A HRMS (Human Resources Management System) is a type of software that helps human resources teams to better manage their routine HR processes. They integrate and automate run-of-the-mill processes and workflows, so that HR teams can spend less time on admin, and more time driving organizational change.
HRMS software suites can increase productivity, reduce costs, and ultimately give your HR team the resources they need to support your employees. But there are a lot of different solutions on the market and, while this means you’re almost certain to find the perfect one for your business, it can also make the process of finding that perfect solution a little overwhelming.
In this guide, we’ll explain what HRMS software is, how it can support employees, and how it can help your HR team get the most out of your company’s valuable people data. We’ll also outline the key features to look for in an HRMS software suite so that, when it comes to choosing a solution, you can be confident you’re making the right decision.
What Is HRMS Software?
HRMS stands for Human Resource Management System. HRMSs are suites of software applications that help HR teams to manage their processes so that they become more efficient. They also help HR staff to better manage the data their organization holds on its employees—often referred to as “people data”—so they can generate data-driven insights to help improve productivity and employee satisfaction, as well as drive organizational change.
To do this, HRMS software offers tools to support a wide range of everyday HR functions, enabling HR teams to carry out their work and access all their data from one holistic platform, which is often driven by a single database. Each HRMS software offers a slightly different feature set to the next, as they’re tailored to meet specific business use cases. One may cater to small businesses with fewer than 10 employees who simply want an easier way to manage their payroll and performance reviews. Another may be designed to support large enterprises looking to manage their payroll and benefits, recruitment strategies, employee satisfaction, learning and development, and workforce analytics.
So, it’s not surprising that there are a lot of different solutions on the market. But they all have one thing in common: they help HR teams do their jobs more efficiently and effectively.
HRIS Vs HRMS Vs HCM
While researching HR software, you may also come across the terms “HRIS” and “HCM”, both of which are often used interchangeably with HRMS. But there are some key differences between the three types of software that you should be aware of.
HRIS stands for human resources information system. HRISs help HR teams to manage the data associated with their routine processes, such a workforce management, payroll and core HR. They make it easier to HR teams to maintain a standardized database of their people data, which makes it easier to process that data.
HCM is short for human capital management. HCM software is designed to help HR teams handle the lifecycle of each of their employees. This includes recruitment and onboarding, learning and development, benefits administration, performance management and reporting. HCM systems enable each employee to be the best they can possibly be.
HRMSs, as we’ve discussed, help HR teams not only to manage their data (like HRISs) and generate meaningful insights into recruitment, employee satisfaction, and productivity (like HCMs), but they also enable HR teams to integrate and automate payroll processing and time-off tracking. In other words, they’re designed to be a single source of truth for all your HR needs.
Why Does Your Business Need HRMS Software?
There are a number of key reasons why you should consider investing in an HRMS suite to help your HR team. Let’s take a look at them:
HRMS systems often store all of an organization’s people data in a single database, which means that HR staff can access all of their data via one holistic platform. This has its own knock-on benefits:
- Data is digitized and standardized, reducing the amount of paperwork HR teams have to do. This reduces the risk of human error, as data only has to be entered once, rather than copied across multiple systems.
- Data is stored much more efficiently, making it easier for HR teams to find the information they need. This also makes it more accessible; remote HR teams can easily access data from home, and HR staff that may find it difficult to read handwritten notes can use a screen reader to access information.
Track KPIs And Make Data-Driven Insights
Key performance indicators (KPIs) are measurable values that show to what extent an employee is achieving their individual objectives, such as closing a certain number of sales, or an organization is achieving its business objectives, such as increasing employee retention.
HRMS platforms offer in-depth reporting and analytics tools that generate visual reports into almost all data sets stored in the system, from recruitment and onboarding to performance and development. These reports make it easier to track KPIs over time. They also empower HR teams to make data-driven suggestions on how employees and the business as a whole can meet their KPIs more effectively.
Enhance Employee Self-Service
Core HR refers to the processing of basic employee information, such as contractual details, payroll, benefits and personal time off. Updating this information can take up a huge amount of time for HR teams, particularly when they have a lot of employees to deal with.
With HRMS software, HR teams don’t have to process or update all of this information manually; employees can do it themselves. Via a self-service portal, employees can access their payroll information, request time off, edit their personal contact details and so on. This reduces the number of enquiries that HR receive, in turn reducing the time they spend on tedious, administrative tasks. It also reduces the risk of human error in entering data by “cutting out the middle man”—instead of forwarding information on to HR to copy into their system, employees just enter it themselves.
Improve Data Security
Last but not least, investing in HRMS software can increase the security of employees’ sensitive or personal data. Most HRMS software encrypt their databases, rendering them unreadable to anyone that gains access to them without permission. The best solutions also offer integrations with identity and access management tools, such as multi-factor authentication or single sign-on, which ensure that only verified personnel are granted access to certain information.
This helps prevent company and employee data from falling into nefarious hands, while also ensuring that your business remains compliant with data protection regulations such as GDPR and HIPAA.
What Are The Key Features Of An HRMS Suite?
So, investing in an HRMS suite can not only make the lives of your HR team easier, but also boost employee engagement business-wide and drive organizational growth. To do this, they offer a combination of features to help HR teams support each employee’s journey within the company.
Features vary between solutions in order to meet different use cases but, generally, the strongest HRMS suites offer the following key capabilities:
First and foremost, your chosen HRMS software should allow your HR team to process each employee’s basic personal and contractual information from one central location. This information should all be stored in one database, so that HR teams don’t have to copy data across multiple systems; the HRMS automatically enters it into workflows where necessary.
The strongest HRMS software offer self-service employee access to core HR information. This means that each employee can view and edit their personal details as and when they need to, helping to ensure the accuracy of the data being stored, and reducing the number of queries HR have to process in terms of updating personal data—or responding to emails asking when the next payday is. Employees should also be able to request personal time off from this portal.
And in today’s hybrid-remote world of work, it’s also important that employees and HR staff alike can access this information remotely, either via a mobile app or mobile-friendly web interface.
Talent Acquisition And Applicant Tracking
Talent acquisition is the process of advertising vacancies, recruiting, tracking and interviewing candidates, then onboarding and training up new starters. The people a company hires are crucial to that company’s success, and HR teams are responsible for making sure that they find the right person to fill each position. But it’s not just about finding the right person for the moment—planning for the future is a huge part of talent acquisition. That means thinking about the potential for growth that each candidate may have within your business.
The best HRMS software come with built-in talent acquisition tools to help HR teams find the right people not just for today, but in the long term. They usually offer integrations with job advertisement platforms such as LinkedIn, to make it easier to source talent. They also help to automate the processes of tracking and interviewing candidates; all candidate information is stored in one location, and the system sets up automatic communications to ensure applicants are kept in the loop. Some HRMSs also offer calendar integrations to help set up interviews without having to manually compare the availability of all attendees.
Finally, to help organizations plan a candidate’s potential career and development path, some platforms offer skills gap analysis tools, which help HR teams to see whether each applicant is suitable not only for the immediate role to which they’re applying, but also higher positions further down the line. This also helps HR to set up any training that new starters may need.
Payroll And Benefits Administration
We live in a digital world. Gone are the days of tracking salaries in a physical ledger; today, all of that data is stored virtually. But that doesn’t necessarily mean that it’s easier to keep track of. Manually managing payroll and benefits across complicated spreadsheets is time-consuming and tedious, and prevents HR teams from being able to focus on generating meaningful strategic insights.
A strong HRMS system should offer integrated payroll functionality. This enables HR teams to quickly and easily access all payroll data company-wide, but also enables employees to view their own information.
As well as built-in payroll tools, your chosen HRMS should offer integrated benefits administration to make it easier for HR teams to create, update and manage the benefits of each employee. These might include health insurance, disability allowances, pension plans and even gym memberships. The system should determine which benefits each employee is eligible for, automatically enrol employees in the company’s benefits program during the onboarding process, and make each employee aware of the benefits they’re able to receive.
Finally, HR teams should be able to generate reports into benefit program usage, to determine whether underutilized programs could be replaced with something that employees would engage with more—saving costs, and boosting employee satisfaction. In fact, a recent study found that companies rated highly on compensation and the benefits they offer see 58% lower attrition compared to companies rated poorly for their benefits.
Performance management is the process of monitoring and evaluating an employee’s performance over time. Traditionally, this manifested in annual performance reviews between an employee and their manager, but 92% of employees prefer to receive feedback more than once a year; 72% would like it at least monthly, and 49% would like weekly feedback.
Because of this, organizations are increasingly adopting a more modern approach to performance management: 360° feedback. This is a continual review process that collects feedback from an employee’s colleagues, subordinates and the employee themself, as well as their manager, offering the opportunity for more regular, unbiased performance reviews.
So, performance management is important. But how can an HRMS solution make it easier? To begin with, integrated performance management tools can help HR teams and managers to schedule regular reviews with each employee, as well as provide a forum for colleagues to give and receive feedback amongst themselves in real-time.
Secondly, they offer a platform from which HR can work with employees to set development goals and personalized KPIs. Employees should be able to log in to track their own progress, and HR should be able to monitor the progress of each employee or team.
And last but not least, performance management reports enable HR to see which employees are performing particularly well and should be rewarded, as well as those who may be struggling and could benefit from further support or training. This helps each employee to feel like the company is investing in them, while also raising the organization’s productivity as a whole.
Learning And Development
Career development and advancement correlate directly with employee retention: for employees to be satisfied in their roles, they need to feel like they’re progressing and reaching their full potential. And if they don’t feel satisfied, they leave. In fact, 58% of workers say that their companies don’t currently provide enough opportunities for growth for them to stay there long term.
Offering learning and development opportunities is a great way to help train employees up so that:
- They feel more satisfied in their role.
- They’re more likely to progress into a higher-level role.
- They perform better.
So, you should look for an HRMS with built-in learning and development tools. This might be a complete learning management system (LMS), which enables your HR team to create, assign and track learning modules for each employee. Or, it might simply integrate with your existing LMS to help you monitor employee development and track their progress over time.
Reporting And Analytics
We’ve mentioned this one throughout discussing the other key features of a strong HRMS. That’s because reporting and analytics functionality should be integrated into every other feature your chosen solution offers.
Integrated analytics tools help HR teams to collect, securely store and analyze all of their people data, including (but not limited to) talent acquisition, payroll and benefits information, performance feedback, KPI tracking, and employee development. Your HRMS should automate the collection of this data so that your HR team can spend their time analyzing the data and sharing their insights with other parts of the business. In-depth, real-time analytics can help improve productivity, as well as influence wider strategic changes across the organization.
When comparing analytics functionality, we recommend that you consider the following two points:
- The HRMS should produce visual reports, with charts and diagrams, that your team can use to easily spot and monitor trends. These should also be exportable and shareable.
- A strong HRMS may also provide predictive analytics, which can help you forecast company growth. This may influence your talent acquisition strategy.
Your company’s people are at the heart of what you do, and your HR team ensures that those people are working to the best of their ability and enjoying the work they do.
When each process has to be undertaken manually, such as basic administration, survey collection and data entry, HR teams often find themselves working through endless amounts of paperwork, unable to spend time analyzing that data to generate any meaningful insights from it.
An HRMS can put an end to that by helping HR teams to make their processes more efficient, so they can spend less time typing and re-typing figures, and more time driving organizational change. Ultimately, they give HR teams the resources they need to better support their company’s people.
If you’re considering investing in an HRMS software suite, take a look at our buyers’ guide to the top HRMS and HCM software, where we outline the best solutions on the market, exploring their key features, pricing, and target audience.