To add a new sub department navigate to

Administration -> HR -> Data Management -> Departments

Once on this page, click on the 'Add' button underneath the Departments list.

Once on this page you will fill in the department details as normal, to make the department a sub department you will need to select a parent department from the drop down list, this will make this a sub department for that parent department

Once you have selected a parent department you continue to fill out the rest of the fields and press submit, if you are unsure of what some of these fields are for they are covered here