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Common HR Terms All Business Owners Should Know

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Human resources (HR) management is a crucial part of running a business. Whether you have a midsize or large operation or you manage a small but growing venture, there are multiple HR terms you’re going to hear and need to understand over the years.

Regardless of whether you have an in-house HR person or team or outsource some of these functions, as a business leader, you still need to understand the jargon. Here are some of the critical terms to wrap your head around.


Workforce change and business restructuring are a standard part of business these days, and many employees will find themselves laid off as a result. When this happens, some companies provide their let-go workers with access to outplacement services. This HR term describes the support individuals can receive in transitioning their careers and finding new jobs.

Outplacement services can include things like career strategy and planning, assistance with writing and updating job application documents, networking help, interview coaching, and contract negotiation for those who land a new role through using outplacement. Firms that invest in such support show that they care about their workforce and their business brand.

Performance Review

A performance review is often an annual or quarterly discussion between an employee and their manager. During this meeting, the leader evaluates and documents the employee’s job performance over the previous period. The pair talk about goals for the future, areas to work on, the employee’s achievements, and more.

This performance review can help make personnel feel more engaged in the company and more focused. For managers, it provides information on where workers hope to go within the company. It also gives them insights on areas in which support might be lacking.

Employee Onboarding

Employee onboarding is one of those HR terms that is fairly straightforward. It is the process of bringing on a new employee in an organization through training. It sets them up in ways that help them be successful in their role. Onboarding can include a variety of tasks, such as doing a background check and filling out employment paperwork. Properly conducted, it also includes introducing people to their coworkers, setting them up in the internal email or intranet system, and showing them the ropes.

Onboarding is important for ensuring new staff members function effectively in their roles. It can also make them feel welcome and part of the team.

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Overtime is one of the HR terms that people frequently misinterpret. It refers to any hours an employee works that exceed their typical working hours, based on their regular schedule. In the HR world, though, the term is more about the remunerations of this additional work. Some employees are exempt from overtime because of the way their employment contract is structured. If they’re not, they need to receive an overtime pay rate for any hours above their standard.

For many employees, this is 40 hours, but it does vary. The rates of pay depend on what’s set up in their contract. They also depend according to the time of the work, too, with some people getting time and a half or double time pay.


Engagement is an important HR term. It refers to how dedicated, productive, interested, and happy people are within their jobs. You need to understand this because you want your employees to like coming to work. You want them to be engaged enough to keep working for the company long term.

The more engaged staff members are, the more effective they are at their jobs, typically. Moreover, the less likely they are to miss days of work. Engaged employees have plenty of energy, commitment, dedication, and flow with their work. They can also help inspire and motivate their colleagues.


Employee Turnover and Retention

The higher engagement is within a workforce, the lower the employee turnover rate will be. Employee turnover basically refers to how often personnel leave a business. The other side of this coin is employee retention. This is a term that describes how well a company keeps its skilled, productive employees within the organization.

You want your turnover rate to be as low as possible and your retention rate as high as possible. In this way, you don’t have to continually find, train, and integrate new team members. Leaders can achieve this by listening to staff, providing a positive corporate culture, giving out excellent perks and benefits, enabling workers to keep growing and developing, and providing other support.


Exit Interview

An exit interview is the conversation managers have with personnel who are about to leave the organization. During this meeting, the idea is to learn about the employee’s reasons for leaving and get an idea of their experiences with the firm while working there.

Exit interviews enable exiting team members to have their say. The chats also give business owners, HR heads, and other leaders the ability to pick up on insightful data about what does and doesn’t work about the corporate culture.


Understanding HR Terms Will Make You a More Effective Leader

These are some of the leading HR terms you need to know. But keep a lookout for others, too. The more you understand key concepts and how they apply to your business, the more effectively you can manage your team.