is HR important?

HR is important because it helps employers recruit in-demand talent and create safe, inclusive workplaces where employees can be their most productive. In addition, many HR responsibilities, such as payroll and regulatory compliance, are essential to avoiding costly violations.

What are the seven functions of HR?

There are many HR functions, but seven of the most common are:

  1. Payroll and tax administration
  2. Regulatory compliance
  3. Benefits administration
  4. Recruitment and hiring
  5. Workforce training and development
  6. Employee relations
  7. Workplace policymaking

What is an example of how HR works?

Suppose a recruiter lands several candidates who have accepted an offer to come work for an employer. At this point, HR begins the onboarding process, which typically consists of running background checks and completing new hire paperwork. The department then schedules an orientation on the first day so that the new employees can meet their coworkers and managers, learn more about company policy, and receive any necessary training.

This article is intended to be used as a starting point in analyzing human resources and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.