Organizational Wellness

How to Build a High-Impact HR Department From Scratch

Last Updated Mar 10, 2025

Time to read: 13 minutes

Building an HR department from scratch can feel like trying to assemble a jet while it’s already in flight. Overwhelming? Absolutely. But here’s the thing—every thriving company started exactly where you are now.

One hundred percent of Fortune 100 companies have a dedicated HR team, according to BambooHR’s State of Human Resources Leadership 2023 report. That’s no coincidence. HR isn’t just a department — it’s the backbone of a company’s growth, culture, and success.

If you’ve been handed the mission to build a fully functioning HR department, don’t sweat it. The right approach and proven strategies can turn this intimidating task into a smooth takeoff for your company’s future.

Let’s uncover the steps and best practices that will help you create a rock-solid HR foundation—right from day one.

What Does an HR Department Do? Core HR Functions

An HR department manages a range of functions related to the employee lifecycle, including recruiting and hiring, training and development, managing compensation and benefits, ensuring compliance with labor laws, and maintaining employee relations. Essentially, HR helps to maximize employee performance in service of the organization's strategic objectives while ensuring the wellbeing and satisfaction of the workforce.

It's a lot, which is why building an HR department from scratch can feel overwhelming. Fortunately, you don’t have to go at it alone, do it overnight, or reinvent the wheel. Building a whole new department takes time and effort, but getting started with the following essential functions can help you get up to speed as fast as possible.

Talent Acquisition and Recruitment

Finding and keeping great talent is about more than just posting job ads and hoping for the best. Hiring an employee can cost up to three times their yearly salary, according to an SHRM study, so it’s important to go about this strategically. Here’s what can move the needle:

Strategic planning: Create recruitment strategies that align with where your business is headed. Think about your workforce needs, budget realities, and a timeline. Then, build a plan that brings in the right talent at the right time.
Employer branding: Develop a compelling story about why great candidates should choose your organization. Slowly, you’ll build your employer brand by engaging authentically with potential hires through different channels.
Selection process: Design hiring methods that identify true talent while treating every candidate with respect. Using consistent evaluation criteria can help you make fair, effective decisions.

Performance Management

Getting the best from your team requires more than just doing an annual performance review. Modern performance management is an ongoing conversation that helps everyone grow and succeed.

Regular feedback and clear expectations create the foundation for real development. Your employees understand their goals and get the support they need to achieve them while your organization builds a culture of continuous improvement.

Compensation and Benefits

Creating attractive compensation packages is part art, part science. Although offering a generous total compensation package may sound like a big financial commitment, the reality is that it makes sense for most companies.

As revealed in Wellhub’s Return on Wellbeing 2024 report, 56% of companies see a return on investment of more than $2 per each $1 spent on their wellbeing programs. To find what your ideal total compensation package looks like, you can try:

Market research: Stay on top of what other companies are offering through regular salary surveys and industry benchmarking. Build relationships with similar organizations to share compensation insights and trends, and don’t forget to consider local and industry-specific factors! They might influence competitive rates in your market, like the cost of living.
Organized internal structure: Build clear, fair pay scales that make sense for your organization and create transparency around compensation decisions. Regular reviews can help you catch any pay gaps before they become problems and work towards a fairer workplace.
Complement with total rewards: A complete package has to go beyond just salary to attract and retain top talent. Keeping in mind that most employees would switch companies for better benefits, according to a 2024 Maven survey. Offering unique benefits can help your company stand out. This includes everything from flexible work arrangements to professional development opportunities, wellness programs, sabbaticals, and more.

Employee Development and Training

Growing your own talent is often smarter than constantly hunting for new hires. Having the right professional development tools can help both you and your employees, as more than 90% of employees consider professional development opportunities to be important parts of their jobs, according to a BetterBuys survey. Try incorporating some of the following best practices:

Skills assessments: Having regular check-ins to identify what your team needs to succeed in both current and future roles can help everyone stay on the same page. Consider using a mix of formal assessments, manager feedback, and employee self-evaluations to get a complete picture.
Learning paths: Create clear development routes that show people how to grow within your organization. Map out potential career trajectories across departments, not just up the traditional ladder. Include specific milestones, required training, and experience needed for each step of the journey.
Transparent success metrics: You can track program effectiveness through completion rates, skill application of the job, and impact on performance reviews. Gather feedback from both participants and their managers about the practical value of training initiatives.
Resource library: Build a comprehensive collection of tools and materials employees can access whenever they need support. Include both self-paced learning options and structured course materials to cater to different learning styles.

Employee Relations

Strong relationships are the glue that holds great organizations together. Creating positive employee relations means building trust through consistent, fair practices like a wellbeing program. In fact, more than 90% of employees think their employers should care about their wellbeing, according to the American Psychological Association. Think about creating:

Regular check-in opportunities
Clear communication channels
Fair conflict resolution processes
Employee recognition programs
Inclusive team-building activities

Crafting Policies and Procedures

Good policies are guidelines that help everyone work better together. They should reflect your organization’s values while keeping things running smoothly. When creating policies, it’s always a good idea to involve people from different parts of your organization so your policies work well in the real world — not just on paper. Your policy framework should:

Support daily operations
Protect both employees and the organization
Adapt as your organization grows
Stay current with legal requirements
Reflect company culture

Lay a Strong Foundation for Your HR Department

Before jumping headfirst into how to build an HR department from scratch, it’s super important to understand what your organization needs from its new HR department. This will help you build a department that truly serves your people and leadership goals.

Define Your Needs

Setting up an HR department feels a bit like building a house — you need a solid foundation before you can start building up. You’ll want to start with the essentials of any organization’s HR department:

Business analysis: Take a close look at your organization’s unique needs based on size, industry, and growth plans. Think about both immediate needs and where you want to be in the next few years so your HR foundation can support future growth.
Current challenges: What are your existing pain points? Is it low retention or recruitment issues? Look for patterns in employee feedback and exit interviews to take stock of your organization’s biggest challenges. Consider conducting a thorough assessment of current HR practices, even if they’re informal, to identify what’s working and what’s not.
Core functions: Prioritize which HR functions are most important to your organization right now. While recruitment and payroll might be obvious starting points, don’t overlook areas like employee development and workplace culture.

Legal Compliance

The legal considerations of an HR manager can feel overwhelming, but getting it right is non-negotiable. Understanding and following regulations is critical to avoid fines and create a fair workplace where everyone can thrive. Here’s where to start:

Regulatory research: Look at the key laws affecting your workplace, from federal regulations to state-specific requirements. Start with the Equal Employment Opportunity (EEO) laws, the American Disability Act (ADA), and the Fair Labor Standards Act (FLSA) for guidance.
Essential requirements: Create a compliance checklist covering everything from hiring practices to workplace safety. The Occupational Safety and Health Administration (OSHA) is in charge of setting up the safety regulations all workplaces must follow to protect their employees.
Legal support: Find the right legal partners who understand both HR law and your industry. Depending on your organization’s size, you may need in-house or external counsel options.

Establish a Budget

Creating a realistic budget means balancing immediate needs with long-term investments in your HR infrastructure. Start with the essentials and build from there. Remember to consider both direct costs like salaries and benefits and indirect costs like training and investment. Here are some tips:

Do a cost analysis: Break down expenses into must-haves and a wish list. Include everything from basic HR software to training programs and employee benefits. Factor in unexpected costs like legal consultations and emergencies.
Find strategic solutions: Research cost-effective options that still deliver quality results. For example, you could rely on free or low-cost resources like YouTube courses or professional HR networks while you focus your budget on more pressing needs. You can join LinkedIn HR groups or local SHRM chapters, which often offer free member discussions and resources to help you handle common HR challenges.
Invest in tech: Choose HR systems that can grow with your organization. Calculate both the immediate costs and long-term servings from automation. Although a steep sticker price may be shocking at first, keep in mind how technology can help you scale your HR services efficiently.

Building Your HR Team

You’ll want to be very strategic when building your first HR team. The right mix of skills and personalities can transform your HR functions from administrative to strategic.

HR Roles and Responsibilities

Start by defining clear roles that cover your essential HR functions. Think about both immediate needs and future growth when structuring your team. Pay attention to:

Core positions: Map out the key roles you need to handle critical HR functions, like an HR manager for daily operations, a benefits administrator to handle employee programs, and a hiring manager to handle talent acquisition. Some specialties may need in-house roles, while others could be easily outsourced. Identify which functions might be better served through external partners to reduce the direct burden on your HR department.
Role evolution: Plan how positions will grow as your organization expands, building in flexibility to adapt roles as needs change so you are ready to scale your department as your team grows. (This can also be one of the first tasks you assign your initial HR hires).

Hiring the Right People

To find great HR talent, you’ll have to look beyond the technical skills. You need people who can build relationships, think strategically, and adapt to change. You can do this by creating a thorough hiring process that assesses hard and soft skills through behavioral interviews and practical exercises.

Most importantly, you’ll want to look for candidates who will positively impact your company culture. Look for signs that they’ll be valuable additions to the team beyond their roles and responsibilities, considering how they’ll interact with employees at all levels.

Developing HR Skills

Building a strong HR team is an ongoing process of continuous development and growth. Regular training and development opportunities help your HR team stay current and effective. You can encourage ongoing education by providing:

Regular skill-building workshops
Financial support for professional certifications
Industry conference trips
Internal knowledge-sharing sessions
Leadership development programs

Creating HR Policies and Procedures

Now’s the time to really get into the nitty-gritty of building your HR department. Writing the policies and procedures is like setting up the rules of the game, and when everyone knows how to play, the whole team works better together.

Essential HR Policies

Good policies strike a balance between protecting your organization and supporting your people. Let’s take a look at the most important areas to cover:

Employee conduct: Your code of conduct sets the tone for workplace behavior. Beyond just listing rules, it should reflect your company values and culture. Remember to include real examples of how these values play out in daily life.
Leave and attendance: People need clear guidance on time off. Write policies that protect both the business and your team’s need for work-life wellness, covering everything from vacation time to family emergencies.
Performance and growth: Skip the fluffy corporate language and clearly explain how performance reviews work, what stellar performance looks like, and how people can grow in their roles.
Workplace safety: From anti-harassment policies to data security guidelines, make it crystal clear that you’re serious about keeping everyone safe. Include specific examples of prohibited behavior and exactly what to do if something goes wrong.

Employee Handbook

Your employee handbook needs to be clear, helpful, and easily accessible. Here are some tips on creating your first employee handbook:

First impressions matter, so make it welcoming and easy to navigate. Start with the most important information that people need and organize the rest logically.
Include a table of contents and an index to help people find what they need right away.
Keep the language friendly but professional and avoid legal jargon unless absolutely necessary.
Include real-world examples that help people understand how policies apply to their daily work.
Add some FAQs based on common questions you hear from employees.

Run a Lean Department With HR Technology

The right tech tools can turn your HR team from paper pushers to strategic partners. But with so many options out there, choosing the right systems matters. Let’s start with the most important ones.

HRIS and Payroll Systems

A good Human Resource Information System (HRIS) can help you avoid manual data entry (or minimize it as much as possible). These systems can completely transform how your department runs:

Core functions: Look for systems that handle the basics brilliantly, including employee data, time tracking, and payroll processing. The best platforms make these tasks almost invisible, running smoothly in the background while your team focuses on more important work.
Integration power: Your HRIS should play nice with your other systems, from benefits administration to performance management. Think about current and future needs — the right team grows with you.
Employee experience: Give your team self-service access to their information, from downloading pay stubs to updating personal details. The easier you make it for employees to handle routine tasks, the more time you have for strategic work.

Talent Management Software

Modern talent management goes way beyond just applicant tracking. The latest tools can help you nurture talent from first application to future leadership roles:

Recruitment magic: Look for tools with features that streamline your hiring process, from posting jobs to scheduling interviews. Great systems help you build talent pools and keep candidates engaged throughout the process.
Development tools: Look for platforms that help you track goals, document feedback, and create learning paths. The right system makes it easy to spot top performers and support struggling team members.

Employee Engagement Platforms

Building a great workplace culture is usually one of the top priorities of the best HR departments. That’s because a positive company culture can lead to higher employee engagement and productivity, according to a survey published in the International Journal of Environmental Research and Public Health.

You can use your HRIS to keep a constant finger on the pulse of your organization:

Communication channels: Find tools that make it easy for everyone to stay connected, whether they’re in the office or working remotely. The best platforms encourage regular feedback and open dialogue.
Recognition features: Make it easy for people to celebrate wins and thank colleagues for their great work. This can help foster deeper bonds among team members!
Data insights: Choose a platform that helps you spot trends and take action before small issues become big problems. Good systems turn employee feedback into actionable insights for your leadership team.

Transforming HR From Administrative to Strategic

The most important part of building an effective HR department is to set up systems and policies that support business success and employee wellbeing. From establishing core functions to implementing the right technology, each piece plays an important role in creating an HR operation that truly delivers value.

A comprehensive employee wellbeing program can boost the effectiveness of almost every single one of your HR initiatives. When wellbeing is integrated into your department’s DNA from the start, you create an environment where both your HR team and your employees can thrive.

Speak with a Wellhub Wellbeing Specialist today to see how incorporating wellbeing into your HR foundation can help create a more engaged and productive workplace.

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[*] Based on proprietary research comparing healthcare costs of active Wellhub users to non-users.