Chapter 14: Human Resource Management
The hallmark of a growing company is its people. As Spindl flourishes, what started as a small team led by Saf and Mel begins growing. This inevitably leads them to wonder if it’s time to expand their existing Human Resources department. As is the case with most areas in a growing organization, managing human resources is neither simple nor straightforward. Providing quality support to their employees goes hand-in-hand with managing many technical processes. It’s important not just to have a good team of people, but also a system that works well. To assist with the latter, Saf and Mel turn to their ERP expert, Lyn.
Why use ERP for human resource management?
Managing your team efficiently is key to ensuring success for your business. This requires you to enable them to do their work in the best way possible, by equipping them with the right tools and systems. With an HRM module for your ERP, you can cover various tasks and processes that are linked to administering a team of co-workers or employees. It allows you to keep track of various employee-relation functions, such as:
- Leave management
- Expense claims
The most widely used feature is payroll processing and generating salary slips. Most countries have complex tax rules which state the expenses the company can make on behalf of its employees (e.g., social security, taxes). All of this is taken into account in an HRM/ERP software.
Breaking down the workflow
Let’s first take a look at some concepts and how they function in Human Resource Management!
An individual who works part-time or full-time under a contract of employment, and has recognized rights and duties of your company is considered an employee. While storing employee data in an ERP, you can include personal details, demographics, joining and leave details, type of employment (e.g., intern, contractor, full-time, part-time, probation, etc.), department, designation, branch, etc.
Along with this, details regarding the employee’s salary payment, leave policy, previous work experience are also stored.
Moreover, if your company provides health insurance to employees, details regarding it can also be stored within the system. This helps keep track of the insurance plan that the employee is on. Upon an employee’s departure from the company, exit details such as their resignation, exit interview, and leave encashment can also be documented.
Planning your workforce
There are many moving parts when it comes to the recruitment of new employees. For this process, an HRM system helps you create staffing plans, which help you plan manpower requirements for your company. You can enter budgeting, vacancies, estimated cost per position, number of positions, etc. while creating a staffing plan.
The hiring process
When there is a job vacancy in your company, it usually goes through this process:
- You put out a job opening, people find it.
- Those who are interested apply for the job (sometimes maybe another employee refers them to you!).
- Interviews are conducted.
- Once you’ve selected someone, you give them a job offer (this states the offered salary package, designation, grade, department, number of leave days, etc.).
- If they accept, then they’re given an appointment letter!
With an ERP, you can keep track of each of these individual steps by creating records in the HRM module for them.
The leave application process
Everyone needs time off. Managing leaves using an ERP enables you to efficiently maintain The leave schedule of your organization. The number and type of leaves an employee can request using a leave application are controlled by their individual leave allocation for a leave period based on the company’s leave policy.
Types of Leaves and Leave Encashment
Leaves Can be categorized using leave types, each of which can have their own set of guidelines:
- What are the maximum leaves allowed?
- How many continuous days of leave are allowed?
- Do the leaves carry forward?
- Is the leave considered leave-without-pay?
- Is the leave optional?
- Does the leave allow for negative leave balance?
- Does the leave type include holidays within the leave?
- Is it compensatory?
Accumulated leaves allow employees to use leave encashment, which is an amount of money received by an employee for leaves that were left unused by them.
Compensatory Leaves and Additional Leaves
Employees can also request compensatory leaves if they’ve been working overtime or on holidays, based on your company’s policies. This is generally reliant on their attendance (more on that in the next section!).
You can also add additional leaves if your employees have run out of their allotted leaves and are allowed to take more (sometimes unpaid) leaves.
Holiday Lists and Leave Block Lists
You can also maintain a holiday list, which contains the dates of all holidays that the company follows. Multiple lists can be created and assigned to employees, as different locations or departments might have variations. On the other hand, having a leave block list consolidates all the dates in a year on which employees cannot apply for leave.
The leave ledger keeps track of all leave-related transactions for an employee. Each such transaction is a leave ledger entry. This includes leave allocations, leave applications, and leave encashments made by each employee.
Attendance and Shift Management
Attendance is a record stating whether or not an employee has been present on a particular day. Most ERP systems have an employee attendance tool which you can use to mark attendance of multiple employees on a given date. On the off-chance that an employee’s attendance was not marked, they can submit an attendance request so that the accurate updates are made.
You can also log details about shifts. Whatever period of time any employee clocks in during work is considered a shift. Shifts are useful to maintain a consistent uptime of working hours by rotating the job between different employees during different hours. This lets them relieve each other of the task but ensures that the work does not come to a halt. (For example, an employee in the customer support department can have a day shift, and when it’s time for them to head home, they are relieved by the person who takes over the job in the night.)
Attendance details for each employee can include shift type, which is defined by the types of shifts in your organization. When someone uses the employee check-in for a shift, it can be used to mark attendance automatically. Employees can also use shift requests if they wish to request a particular shift type. Once a shift request is submitted, shift assignments for the employee are updated.
While setting up the hrm module, or adding bulk attendance, you can use the ERP's in-built upload attendance tool using the .Csv template that your implementor provides you with.
Lifecycle and Salary
The series of changes, growth, and developments that an employee will go through during their time at your company can be recorded and tracked. This is their lifecycle.
Employee Onboarding Starting with employee onboarding, the process of hiring and equipping an employee with the training they need to become a productive member of your organization. For each job application that is approved, a set of tasks gets created. For example, performing a legal and professional background check, creating an employee document in the ERP system, creating an email account, creating an identity card, allocating leaves, etc. are all onboarding tasks.
Appraisals and Employee Skill Maps Then come appraisals, an assessment using which the job performance of an employee is documented and evaluated. When creating an employee appraisal, you can set key result areas (KRAs) based on the goals. Some ERP systems let you create employee skill maps, records which help your organization track and evaluate the employee’s skill sets and training. This data can be used while making appraisals as well.
After appraisals are conducted and evaluations are completed, it’s time for the employee to grow. The employee promotion document is created when an employee makes a career advancement within your company and is given a higher share of duties, a higher pay-scale, or both.
When an employee is shifted from one department or unit to another, takes up different roles, or is moved to a different location, you can make an employee transfer document. Details about the changes taking place, the transfer date, etc. are entered and stored.
When the time comes for the employee to leave your organization, there are a few things HR needs to get done. To simplify the exit process (e.g., collecting company property, clearing dues, collecting any identity card, disabling access to systems, deleting the email account, etc.), you can create an employee separation document. It creates a set of tasks that need to be completed for the separation process.
Payroll management and processing is a core part of HR functions. It’s crucial that every company has a solid payroll process. Employees should always be able to rely on being paid on a consistent basis. It is the sum total of all compensation a business must pay to its employees for a set period of time or on a given date.
The HRM module usually allows you to:
- Define a payroll period.
- Define the income tax slab.
- Create a salary structure with salary components (i.e. earnings and deductions).
- Assign salary structures to each employee.
- Generate salary slips.
- Book the salary payments in your accounts.
A payroll entry allows for bulk processing of salary slips of employees. This can either be company-wide or divided into categories such as branch, department, designation, etc. If you’re using other documents such as attendance, timesheets, etc. then you can adjust salaries based on them. You can set a cost center (more on this in the accounting module) against which the expenses will be made. Then, when it’s time for salary payment, you can issue a bank entry for it.
Additional salary is something that an employee receives from the company they work for, other than their usual pay. Performance bonuses, incentives, and deputation allowances are some examples. These are called salary components, which allow you to add or deduct an ad-hoc salary for a particular employee while processing the payroll. You can also set up a recurring additional salary which is applied at a fixed interval.
Employee Benefit Application
Once per payroll period, employees can create applications for their flexible benefits within the ERP using employee benefit applications. This makes the process easy for both the employee and HR. They can view the available benefits based on their assigned salary structure before creating an application.
Human Resource Management Reports
As is the case with every piece of data entered into the ERP, you can generate specific reports for HRM. Some key reports are employee leave balance, employee holiday attendance, monthly salary register, vehicle expenses report, monthly attendance sheet, bank remittance report, and loan repayment report.
Fleet management helps your organization vehicles and track the expenses that come along with them. Each vehicle has its own separate document which lets you define the type of vehicle, license plate, brand and model, odometer value, fuel type, etc. Along with details of the location, employee managing the vehicle, insurance details, etc.
Once the vehicle document has been created, a vehicle log can be maintained. Updated entries of odometer readings, fuel expenses, and service expenses are stored in this log.
When an employee spends their personal money on behalf of the company or to cover company expenses, they’re entitled to reimbursement. They can request it using the expense claim form.
Setting up a workflow
Saf and Mel have hired Ava to lead their newly expanded Human Resources department. With Lyn’s expertise on deck, they create thorough HRM workflows for the department’s various purposes.
- All employee data is added to the system. This includes their personal details, type of employment, department, designation, branch, etc. All employees who interact directly with the ERP are also given user accounts.
- A recruitment pipeline is set up. This begins with creating a staffing plan for the financial year. As vacancies open up, a job opening entry is made. Then, the process of hiring takes place through job applicant entries, finally ending with an appointment letter to the selected candidates.
- Leaves and holidays are entered into the system based on the company’s leave policy. A leave ledger is used to keep track of employee leaves.
- The employee’s lifecycle is tracked from beginning to end. Starting from employee onboarding, to appraisals, KRAs, promotions, transfers, all the way to employee separation.
- Payroll management is set up. Once the payroll period, income tax slabs, and salary structures are entered, it allows Ava’s team to generate salary slips for employees. Payroll entries are used for bulk processing of salary slips.