What is transactional HR?

Human resource management adds value to any organization, regardless of the number of employees or the industry. Before deciding on an HR strategy or approach, it’s important to figure out the role HR should play in the business. Organizations can begin by identifying the goals they want to achieve and the gaps that currently prevent them from achieving those goals. 

One type of human resource management approach that businesses can implement is called transactional HR. Let’s dive into the details. 

Understanding the basic functions of transactional HR

Transactional HR involves the administrative tasks and day-to-day activities a business completes to ensure employees can satisfy their job requirements. There’s very little human resource management strategy involved, as this is largely a process-oriented role that reacts to the needs of the business. 

Here are some of the most common transactional HR tasks and how an HR team carries them out:

  • Recruitment and hiring. When they get a notification about an open position, the HR team writes the job description and position requirements, posts it to relevant job boards, and screens interested applicants. They may be involved in the interview process in conjunction with the hiring manager. They’re also responsible for vetting candidates by doing reference and background checks.
  • Onboarding and training. Once a company hires a new employee, the HR folks will show them around the workplace, set them up with any required office ID, and ensure they have the tools and technology to do their job. If the employee needs training, the HR team can deal with the logistics.
  • Performance appraisals. HR personnel may create the performance evaluation forms for department managers to use. They can help schedule performance evaluation meetings and track which employees have had their annual appraisals. If disciplinary action is required, someone in HR will make notes in the employee’s file so there’s proper documentation.
  • Compensation. The HR team is responsible for completing paperwork related to salaries and benefits. They can administer benefits or facilitate administration with a third party. They also keep records of employee hours, days off, and vacations.  

Adding a strategic approach to transactional HR

In many organizations, especially small businesses, the transactional HR approach works well to provide the administrative and process-oriented support the company needs. However, if a business plans to grow, it’s necessary to add a strategic approach to the way the HR team works. 

This can help HR reduce operational costs, improve productivity, and more effectively support the company’s goals. To shift your organization from transactional HR to a more strategic approach, consider implementing these changes:

  • Create short-term and long-term plans. Where possible, start thinking ahead to the future needs of the business. What will the company need three months from now, six months from now, and one year from now? Short-term and long-term plans will ensure HR won’t have to rush transactional tasks due to lack of preparation.
  • Empower employees with self-service tools. Enable employees to learn company policies and processes by sharing documentation with them in an easily accessible format. Giving them the ability to book their own time off in an automated system can also help reduce paperwork for your HR team.
  • Automate tedious or repetitive tasks. Transactional HR involves a lot of paperwork for payroll, benefits, leave management, and more. A human resource management system can automate many of these tasks. This not only saves time but also minimizes inaccuracies and inconsistencies.
  • Pay attention to the numbers. There’s little focus on metrics in transactional HR, but looking at certain numbers — like cost per hire or employee turnover — can help improve company processes and strategies.

Transactional HR is an effective approach to conducting the day-to-day activities and administrative processes an organization needs to complete to support its employees. In addition to these tasks, organizations can add a strategic approach to their transactional HR processes to help reach larger objectives and improve workflows.

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