Depending on the size of a business, a human resources department might fall under operations or finance, or it might function as a stand-alone department. The decision about where to put the function often depends on the backgrounds of the company's staff members and what services the HR department provides.
Operations
If the main thrust of a company's HR efforts includes hiring and managing employees, with aspects such as payroll and benefits outsourced, the business might put HR under operations. The main functions of the department would be recruiting workers, creating and maintaining workplace policies and procedures, administering annual reviews, scheduling and terminating employees. These are primarily administrative functions, and it makes sense to put them into the operations area of the business.
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Finance
At small companies, a business owner might personally hire one or a few employees each year, operating without formal employee policies and procedures. The bulk of the company's HR work might consist of paying employees, legal compliance and benefits administration. The company might schedule employees based on budgets. In this scenario, it makes more sense to put HR under the finance department.
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Considerations
As companies grow, HR activities might expand to include recruiting and retention, payroll, benefits administration, morale, scheduling and wellness. If the department handles all of these functions internally rather than using contractors and has several employees, the department might function as a separate area of the company, similar to marketing or information technology. If the company still desires to put HR under either the administration or finance umbrella, it would determine with which of those functions HR's activities most closely align. In some cases, the finance department will approve HR budgets and spending requests, while operations will approve HR's strategic plans and operating methods.
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