The Ultimate Guide to Human Resource Management (HRM)

Human resource management (HRM) has become the cornerstone of every organization, extending beyond traditional personnel management. Its evolution has seen it cover aspects such as employee performance, business compliance, organizational management, and customer relations.

It has also become imperative for owners of Startups, Small Businesses, HR Professionals, and Founders to have a complete understanding of Human Resources Management for long-term business success.

In this detailed guide to HRM, we’ll walk you through the fundamentals, functions, and trends in HRM. We’ll answer the most-asked questions about Human Resources management, and also recommend some HRM tools to help run your business successfully.

What is Human Resource Management (HRM)?

Human Resources Management (HRM) is an organizational function that entails the strategic management of an organization’s employees and other stakeholders.

HRM encompasses a long list of responsibilities, including recruitment and onboarding, employee motivation and engagement, remuneration and compensation, as well as compliance and evaluation.

The summarized function of HRM is to ensure that qualified people are properly equipped with skillsets and tools and given an enabling environment to deliver on the needs and expectations of an organization.

HRM is designed to create a win-win situation where employees and businesses thrive.

In recent times, HRM has gone beyond traditional administrative tasks to include modern tools and strategies such as data-driven, technology-supported tasks and decisions. Processes like hiring, payroll, remote team management, and workforce support are now handled differently, with people and technology at the center; hence, the need for more knowledge about modern HRM.

Importance of HRM in Modern Organizations

Modern organizations cannot survive without HRM in today’s business landscape. This is simply because the drivers of organizational success are the people, and not the products. Therefore, if employees are not productive and operations are not efficient, the entire organizational process amounts to nothing.

Human Resources Management ensures that organizations recruit and retain the best staff, motivate them, and build high-performing teams.

With HRM, organizations can:

• Make better, more informed hiring decisions
• Reduce hiring costs
• Quicken and simplify onboarding processes
• Reduce employee turnover
• Build strong leadership and succession processes
• Ensure a healthy organizational culture
• Ensure compliance with all related laws.

The reverse is obtainable when an organization lacks the right HRM strategy. From poor work culture to high turnover and hiring costs, as well as low productivity, the organization without sound HRM has more to lose in human and financial capital alike.

Objectives of Human Resource Management

HRM has several objectives, all of which are geared towards improving an organization and its employees.

They include:

Aligning HR with business goals: HRM is designed to ensure that all efforts relating to hiring, training, employee engagement, and talent-related decisions are consistent with the goals of the business.

Enhancing employee productivity: HRM is out to improve employee productivity by providing the right environment, tools, and support for every employee

Ensuring legal compliance: The HR department within an organization is responsible for ensuring that all activities are in compliance with national, state, local, and all other laws.

Building a strong company culture: HR influences the design of organizational culture that relies on positive shared values, communication, collaboration, mentorship, and reward.

Reducing turnover and increasing retention: By supporting employee well-being and growth, HR makes an organization one that people want to keep working at.

08 Core Functions of Human Resource Management

HRM has 8 core functions that make it indispensable to every organization. Every function impacts a company in no small way, contributing to its growth and productivity.

These core functions are:

1. Workforce Planning
2. Recruitment and Selection
3. Onboarding and Training
4. Performance Management
5. Compensation and Benefits
6. Employee Relations and Engagement
7. Attendance and Leave Management
8. Legal Compliance

These functions will be discussed in detail before the conclusion of this guide.

04 Types of Human Resource Management

There are 4 major types of Human Resources Management across different organizations and industries.

We’ll be discussing each of them:

1. Strategic HRM

Strategic HRM refers to the process of maximizing the potential of an organization’s workforce through planning, talent and performance management, and leadership development.

This process begins with the HR officer understanding the goals and expectations of an organization and then planning the right actions that lead to the actualization of those goals.

2. Operational HRM

Operational HRM focuses on the day-to-day activities within an organization, such as employee attendance tracking, performance monitoring, hiring and onboarding, and work benefits.

This administrative function ensures the smooth running of an organization and equips employees with what they need to perform optimally.

3. Administrative HRM

Administrative HRM focuses on areas associated with documentation and recordkeeping. The HR personnel handles all staff records, beginning with onboarding documentation and including all employee information.

Administrative HRM also entails handling contracts, payroll, and the logistical areas of an organization’s HR.

4. International HRM (IHRM)

International HRM is the process of handling HR functions across global organizations. This entails managing employees across different countries in line with international laws, global cultures, and societal systems.

This type of HRM exists in organizations that have subsidiaries in other countries. The HR team in the parent country/headquarters is responsible for all HR functions, including recruitment, onboarding, appraisals, payroll, etc.

Structure of an HR Department

Do you wonder what the structure of an HR department looks like? There is no one structure for all organizations. Rather, the size and needs of an organization determine the structure it will have.

Here are some major HR department structures.

HR Generalist vs HR Specialist

An organization can choose to recruit an HR specialist or an HR generalist, depending on its needs. Here’s the difference between the roles:

HR Generalist: An HR generalist operates across a wide range of HR responsibilities within an organization. For instance, an HR generalist is often expected to handle all the HR tasks for an organization, with the duties changing from day to day to suit the current needs of the business. E.g., hiring today, onboarding next week, and solving employee disputes the next day.

HR Specialist: An HR specialist is trained in a specific area of HR and functions solely in that area. For instance, an HR specialist could handle only hiring and onboarding, while another specialist handles employee motivation and benefits.

A company that embraces HR specialists will have several specialists as part of a larger team of HR professionals.

Typical roles in HR

There are several common roles in HR across different organizations and departments. They include:

HR Manager: Responsible for overseeing the entire HR department and setting the goals and strategy for all HR operations.

Recruiter: Responsible for hiring the right candidates for an organization based on its needs.

Learning & Development Specialist: Manages employee training, professional development, and growth within an organization.

HR Business Partner: Liaises with other departments of an organization to ensure that the HR function strategically aligns with business goals.

Outsourced vs in-house HR teams

Outsourced HR: Entails hiring an external HR professional, company, or service provider to handle several HR functions on behalf of an organization. The most commonly outsourced HR functions include recruitment and training, legal compliance management, and benefits administration.

In-house HR: refers to handling all HR functions within an organization and hiring HR professionals who work as part of the organization and handle all its HR needs, including recruitment, payroll, employee management, compliance, benefits, etc.

What Do Human Resource Managers Do? Roles and Responsibilities

Human resource managers play a crucial role in ensuring that a company’s workforce is productive, engaged, and compliant with labor laws. Their responsibilities go beyond hiring and firing—they act as the bridge between management and employees. Here’s a breakdown of what HR managers typically do:

1. Recruitment and Hiring

• Create job descriptions and post openings.
• Screen resumes and conduct interviews.
• Coordinate onboarding for new employees.

2. Employee Training and Development

• Identify skills gaps and organize training programs.
• Support career development and succession planning.
• Foster a learning culture within the organization.

3. Performance Management

• Set performance standards and evaluate employee performance.
• Provide feedback and conduct performance appraisals.
• Address performance issues and implement improvement plans.

4. Payroll and Benefits Administration

• Manage salaries, bonuses, and incentives.
• Administer benefits such as health insurance, retirement plans, and leave.
• Ensure accurate and timely payroll processing.

5. Employee Relations and Compliance

• Handle workplace conflicts and mediate disputes.
• Ensure compliance with labor laws and company policies.
• Promote a positive workplace culture and employee engagement.

6. Strategic Planning and HR Analytics

• Analyze workforce data to inform decision-making.
• Advise management on HR policies and organizational changes.
• Align HR initiatives with overall business goals.

In short: HR managers ensure that employees are supported, motivated, and aligned with company objectives, making them a cornerstone of any successful organization.

HRM in Small Businesses vs Enterprises

HR needs and functions differ based on the size and nature of businesses. As such, HR in small businesses and Enterprises looks different.

Here’s how:

Differences in structure, needs, and tools: 

While small businesses often depend on generalist HR professionals to handle all HR functions, enterprises have HR departments comprising several specialists to handle unique HR needs. Small businesses often have a low HR budget and embrace simple, user-friendly HR tools. Enterprise companies use more powerful HR systems with massive features and scalability. While small businesses focus on local HR compliance, Enterprise companies pay attention to local, national, and global compliance.

Why HR is critical even in small teams:

No team is too small to have an HR officer. HR functions are necessary even amongst a few people. There is a need to ensure proper communication, performance, collaboration, and motivation. It is the job of HR to deliver these while preventing any issues among the members of the team.

Cost-effective HR strategies for SMBs:

Small and Medium businesses can save costs when they embrace the following HR strategies:

• Outsource HR functions that aren’t frequent, such as recruiting and compliance.
• Use affordable HR tools for several functions, such as hiring, onboarding, attendance management, and payroll. Payrun is an example of an affordable HR tool.
• Start with the most important HR functions and scale up as you grow.

Role of Technology in HRM

Technology has completely transformed HRM into a data and tech-driven process, supported by HR software.

What is HR software (HRMS/HRIS)?

HR software, often called Human Resources Information System (HRIS) or Human Resource Management System (HRMS), is a digital tool that automates major HR functions like recruitment, attendance, performance management, and payroll. These tools simplify processes, save time, and reduce human errors while supporting data-driven decision making.

Benefits of using HR software

HR software delivers immense benefits to all sizes of businesses, especially SMEs.

These benefits include:

• Improved Efficiency: Reducing repetitive tasks by automating functions like attendance and leave tracking, payroll, and onboarding.
• Improving Accuracy: By reducing human errors associated with all HR functions.
• Data-Backed Decision Making: Access to performance data, employee metrics, and insights all support data-driven decision making.
• Supporting Growth: HR software supports business growth with its scalable systems that adapt to the evolving organization.

Key features to look for in HR tools

The best HR tools ought to have some of these key tools:

• Payroll management
• Attendance and leave tracking
• Performance insight and management
• Onboarding tools
• AI Resume screening
• Compliance management
• Employee self-service

In addition to these, opt for tools that are cloud-based, easy to use, and available on mobile apps.

Top 5 Human Resource Management Software:

There is a lot of HRM software out there, but these are our 5 top recommendations:

1. Deel:

Deel is a global HRM software that helps organizations hire, manage, and pay global employees across over 150 countries and stay compliant with global laws from a single platform.

2. Payrun:

Payrun is an HRM software equipped with all the most important HR features and functions, including resume screening, onboarding, leave and attendance tracking, payroll, etc. It is a powerful software that is affordable and easy to use.

This software is best for small businesses and startups.

3. Gusto

It is a software designed to support employee payroll, benefits, and other functions such as insurance.

4. BambooHR

It is a platform that delivers HR functions like hiring and onboarding, reporting, payroll, employee experience, and benefits, all in one platform.

5. Zoho People

Zoho People is a cloud-based, mobile-friendly software that streamlines all HR processes with employees at the center to ensure the best experiences for them.

Human Resource Management System (HRMS) Explained

As earlier described, a Human Resource Management system is a platform that encompasses all HR functions.

Many organizations are embracing HRMS platforms like Payrun to help them handle a wide range of HR tasks on a single platform instead of using multiple tools and files. 

let’s Explore Payrun a Bit…..

Payrun is an affordable HR solution that allows organizations to manage HR functions from a single, secure dashboard. It reduces human effort with automation features, especially in recruitment.

Payrun has features such as onboarding, payroll, and attendance. However, its AI Resume Screening Feature is a game-changer for HR because it:

• Rates and ranks submitted resumes based on job suitability
• Identifies the most suitable candidates whose skills and experiences match the keywords in the job description
• Saves time with automated shortlisting.
• Reduces human bias in the hiring process.

Challenges in Human Resource Management

Despite increasing knowledge and HRM tools, several challenges still remain to be surmounted. They include:

Talent shortage and hiring delays: Finding qualified candidates takes time, and long hiring times cost more.

Remote team management: Collaboration, monitoring, and communication suffer in the age of remote teams.

Legal and regulatory complexity: Laws are constantly changing, and many businesses struggle to catch up.

Maintaining engagement in hybrid environments: poor communication and engagement lead to dissatisfied employees.

HR data overload and decision fatigue: HR officials are doing so much nowadays, which takes a toll on their decision-making abilities.

HR tools like Payrun can help the HR team solve these challenges.

Future Trends in HRM

HRM is still evolving, and the future looks promising. Here are some trends that’ll become commonplace in the near future:

• AI and automation in HR (AI-Resume Screening) to ease repetitive tasks and reduce human errors.
• Employee experience (EX) is designed to support employees from the onboarding stage throughout their careers.
• People analytics that support better, data-driven decision making for better employee outcomes
• Mental health and wellness support for team members to protect their health as they work
• The rise of the gig and remote workforce opens a wide range of opportunities for HR to explore tools and opportunities for improved work delivery.

Best Practices for Effective HRM

Support open communication: The workforce and leadership should have open communication for better understanding.

Prioritize employee development: Invest in training and upskilling employees. It supports their growth, boosts job satisfaction, and increases retention.

Data-backed decision-making: Metrics and insights should influence all HR processes and strategies.

Embrace HR Automation: Automating Payroll, resume screening, and attendance tracking saves time and reduces human error.

Ensure Legal Compliance: Review labor and industry laws regularly and ensure all organizational practices and policies are legally compliant.

Here is the Detailed Breakdown of the 08 Core Functions of HRM

1. Workforce Planning

The workforce planning function of HR ensures that the right talents are placed in the right roles within an organization. This function also involves identifying skills gaps, forecasting talent needs, and succession planning.

Ensuring an inclusive and diverse workforce is also a key element of workforce planning.

2. Recruitment and Selection

This function ensures the attraction and employment of the best talents that match the needs and goals of an organization. It entails drafting and putting out job descriptions, sourcing candidates from job boards, recruitment agencies, or by referrals.

This process also entails screening resumes to shortlist the most suitable candidates. This is one of the most time-consuming processes, but AI resume screening features in Payrun help to save time and improve screening processes.

Interviews and candidate selection are also a part of this function.

3. Onboarding and Training

After new staff are employed, this function is responsible for designing structured onboarding programs to get them properly situated in their new roles. The right onboarding experience clarifies expectations, enlightens about the company culture, and provides needed training.

A checklist can help ensure consistency in this process and ensure nothing is forgotten.

Frequent training and development initiatives are also necessary to equip employees with the skills needed to stay ahead of industry changes.

4. Performance Management

Performance management begins with setting clear Key Performance Indicators or organizational objectives and key results. Then, feedback and appraisal systems are put in place to spot areas of underperformance and underdevelopment. Underperforming staff are then offered training and support if needed, after which follow-up evaluations will take place.

5. Compensation and Benefits

Organizations need to prioritize benefits and compensation if they want to retain their best talent. This begins with salaries and includes bonuses and other job perks like health insurance, paid leave, stock options, and wellness facilities.

Systems like Payrun help to support the payment of salaries and benefits in compliance with tax laws.

6. Employee Relations and Engagement

HR needs a strong conflict resolution strategy to ensure a healthy workplace and quick dispute resolution. This function also ensures team-building and positive employee engagement throughout an organization. Rewarding hard work and excellence through employee recognition programs is also essential for morale boosting and increased retention.

7. Attendance and Leave Management

Attendance, leave, and time-off policies ought to be in place, guided by clear policies for each leave type, including paid, sick, maternity, or casual leave.

Systems should be in place to help staff easily request time off and track leave processes to avoid human mistakes.

Tracking tools like Payrun’s attendance feature help HR teams identify patterns, flag leave and attendance issues, and improve the process in compliance with local laws.

8. Legal Compliance

HR departments must ensure that their organization and its processes are compliant with all laws, including labor laws, safety standards, and data security and protection laws, such as GDPR.

Policy changes should be immediately identified to ensure that the organization adapts and avoids legal penalties.

All grievances and disciplinary action must be properly documented and handled according to organizational protocol.

Final Thoughts

HRM has an undeniable role in every organization. It is responsible for everything that concerns an organization’s human resources.

The HR department handles recruitment and onboarding, employee engagement and development, benefits and payroll, and ensures that all these processes are aligned with the organization’s goals.

There is no business success without HR. So, whether you own an SME, a startup, or a large establishment, you need HRM to foster a strong workforce, a healthy work environment, and lasting organizational growth.

Are you looking to make your HR efforts more efficient and productive with less stress? Payrun is the best workforce management software that can help you achieve it.

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FAQs About Human Resource Management