The term “Human Resources” seems self-explanatory. Although the self-explanatory connotation is valid, it is not all-encompassing, especially in a business context.

Human resources encompass all the useful areas that humans can be resourceful, whether it’s in an organization, business sector, industry or the general economy.

Narrowing it down, it could also mean the number of skills and knowledge that a group of individuals possess to make them resourceful.

This article explores the true meaning of HR, as well as its importance to businesses.

What Exactly Is Human Resources In Business?

John R. Commons, an American institutionalist, was the first to come up with the term, “Human Resources” in his book “The Distribution Of Wealth” which was published in 1893.

Human resources, by Commons’s definition, is the division of a business that is charged with the sourcing, recruitment, and training of talents for an organization. It also administers employee benefit programs, including the pension plans and general welfare of all the company’s staff.

HR –as it is commonly called– plays key role in helping companies deal with a rapidly-changing business environment. Its functions are numerous and for the purpose of this article, we are going to focus on 9 of those key functions.

Before we jump into it, however, here’s a quick rundown on the different kinds of Human Resources.

Types Of Human Resources

Apparently, there are two kinds of human resources from a broad perspective.

Traditional HR

This is the most prevalent practice in human resources, especially for old businesses. It involves a team of individuals, physically carrying out the “supposedly automated” tasks.


Without being said, many small businesses coming up today know that this is an inefficient kind of human resource management since the human team is prone to making mistakes. Also, it’s a lot of cost to hire and keep the personnels that will run the HR department.

Automated HR

47% of companies will use AI-based solutions in human resources by 2022

The automated kind of HR involves integrating software into your HR activities. This easily automates routine tasks and keeps the database up to date at all times. As a matter of fact, some businesses are taking things up a nudge by incorporating AI into their HR processes.

According to Gartner, 47% of companies will use AI-based solutions in human resources by 2022. Consequently, the human resources industry is becoming one of the many newly automated sectors in the world.

Some of the top recommended HR software designed to help small businesses make the best of their talents while saving enormous cost include the following.

Operational HR

This kind of HR focuses on the day-to-day essentials to meet the needs of your employees. This HR is very interested in ensuring that employees are faring well, improving their talent, and consequently providing incremental growth for the company.

Strategic HR

Strategic HR is a more forward-looking kind of HR. It focuses on predicting long-term outcomes and ensuring that your company has enough human talent in the pipeline.

To maintain a good strategic position talent-wise, strategic HR teams maintain a broad database of qualified candidates, facilitate skill acquisition and job hunting programs, etc.

Narrowing down the kinds of HR further will be based on their primary functions. However, many HR companies (or departments) serve more than a dozen functions. This makes it hard to further classify them into unique kinds due to the overlap in functionalities.

9 key roles of human resources

Regardless of the kind of HR used by a company, a competent HR division will be responsible for these key activities.

1.   Hiring and staffing

This is usually the first major role of the Human Resource departments. It is typically associated with the talent scouting, interviewing and hiring process. This process is sometimes referred to as recruitment and selection.

It basically helps your company with sourcing for potential employees that are to fill vacant positions, and hiring the most qualified individuals for those positions.

This is one of HR functions that focuses on methods to increase employee retention, attract a more qualified labor and talent pool, and also adjust the interview or test questions to accurately determine the best fit for any given position.

Furthermore, this process will help your company in identifying opportunity areas pertaining to recruitment and selection which entails reviewing and updating job descriptions.

It also involves surveying your current workforce to ascertain ways to improve loyalty and invariably reduce turnover.

2.   Training, development, and performance management

46% of Learning and Development leaders said upskilling or reskilling was a top focus area this year. Companies that encourage curiosity see employees engage more deeply in their work, with 73% generating and sharing new ideas.

Consequently, one of the best ways to increase retention of staff and improve your overall company productivity is by providing career growth opportunities for top-performing employees.

46% of L&D leaders said upskilling or reskilling was a top focus area in 2022 

To ensure that these people really take the effort to grow, it will be extremely beneficial to your company if it includes training and development programs to match employees’ growth needs.

The training and development function of an HR department includes tracking and appraising employee performance. This result of the appraisal will be used to determine where your employees are experiencing difficulties.

This will help executives and HR customize training programs to fix and improve these poor areas.

3.   General and payment administration

Salary payment in a company is pretty tricky. You might find two middle managers receiving different salaries, enjoying different benefits, and bagging varied bonuses from time to time. It’s almost impossible for a business to keep track of these payment differences without a HR division.

An effective HR team maintains a database of employees, including their offered benefits, salaries, and bonuses. With this important bit of information, HR ensures that all these payments and benefits are paid to employees in a timely manner.

Despite the efforts of the most effective HR, nothing in the world of human management is pitch-perfect. Sometimes, payments bounce and employees experience delays. Other times, an employee may be requesting a raise. There are several sporadic activities that go on around payments and benefits. Managing these occurrences is one of the primary functions of a good HR.

An effective HR team maintains a database of employees, including their offered benefits, salaries, and bonuses.  

4.   Labor Law Compliance

There are several laws designed to protect employees from unfair treatment from their employers. Flouting these laws could attract millions of dollars in fines and also make your company unsuitable for new talents to consider building their careers.

It is the HR division’s responsibility to ensure that the company’s activities are in compliance with these various labor laws. For companies that only employ US residents, the local laws are easier for HR to follow.

However, in a much more global talent pool, companies could reach out to other countries for cheaper and more qualified talent. Exploring a global talent pool makes compliance a more challenging task for HR. Depending on the countries a company is hiring from, labor laws vary and HR must ensure that the company remains compliant with all of them.

5.   Social development

In our world today, companies are prioritizing corporate social responsibilities. This is compelling businesses to make sure that employees across various races, socioeconomic backgrounds, military records, disabilities, origins, etc, are offered equal opportunities for career growth. This is mostly an HR responsibility to ensure that minority groups are represented in every area of the company.

This HR function goes beyond hiring and offering promotions to a diverse workforce. It includes the development of socially inclined initiatives to support minority communities, foster employee engagement, and help the company build a respectable public reputation. These can be accomplished through the integration of Diversity & Inclusion programs, diverse hiring frameworks, scholarship and internship opportunities, and many more.

6.   Career Planning

Employees are humans like everyone else. They sometimes find themselves at crossroads, pondering what direction to take their career. This confusing state of being can affect productivity since the employee is often distracted. Interestingly, this feeling is contagious and can spread across the organization quickly.

HR departments are there to offer career guidance when situations like this occur. The best HR teams try as much as possible to offer objective guidance to employees to help them choose what’s best.

Senior employees may experience difficulties pivoting their career, but new hires are often caught in a broad web of career options that makes it hard to choose a definite path. HR departments are always there to help new hires plan their career from an early stage. This process is called “career pathing.

7.   Industrial relations

Another intriguing function of HR is establishing, cultivating, and maintaining relationships with other companies, labor unions, cooperatives, and their members.

Although unionization seems to be on the decline in many developed nations, it is still very much prevalent and a poor relationship between them and a company can quickly escalate into a tugs of war.

By maintaining very good relations with relevant unions through HR, companies can sort out potential conflicts more appropriately. This industrial relation also helps to ease the economic burden on your organization in times of layoffs or pay cuts.

8.   Safety and health

It is the job of the Human Resources to make sure that all employees are safe while on the job. HR is responsible for putting safety regulations in place to ensure this.

In 2020, over 4,700 employees experienced fatal injuries in the workplace, according to the Bureau of Labor Statistics. In the preceding year, workers’ claims for workplace injury averaged $113,695 per reported case. Therefore, US companies paid out billions of dollars in injury-related claims.

With HR departments setting the appropriate safety measures in place, companies could save heavily by avoiding the need to provide injury-related compensation.

Here’s a good example. The Human Resources team at Shell, PLC has created initiatives to ensure maximum safety for its employees. These initiatives are a part of the company’s “Goal Zero”, which aim to achieve “Zero workplace accidents.”

9.   Personal well-being

Employees do run into personal challenges that may not be directly related to their jobs. However, these personal challenges can get in the way of their productivity.

One key human resource function is to recognize when employees are having these challenges or, at least, encourage a culture of open communication that allows employees to present their challenges and seek assistance.

For companies that can afford it, the HR division sometimes hires a wellness specialist to help employees navigate issues regarding their wellbeing. These specialists can work with the HR and the workforce to create initiatives that will encourage engagement and open communication between employees.

Most of those initiatives are geared towards helping the staff maintain an optimum state of well-being, suitable for productivity, and both personal and career growth.


The relevance of HR can not be overemphasized. However, as more small businesses take solid positions in the economy, the question of whether the effort of building a HR division is worth it boggles the mind of business owners.

In truth, there are software in the market to handle many of these responsibilities highlighted above. However, the need for skilled HR professionals to supplement HR software is paramount.

It’s difficult to help real human employees openly express themselves and their challenges without first creating a connection with another real, empathetic human being. Ergo, the need for a real HR team.

However, it is fair to recognize that building HR costs a fortune. Small businesses could really use cost-friendly HR software to automate simple tasks and save money.

Sonary provides in-depth analysis of leading HR solutions, alongside hyper-objective recommendations, and first-hand reviews of these solutions for small and medium-sized businesses to work with.  Take a moment to check out our HR software analyses.