Set up an HR Department

The process of setting up an HR Department will vary if you are an already established company or if you are a startup. The functions will also vary depending on which activities you will do in house and which activities you intend to outsource.

A number of companies outsource their HR activities to consultant. So you need to decide which activities you intend to outsource.

The below are the activities which are part of HR

Manpower Planning (Determine current manpower and future manpower needs). Know more .

Recruitment & Selection (Hiring of employee)

  • Inhouse Recruiters
  • Outsourced Consultants

Sources of Recruitment: Job Portals, News Papers, Employee Referral, Internal Database, Social Networking. Determine what the open vacancy are.

Joining Process (Joining Form, Employee Documentation) Create the employee joining file which will have all the necessary joining documents of the employees. Any future documentation will also be kept in this file.Onboarding and Induction: Here a new joiner is introduced into the company.  Employee is educated about the processes and policies of the company.Know more

Job Analysis (Create Job description and Job Specification)

Compensation: Determine the monetary and non-monetary compensation factors. What will be the benefits and perquisites you will offer? The salary which you offer should be in line with statutory laws. Design the CTC structure. Know more

Time and Attendance: Develop the time and attendance policy of the company.What are the different types of leaves and how many leaves will an employee have. Know More.

Payroll: Develop the parameters for payroll processing. Will it be done in house or will it be outsourced to a consultant. Know more

Claims / Expense Management: For employees on out station travel, sales conveyance, food or travel expense the policies for claims and expense need to be set.

Travel Management: The company needs to set the parameters for their travel policy. For what grade of employee what would be policy?  Travel Policy depends on company’s goals, travel practices

E.g :

  • For Level 3 employees : 2nd Class AC Train
  • For Level 2 : 1st Class AC Train
  • For Level 1 : 1st Class Air Fare

In addition the hotel and accommodation parameters also need to be set.

The travel booking process should be simple and organized. The reimbursement process for employees should be streamlined.

Performance Management: The performance management process used to evaluate the performance of employees should be selected. There are a number of methods available.


  • Bell Curve Method
  • Management by objectives
  • Forced Ranking
  • Balanced Scorecard

The performance management period should be determined.


  • Is it January – December
  • Or is it April to March

Employee Handbook : Create the employee handbook which will contain all HR policy details (Recruitment, Onboarding, Joining, Equal Employment, Confirmation / Probation, Notice Period, Performance Appraisal, Disciplinary Practices, Sexual Harassment Working Hours, Leave Policy, Compensation Policy, Office Equipment, Data Confidentiality, Ethics, Grievance, Exit).