Business 2005

1. THE PURPOSE OF THE HUMAN RESOURCES MANAGEMENT PROCESS

THE PURPOSE OF HUMAN RESOURCES MANAGEMENT

Development, implementation, and maintenance of the human resources management process represents one of the most important managerial tasks.

The main purpose of Human Resources Management is to plan, organize, direct, and control effective utilization of human resources within your organization. These resources are the employees who provide the company with their work, skills, talent, creativity, and motivation.

2. WHO IS AN EMPLOYEE?

IMPORTANCE OF CORRECT CLASSIFICATION OF HUMAN RESOURCES

In these days of "contingent workers", companies sometimes misclassify workers by calling them "contract workers" rather than employees. Both, the Internal Revenue Service (IRS) and the Department Of Labor, can sanction employers with stiff fines and penalties for such misclassification.

It is essential, therefore, that you and your management team understand how to classify a broad range of human resources available to your organization. These resources may include three types, as illustrated below.

THREE TYPES OF RESOURCES AVAILABLE TO A COMPANY


Employees	Independent Contractors	Sub-Contractors

WHO IS AN EMPLOYEE?

An Employee, in general, is a person who works under the company's direct management supervision during hours set by the company, doing work on the company's premises, using materials, tools, and other equipment provided by the company, and being paid by the hour, week, or month. Sometimes, an employee may do certain amount of work from home, depending upon specific circumstances and the nature of the company's business.

Some of the important issues related to employees are outlined below.

IMPORTANT ISSUES RELATED TO EMPLOYEES
No.	Details
1	An employee receives his or her compensation from the company on a "net-pay" basis, i.e. after taxes.
2	The company must withhold appropriate amounts of federal and state taxes and other deductions, and make its own contributions in accordance with the prevailing federal and state laws.
3	An employee is entitled to receive fringe benefits offered by the company, such as paid leave, paid public holidays, insurance, etc.

ADDITIONAL INFORMATION ON THE INTERNET

You can obtain additional information about a broad range of issues related to employees online.

. The US Department Of Labor - Small Business Handbook

. The Internal Revenue Service (IRS)

. The IRS Status Of Employee And Independent Contractor

3. WHO IS AN INDEPENDENT CONTRACTOR?

WHO IS AN INDEPENDENT CONTRACTOR?

An Independent Contractor, in general, is a person who may work for any number of companies without limitation. The independent contractor does not work under direct control of a specific company, and for this reason he or she is not considered an employee.

The duration of work period and compensation are specified in advance and agreed upon between the company and the independent contractors. Some of the important issues related to independent contractors are outlined below.

IMPORTANT ISSUES RELATED TO INDEPENDENT CONTRACTORS
No.	Details
1	The independent contractor is not entitled to any benefits, such as fringe benefits, leave pay, or insurance.
2	The independent contractor receives compensation on a "gross-pay" basis, i.e. before taxes.
3	At the end of the work period the independent contractor is expected to be paid in full by the company.
4	The independent contractor is fully responsible for his or her own taxes to the IRS.
5	At the end of the fiscal year the company must issue a 1099 Form to the independent contractor (a copy must be sent to the IRS) in the amount equal to total gross earnings in order to comply with the IRS requirements.

THE IRS COMMON LAW TEST TO DETERMINE WHETHER THE WORKER IS AN EMPLOYEE OR AN INDEPENDENT CONTRACTOR
No.	IRS Common Law Test Questions	Individual Is Generally:
No.	IRS Common Law Test Questions	An Employee If The Answer is "Yes"	An Independent Contractor If The Answer Is "No"
1	Must comply with the employer's instructions about the work.
2	May receive training from or at the direction of the employer.
3	Provides services that are integrated into the business.
4	Provides services that must be rendered personally.
5	Hires, supervises, and pays employees on behalf of the employer.
6	Has a continuing working relationship with the employer.
7	Must follow set working hours.
8	Works full-time for the employer.
9	Does his or her work on the employer's premises.
10	Must do his or her work in a sequence set by the employer.
11	Must submit regular reports to the employer.
12	Receives payments of regular amounts at set intervals.
13	Receives payments for business and/or travel expenses.
14	Relies on the employer to furnish tools and materials.
15	Lacks a major investment in facilities used to perform the service.
16	Cannot make a profit or suffer a loss from his or her services.
17	Works for one employer at a time.
18	Does not offer his or her services to the general public.
19	Can be terminated by the employer.
20	May quit work at any time without incurring liability.

4. WHO IS A SUB-CONTRACTOR?

WHO IS A SUB-CONTRACTOR?

A Sub-Contractor is an independent person or business entity, who provides specialized service to a company on a sub-contracting basis. Upon completion of work the sub-contractor is expected to be paid by the company in full in accordance with a contract or sub-contract agreement.

Similarly to the independent contractor, the sub-contractor is fully responsible for his or her taxes to the IRS. All other provisions related to the independent contractors, as described above, also apply to sub-contractors.

5. SIX MAIN FUNCTIONS OF THE HUMAN RESOURCES MANAGEMENT PROCESS

Planning and control of the Human Resources Management Process entails a number of steps which fall under six main functions, as outlined below.

SIX MAIN FUNCTIONS OF THE HUMAN RESOURCES MANAGEMENT
No.	Details
1	Staffing. This is the process of obtaining suitable people to accomplish company objectives.
2	Development. This is the process of training designed to ensure high performance by employees in the company.
3	Compensation. This is the process of establishing a fair and equitable level of employee remuneration for their contribution toward the accomplishment of the organizational objectives.
4	Integration. This is the process of ensuring a positive level of attitudes toward work and harmony within the company.
5	Maintenance. This is the process of ensuring the continuation of adequate working conditions for employees within the company.
6	Conflict Management And Separation. This is the process of handling any type of conflict among employees and their discharge.

6. STEPS IN THE HUMAN RESOURCES MANAGEMENT PROCESS

The Human Resources Management Process entails a number of steps which are summarized below.

THE HUMAN RESOURCES MANAGEMENT PROCESS

Step 1: Be Familiar With Equal Employment Opportunity Laws.

Step 2: Determine Duties And Skill Requirements For Various Positions Within The Company.

Step 3: Prepare Job Descriptions And Job Specifications.

Step 4: Identify Short-, Medium-, And Long-Term Employee Requirements.

Step 5: Initiate And Maintain Effective Employee Recruitment And Hiring Procedures.

Step 6: Establish And Maintain Sound Procedures For Screening, Testing, And Interviewing Applicants.

Step 7: Develop And Implement An Effective Employee Orientation Program.

Step 8: Establish And Maintain Effective Employee Training, Development, And Motivation Programs.

Step 9: Develop And Implement Effective Employee Compensation Plans.

Step 10: Establish And Maintain Effective Employee Evaluation Procedures.

Step 11: Develop Suitable And Effective Career Management Programs.

Step 12: Establish Sound Labor-Management Relations And Be Aware Of Labor Unions.

Step 13: Develop And Maintain Effective Employee Safety And Health Procedures.

Step 14: Maintain Effective Employee Conflict Management Procedures.

Step 15: Maintain Sound And Legally-Proof Employee Separation Procedures.

7. EQUAL EMPLOYMENT OPPORTUNITY AND COMPENSATION LAWS

EQUAL EMPLOYMENT OPPORTUNITY AND COMPENSATION LAWS

The human resources management process must be developed in accordance with various employment and compensation laws. The most important Equal Employment Opportunity and compensation laws are outlined below.

Equal Employment Opportunity Laws are discussed in details in later in Tutorial 2.
Compensation And Benefits Laws are also discussed in details later in Tutorial 2.

EXAMPLES OF EQUAL EMPLOYMENT OPPORTUNITY LAWS
No.	Details
1	Title VII Of The 1964 Civil Rights Act.
2	The Age Discrimination In Employment Act Of 1967.
3	The Vocational Rehabilitation Act Of 1973.
4	The Americans With Disabilities Act Of 1992.
5	Various State Laws.

EXAMPLES OF COMPENSATION AND BENEFITS LAWS
No.	Details
1	The Social Security Act Of 1935.
2	The Fair Labor Standards Act Of 1938.
3	The Equal Pay Act Of 1963.
4	The Employee Retirement Income Security Act Of 1974.
5	Workers Compensation Laws.

8. WHAT IS JOB ANALYSIS?

JOB ANALYSIS

Job Analysis is an important element of the human resources management.

One of the first operational tasks in human resources management entails conducting a comprehensive job analysis and determining duties and skills for various positions within the organization.

All duties and skills need to be specified in accordance with the company's overall plans for the current fiscal period. Moreover, allocation of duties depends upon the specific nature of the company's existing organizational chart.

Job Analysis is discussed in details later in Tutorial 2.

9. WHAT ARE JOB DESCRIPTIONS AND JOB SPECIFICATIONS?

JOB DESCRIPTIONS AND JOB SPECIFICATIONS

A comprehensive job analysis enables management to prepare detailed job descriptions and job specifications for various positions within the company.

Job Descriptions list all relevant duties, responsibilities, authority, and accountability of a specific job.

Job Specifications, on the other hand, outline the minimum level of skills, knowledge, and abilities necessary to ensure acceptable standard of work.

Job Descriptions And Job Specifications are discussed in details later in Tutorial 2.

10. EMPLOYEE PLANNING AND FORECASTING

EMPLOYEE PLANNING AND FORECASTING

Once various job descriptions and job specifications are prepared, management needs to proceed with Employee Planning And Forecasting.

The main purpose of the employee planning and forecasting process is to identify future staffing requirements, to secure the availability of specific types of employees with the skills, experience, and background necessary to meet company objectives.

The employee planning process entails consideration of several factors such as budget limitations, sales demands, production requirements, economic situation, and capabilities of existing employees.

Employee Planning And Forecasting is discussed in details later in Tutorial 2.

11. EMPLOYEE RECRUITMENT AND HIRING

EMPLOYEE RECRUITMENT AND HIRING

Upon completion of the human resources planning and forecasting, management must initiate the Employee Recruitment And Hiring process.

The main objective of employee recruitment and hiring is to meet the company's specific requirements and employ people in accordance with existing organizational objectives. The hiring process entails completion of a job application form by a prospective employee, screening, testing, interviewing, and selecting the most suitable applicants.

Employee Recruitment And Hiring is discussed in details in Tutorial 2.

12. SCREENING AND TESTING OF APPLICANTS

SCREENING AND TESTING OF APPLICANTS

Screening And Testing Of Applicants represents the final stage of the employee recruiting and hiring process. The main purpose of screening and testing of applicants is to enable management to check the accuracy of information submitted by prospective employees.

The hiring procedure sometimes entails preliminary testing of applicants. The prime objective of such testing is to evaluate the person's suitability for existing employment requirements and adaptability to future demands.

Screening And Testing Of Applicants is discussed in details in Tutorial 2.