Some Companies Are Cutting HR Departments

Getting rid of the HR department is a tactic some companies are using to cut costs and streamline operations. Although cutting this department and asking other workers to handle HR functions seems like a good way to save money, there are some potential drawbacks. If you are thinking about laying off HR employees or getting rid of your HR department entirely, examine the pros and cons before doing so.

Some companies are outsourcing their HR functions, while others are relying on employees from other departments to handle HR tasks. In a company with no HR department, payroll administration might be outsourced to another company. Representatives from the finance, marketing and operations departments might be tasked with handling compensation administration, staffing and employee training activities. Releasing your HR employees and shifting their responsibilities to other workers frees up some money in your budget, but there are some negative consequences to consider.

Managers may be unprepared to assume the roles of employee relations specialists, trainers and benefits administrators. Bruce Tulgan, the founder of RainmakerThinking, says many managers drop the ball on HR issues and then blame the HR department for the resulting problems. If managers have not received any human resources training, they may not be able to identify talented employees or complete other tasks typically handled by the HR department. This could lead to reduced morale or other problems in the workplace. Managers often have different priorities than HR professionals, so there is a risk that a manager will spend more time focusing on sales or project results than filling out paperwork and making sure employees are getting along with each other.

There are also some legal consequences to be aware of when cutting an HR department and asking other employees to handle HR tasks. Human resources experts typically handle compliance issues, such as filing OSHA injury logs or documenting an employee's poor work performance. If required documents are not filed on time, your organization may face severe penalties from state and federal agencies. If employees are terminated with no documentation of poor work performance, they could prevail in a wrongful termination lawsuit against your company. You must consider all of these things before deciding to cut your entire HR department from the payroll, especially if your company must comply with laws such as the Family Medical Leave Act or Fair Labor Standards Act.

Eliminating your HR department is one way to cut costs, but it may lead to negative consequences. If a manager makes a mistake, it could put your company at risk for a lawsuit or government penalty. Managers and HR professionals may not have the same goals, increasing the likelihood that some tasks will fall through the cracks. Keep these risks in mind as you decide whether to keep or cut your HR department.

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