How to create an effective HR structure: Four essentials for SMEs

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By Jessica Caban

For SMEs with no expertise in the human resources space, it can be hard to know where to start when creating an initial HR structure for their business.

Read more: Almost two thirds of SMEs are not investing in HR

Too often the matter is placed on the to-do list when, in fact, the building blocks for a sound HR structure should be set in place as soon as possible to create a compliant and collaborative workplace, and reduce the risk of employee-related disputes and fines.

Here are four of those essential building blocks.

1. Modern awards

As a first step, a small or medium business should identify which modern awards apply to its employees.

In conjunction with the National Employment Standards, a modern award contains a set of minimum terms and conditions of employment for every employee covered by it. A list of all modern awards can be found on the Fair Work Commission website. A modern award will contain important matters such as what minimum rate of pay is to be applied to employees and rules surrounding overtime and shift work, trainees and allowances.

While not all employees in a workforce will be covered by a modern award, the majority are and it is best to assume your employees are covered by one. If a business is not confident that it has applied the correct modern award to its employees, it should seek assistance because getting it wrong could be costly. The Fair Work Ombudsman could become involved and the business might be required, for example, to provide back-pay to its employees and pay a substantial fine for breaching the Fair Work Act 2009 (Cth).

2. Employment contracts

Employment contracts also contain terms and conditions relating to a particular employment relationship.

The terms and conditions in an employment contract go to the heart of the personal relationship between the employer and employee. They contain details such as the employee’s rate of pay, an applicable probationary period, hours and location of work, how much notice is to be given on termination of employment, restraints of trade and the like. Verbally agreeing to matters instead of putting them in writing in a contract is risky and can lead to confusion and disputes as to what terms and conditions govern the employment relationship. Further, if no contract of employment exists, an employer might be required to provide an employee with “reasonable” notice of termination of their employment, which could be as much as two years’ notice.

3. Policies and procedures

These days, any business, whether it be a SME or larger enterprise, must have policies and procedures in place, particularly in relation to matters such as workplace health and safety (WHS), anti-discrimination, harassment and bullying, and workplace surveillance of email and internet usage. There are a range of policies and procedures that a SME can choose to implement relating to, for example, diversity and equal employment opportunities, leave, grievance, performance, disciplinary, IT, drug and alcohol, and social media use.

However, it is not enough for a business to simply create its policies and procedures and do nothing more; every employee must be made aware of the policies and procedures and regularly provided with training in relation to them. Creating a suite of well-written policies and procedures, and ensuring all employees are aware of them, will assist in ensuring that employees are aware of what is expected of them and in turn, reduce the chance of an employee bringing a successful claim against the business.

4. Workplace health and safety

Creating measures to ensure the health and safety of people at work is not just an important building block, it’s a vital one. The safety and wellbeing of employees should be paramount to any organisation and all businesses must comply with the WHS laws in their respective state or territory. A breach of WHS laws could lead to large penalties and possibly imprisonment for an individual within the business who is involved in any such breach.

Conducting safety assessments of the workplace, ensuring regular safety training for staff, preparing a WHS policy and providing appropriate safety resources (e.g. safety signs around work areas and personal protective equipment), are all examples of the kind of steps a small or medium business should take to ensure the health and safety of its employees. Ignoring WHS could, at its worst, result in the injury or death of an employee.

Laying the foundations of an effective HR structure should be a matter of priority for any SME. The benefits of such a structure far outweigh the time and effort, and cost, that may be involved in putting one in place.

Jessica Caban is principal of Penlar Consulting, an outsourcing agency that specialises in employment relations and human resources. 


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Bob Aley
Bob Aley
5 years ago

Completely agree with these steps. I implement them for every client. I would add, however, that the Minimum Employment Period also needs to be explained and included in the Employment Contract, in order to remove confusion around an ‘arbitrary probation period’ and make every new employee aware of the implications for their initial employment period regarding unfair dismissal, etc.