HR software is the heartbeat of a business. It streamlines the various functions of human resource management and reduces the mundane work burden on the HR administrators. Whether you’re looking for your first human resource management system (HRMS) or replacing an existing solution, there’s no downplaying the importance of the process. After all, this is the system that tracks your most important assets: your employees.
It’s essential to fully grasp the HR needs of your business and the features you’ll use to fulfill them. There’s a strong link between requirements knowledge and HR system implementation success. With that in mind, l et’s get started by guiding you towards making a decision that will provide the base for your organization’s success.
- HRM software is often offered as a single, integrated suite. However, best of breed software can provide deeper capabilities and expertise for specific human resources management functions.
- By implementing an HRIS, companies seek to gain a single record system and tools for managing hiring, scheduling, skill development, payroll and other vital areas.
- Foundational human resources features include core HRM, payroll, recruiting and hiring, and time and attendance. Advanced human resource management features include talent management, workforce management and learning management.
- When comparing HRIS solutions, it’s essential to have well-defined requirements and consider the total cost of ownership (TCO) — upfront costs, implementation, and maintenance.
- Ask questions internally of critical stakeholders and user groups to clarify key features and needs. Ask vendors software-specific questions to uncover the full capabilities and limitations of a system and ask about non-software topics like implementation and support.
What Is HR Software?
HR applications provide helpful tools that allow organizations to manage all the processes related to human resources. This functionality can range from basics like a self-service portal and payroll processing to more advanced features like workforce planning and talent management.
Generally, HR software usually falls into two main categories: complete suites that have native modules designed for simple integration and point solutions (also called best-of-breed ) that deliver capabilities for a specific purpose (e.g., payroll).
In some cases, companies end up using a customized approach where they stitch together an ecosystem of multiple platforms from different providers, each of which addresses another HR need.
We’ll examine both integrated and best-of-breed systems to help you gain a better understanding of which is more suitable for your company.
There are some key terms you need to know as you navigate the landscape of HR suites offered by vendors:
- Human resource management system software (HRMS)
- Human resource information system (HRIS)
- Human capital management (HCM)
While synonymous or overlapping in many cases, these terms can also refer to different levels of functionality and the number of modules integrated into the suite. In this guide, we’ll use the terms interchangeably for simplicity. For a more in-depth discussion of these systems, see our article HCM vs. HRIS vs. HRMS: A Comprehensive Comparison of the Differences Between Them.
The goal of an integrated suite is to keep everything under one umbrella. This approach enhances data accuracy, ensures a smooth flow between modules and eliminates the need for setting up complex integrations between systems.
Typical Categories of Best of Breed Solutions
There are varying levels of functionality within this type of HR solution. Some systems will be best of breed, developed to address one HR function like Cornerstone LMS, which offers features that specifically facilitate learning management. Other systems will include a few closely related capabilities, such as core HR and payroll.
While integrated suites tend to be the go-to choice for many organizations, point solutions still offer viable capabilities. Not every company, particularly smaller businesses, will need an all-in-one platform and find it more efficient and cost-effective to opt for point solutions that address their specific needs but nothing more. In addition, some companies prefer the deep expertise often found with best-of-breed solutions.
Point solutions fall into the following categories (we’ll cover associated features further down):
Technology advancements add another layer of complexity. As things like AI become more firmly rooted in HR platforms, more and more new categories are forming or emerging as the HR tech stack evolves.
This constant transformation makes it even more critical to conduct proper research and thoroughly vet vendors to understand exactly what you’ll receive from their HR software.
Whether you choose a cloud or on-premise solution is another factor to consider closely. More and more, companies are shifting to cloud-based models.
Cloud and on-premise solutions both have advantages and drawbacks. For example, cloud hosting is more cost-effective and good for companies that lack an IT department to handle the complexities of implementing and maintaining the software. However, on-premise solutions grant greater customization, which enterprises may find attractive to meet their complex organizational structure and processes.
Other factors to weigh include stuff like security, data governance, disaster recovery plans and integration with other business systems such as an ERP.
Given the many nuances, it’s critical to evaluate your unique circumstances and requirements to determine whether cloud, on-premise or hybrid deployment is best for your organization.
Our HR requirements template can simplify and speed up the process of shortlisting vendors that are a good match for your preferred deployment strategy.
Having an HRMS in place allows your company to complete basic essential functions of running a business. Recruitment, payroll, benefits administration, attendance and other HR software features are universal functions across industries.
However, the benefits extend far beyond that. Implementing an HRIS solution will allow your company to:
- Save Time: HR systems streamline many manual tasks that HR departments and employees face like data entry, employee profile updates, payroll processing, employee self-service via chatbots, recruiting and onboarding. For example, technologies such as AI can save hours by scanning candidate resumes.
- Ensure Data Accuracy: An HRIS provides a central database for employee records and other information, eliminating duplicates and ensuring data is updated. Additionally, close integration between payroll and other modules like time and attendance and compensation management ensures that pay is accurate and that accounts for unique factors like overtime, commission and bonuses.
- Develop the Skills of Your Workforce: A LMS allows new employees to learn critical job skills. These programs can also facilitate career development or promote reskilling so employees can switch job functions if the need arises.
- Promote Employee Growth: Managers can schedule regular reviews and use tools that drive conversations and help employees grow within their positions. Metrics on employee performance help identify employees’ strengths and areas that need improvement.
- Ensure Long-Term Success: Succession planning tools enable executives to plan for the future by identifying employees who qualify for C-Suite roles and developing the skills needed to succeed in such a role.
- Make Data-Driven Decisions: With the ability to track and analyze all HR-related information via dashboards and reports, managers and executives can make decisions backed by data.
Host All Employee Information in a Central Location
|Employee personal information (name, position, time at the company), work-related data (PTO accrued, healthcare benefits) and corresponding documents are all stored in a central database, making the data flow throughout your organization seamless. An employee self-service portal makes this information accessible to all members of your organization.|
Manage New Hire Processes
|New employee onboarding is a critical function of HR software. Some software offers standalone onboarding capabilities. More advanced HRIS software often also incorporates recruiting features.|
Control Monetary Functions Such as Compensation, Taxes and Payroll
|HR systems provide a central location for managing a company’s people-related finances. Employees can view their payment information and choose their preferred payment method (direct deposit or check). Management can use the software to distribute funds, issue reimbursements and make payroll processing changes.|
Keep Track of Employee Time
|Adopting an HRMS simplifies monitoring the time employees spend at work (and away from work). It tracks company holidays, paid time off, sick leave and other absences, often with a streamlined review and approval process that saves employees and managers time. Employee scheduling tools enable managers to arrange shifts for hourly workers. The system feeds this data into the payroll system to ensure accurate compensation management.|
Encourage Employees Development
|Many HR software vendors offer learning management, performance management and career planning features. Employees can receive instruction as part of their onboarding process, monitor their improvement and craft paths specific to their professional goals while receiving support from managers.|
Basic Features & Functionality
|Core HR||Essential HRMS functionality includes a central database, employee information dashboard, document management and a self-service portal for employees and managers. Your HRMS should also have benefits administration and be able to lead your employees through the enrollment process, with all necessary information included in the HRMS.
Employee engagement lets you gather employee feedback from employees, recognize achievements and reward positive results. Usually implemented as an extra tool or total replacement for traditional performance reviews. Performance feedback is a crucial component of employee success, but companies can also reap benefits. Research has shown that businesses with engaged employees are more likely to be high performers and see more significant revenue growth.
Other core HRM features include:
|Recruitment and Hiring||The first step in the candidate-to-employee lifecycle and typically involves applicant tracking and recruiting software. Capabilities include integration with job boards and social media, an AI tool to process resumes, a candidate portal, document sharing, a talent pool and evaluation tools
Streamlined recruitment, evaluation and selection process promotes a positive experience for your business and your applicants, and it ensures you choose the right person for the job.
|Onboarding||The time between an offer letter and the first day of employment has always been critical to an employee’s overall success. Layer on the extreme mobility of the modern workforce, remote workers and so many other risks of alienating your new hire, and the timeline becomes critical – even well beyond day one.
The tools that facilitate employee onboarding are like sandpaper in a workshop, making the employee transition as smooth as possible. Onboarding features can include digital documentation with e-signature, welcome packets, automatic reminders to set up deposit preferences and enroll in benefits, and checklists to monitor onboarding progress. Integration with a learning management platform facilitates employees starting the proper training right away. Workflows can ensure tasks happen in the appropriate order and some solutions also allow managers to create check-in milestones.
|Performance Management||Think about where you are today and where you want to be post-implementation. Annual performance reviews are going by the wayside, partly because a large chunk of the workforce — Millennial and Gen Z workers — prefer ongoing feedback. Look for agile performance management software supporting a more fluid management process. These can include 360-degree reviews, goal setting, peer feedback, engagement surveys, micro-learning, social recognition and check-ins.
High performers and low performers require different levels of support and motivation, according to a report. Having robust HRIS software for feedback, recognition and employee improvement benefits managers looking to keep track of employee progress, and employees who are more motivated and equipped to excel in their roles.
|Payroll||Althoughtpayroll management is often a standalone solution, many of the best HR systems incorporate this capability. The fear of replacing your payroll tool can often be alleviated when weighed against the cost savings and efficiency gains of rolling it into your core HR system.
It can automate relevant deductions, provide flexible payment schedules, ensure regulatory compliance and more.
|Time and Attendance||Users can clock in and out, request time off, view company holidays, receive scheduling updates and perform other time-related tasks. Conversely, managers can approve employee requests, post attendance policies for viewing, view employee availability and update hourly shifts.|
|Compensation||Compensation management tools take all factors of employee payment into account: base salary, overtime, bonuses, stock incentives, retirement plans and more. They also include wellness programs. The workflows associated with rewarding your employees are critical to business, so a product’s ability to manage those processes is a key consideration.|
|Reporting and Dashboards||These analysis tools are critical, as they provide a window into KPIs and let you examine data at a granular level when needed. HR solutions offer pre-built reports based on standard industry metrics. Many also let you customize reports to narrow in on the most relevant data.|
|Accounting||With accounting tools in place, you’ll be able to conduct basic business functions like bookkeeping, expense management, and billing and invoicing. Some systems can handle foreign currency to provide budgeting and forecasting tools.
Some software has these features natively included, while others offer integration with an accounting program like QuickBooks or SAP, which automatically pulls human resources data like payroll.
Advanced Features & Functionality
|Learning||Digital training courses and continued education resources are core components in many robust HCM suites. Learning management ensures all of your employees are up to date on the latest technologies and have the requisite job skills. Some LMS include career development features, helping workers create plans and providing educational materials that align with their goals.
An LMS offers blended learning, instructor-led training (ILT), course creation and management, game-based elements to stimulate learning, certifications, learning paths and reporting features. Larger products also incorporate e-commerce capabilities so companies can offer courses externally.
|Workforce||Workforce management platforms often encompass individual HR functions, such as time tracking, attendance and scheduling. However, it also offers features to manage employee exits, analyze productivity, handle travel details (expenses, schedules) and report on the company’s labor cost distribution.|
|Talent||A talent management suite provides career and succession planning, employee performance management, goal management, competency management and workforce planning. These capabilities enable companies to oversee all facets of their workforce.|
|Globalization||This feature is best for large companies that operate internationally and need localized views and compliance, multi-language and multi-currency support, and location-specific workflows. It also provides a standard UI and one system of record for a unified, seamless experience.|
Current & Upcoming Trends
For an in-depth treatment of industry trends spanning general HR, talent management and HR technology, check out the additional resources at the end of this guide. Here, we’ll cover some of the key highlights so you can make a more informed buying decision.
Demand for Hosted HRM Solutions
The HR market is projected to be worth more than $38 billion by 2027, achieving a CAGR of 11.7%. The report also highlights that with the continuing effects of the COVID-19 pandemic, employers are giving their employees an option to continue working remotely — leading to an expected increase in the deployment of hosted HRM solutions.
Employee wellbeing has evolved over the years. With the post-pandemic workplace in mind, employers are moving beyond employee perks, benefits and programs. They’re emphasizing a healthy organization, and a holistic approach to improving the workplace environment focusing on employees and active leadership support.
It covers various aspects of employee well-being, including financial fitness, healthy culture, social health, community service, a safe workplace and more.
Companies have realized the importance of reframing the place employees have in a company. The employee experience has become a central theme as organizations seek to attract talent, engage employees to produce better results, reduce churn and compete in a high-demand talent marketplace.
A majority of employers believe that enhancing employee experience will be an important priority over the next three years, according to a report by SHRM.
HR software seeks to enhance productivity and engagement by presenting a single interface where employees can go to receive services and find relevant information.
AI-Based Team Building
Building the right team is crucial to achieving goals and long-term growth. With factors like human nature and remote work thrown into the mix, manually creating efficient teams to meet targets has become difficult for HR administrators.
Harvard Business Review explains:
“Integrating AI’s viewpoints into superteams’ work helps the bottom line: organizations with higher levels of diversity see a greater proportion of revenue from innovation and overall stronger financial performances.”
Adopting AI support can bring efficiency to the team-building process, leading to better results.
Software Comparison Strategy
The above sections should have given you a clear idea of the types of HRM systems, what they offer and the main features to look for. Now it’s time to take that information and apply it to your situation.
The first step is to identify key stakeholders from across your organization. This team commonly includes human resources staff, IT personnel, finance and operations members, and payroll specialists. To ensure the best outcome, you should loop in managers, front-line employees, administrators and executives. HR software impacts everyone, so every tier at your company should have input.
Once you have a team assembled, you can build your requirements (our requirements software speeds up and simplifies this often complex and time-consuming process). When listing your requirements, differentiate between business-critical and optional features. For example, having a payroll tool and employee database is essential for any company. However, you may not need the ability to conduct succession planning.
It may help to use a weighted scale to assign importance to each requirement to decide which shortcomings are deal-breakers and eliminate vendors based on those parameters. Beyond standard feature requirements, it’s equally important d to consider budget, time, infrastructure and additional non-feature factors like vendor support during your HR reviews.
With your requirements in hand, begin exploring the market. If you already have an initial list of products you’re interested in, eliminate some based on your refined needs. Old, new, broad, narrow — the HR management software market is a complex tapestry of products due to the different buyers it serves, acquisitions and individual vendors’ evolution.
That makes it vital to be clear on your company’s needs so you don’t get sucked into purchasing a platform that on the one hand lacks features or on the other hand offers bloated functionality you won’t use.
Pricing & Costs
Cost is always a significant consideration in any software evaluation project. That fact is especially true if you’re looking at large HCM suites that come with feature-rich modules — and a higher price tag.
You can refer to our HR Software Price Guide for a detailed breakdown of the top HRMS solutions cost. Here, we’ll take a broad look at the pricing in the HR industry, so you know what to expect and look for.
Pricing depends on a number of factors:
SaaS vs. Software License
SaaS (software-as-a-service) products follow a subscription model, with monthly or annual payments based on the number of users. A license, most common with on-premise solutions, lets a company use the software after paying for a one-time purchase (some licenses require renewal).
One-time licenses are much more costly upfront because you’re paying for the software in one lump sum. On top of that, your company will need an adequate number of IT professionals to maintain the system and ensure data security, which can be an additional expense.
Subscriptions, by contrast, are much less expensive in the short term. That said, it’s smart to consider long-term costs, since you’ll always have to pay for a SaaS product, but once you’ve licensed an on-premise system, it’s less likely you’ll have to worry about ongoing payments.
Number of Modules Needed
If you’re looking at an HR suite rather than point solutions, you’ll have to factor in required modules to your cost equation. Like a food buffet, many vendors let you choose which modules you want to plug into the ecosystem. For example, if you’re looking for core HR, learning management, payroll and workforce management capabilities, each of those functionalities may carry an individual sticker price.
Number of Users
The number of users who will need access to the system is one of the biggest considerations when budgeting. As mentioned, many SaaS models charge per user. So even if the cost is only $10 per user, each month, if you need to support 1,000 users, you’ll pay $120,000 every year.
Making specific customizations to the software may cost extra. You’re more likely to find this incorporated into the base cost. Still, you should always check, as things like the extent of the customizations, complexity and specific needs contribute to the overall cost.
Customization expenses are more common with subscriptions, as the vendor would handle customizations. Vendors may also customize elements of an on-site system, but once the platform is on your servers, your IT department has the freedom to make any changes necessary.
More complex systems often require training for administrators and users to understand workflows, setups and individual capabilities. Again, you’ll find a wide variety, with some vendors offering in-person training, some providing online premium training or free self-training, and some offering a mix. Whatever the case, don’t overlook this element when budgeting for an HRMS solution. Proper training can encourage higher user adoption rates and ensure users get the most out of the software.
Other areas to think about include installation and implementation, data migration, and maintenance. Often rolled into the subscription or license price tag, so you don’t have to pay for them separately. It’s always good to verify, though, because each vendor has it’s own pricing details.
Best HR Software
Is it necessary that a solution that worked well for one organization should work for others too? Precisely, no. This makes careful analysis and comparison all the more important before investing in a product. There are endless options in the HRM solutions market, but here’s a quick overview of the highest-rated solutions according to our analysts:
UKG Pro is a unified cloud-deployed suite that simplifies human resource management.. It provides local and global HCM for many sectors like manufacturing, healthcare, hospitality and more.
It offers various capabilities, including payroll processing, benefits, document and compensation management, and more. Use machine learning, predictive analytics and business intelligence to improve employee performance and retain high-performing human resources.
A peek into the payroll dashboard of UKG Pro.
Oracle HCM Cloud
Oracle HCM Cloud offers a variety of modules for efficient human resource and talent management, including employee information management, rule-driven processing, advanced HCM controls to prevent payroll errors and more.
Companies can manage their workforce globally by improving business agility and encouraging engagement, leading to quality employee performances.
A look into the performance management capability of Oracle HCM Cloud.
Dayforce helps smaller businesses across multiple sectors manage the entire employee lifecycle. Along with the must-have features of an HR system, it also offers clock solutions, unified payroll and time, centralized employee records, organizational charts and more.
It enables effective decision-making with workforce insights and improves team engagement through Teamrelate surveys.
A snapshot of the onboarding checklist of Dayforce.
SuccessFactors lets organizations automate daily HR operations using AI and machine learning. It supports businesses with strategic initiatives to provide a competitive advantage. The digital boardroom helps improve decision-making.
Its noteworthy attributes include HR analytics, time and attendance management, workforce planning, performance compensation, and payroll management.
A snippet of the payroll processing by Successfactors.
ADP Workforce Now
ADP Workforce Now helps midsized and enterprise organizations efficiently handle various complexities of the employee lifecycle. Employees can access their data easily using a self-service module. It also streamlines daily processes and allows information management on the go.
ADP DataCloud uses AI to manage information and provides real-time insights for effective decision-making.
A snapshot of payroll processing by ADP Workforce Now.
Questions to Ask Yourself
Use these questions as a starting point for internal conversations:
- What are you hoping to improve by adopting human resource information system software?
- What current and future company-wide priorities do you need to consider?
- Who will use the HRIS software and what are their must-have features and their nice-to-have features?
- What challenges are users facing with your current solution?
- What deployment model makes the most sense for your company, given constraints such as personnel, budget and user count?
- What’s your budget?
- What business software integrations do you require (CRM, ERP, accounting)?
- Is gaining the functionality of point solutions key to your business, or is having a unified suite more important?
Questions to Ask Vendors
Use these questions as a starting point for conversations with vendors:
About the Software
- Are payroll previews available? How easy is it to rectify payroll errors?
- How is the HRMS software implemented and how is data migration handled?
- Is the software built on one database, allowing for a seamless data flow between modules?
- Do dashboards and reports make it easy to identify and keep tabs on key business metrics quickly ? Do they also allow enough drill-down for granular analysis when needed?
- How does the HRMS software automate and streamline manual tasks such as data entry, recruiting and onboarding?
- How often are product updates released? How are they rolled out — are upgrades automatic?
- What compliance tools (audit templates, workflows, GDPR) are offered?
- Does it provide a unified, user-friendly experience for managers and employees?
- Is there a mobile app? Is there a seamless user experience when switching between desktop and mobile apps across devices? How many tasks can be performed on a mobile device?
- What security measures are in place to protect employee data, prevent data loss and comply with industry-specific regulations?
- Can the HRMS software be configured according to industry-specific best practices? Does it offer functionality that can handle requirements for companies in your industry?
About the Vendor
- Is free training included?
- Related to training, how soon until employees are able to use the human resources management software?
- What’s the size of the vendor? Are they financially stable and viable in the market?
- How well does this vendor serve your industry? For example, can it support unique workflows and capabilities?
- How dedicated to support is the HR software provider? Do current clients vouch for it? What support avenues do they offer (phone, chat, email, community forum, client success manager)?
- What does the implementation process look like? How much support will the vendor provide?
Finding the right HR software is critical to the short and long-term success of your business. With strong software in place, you’ll be able to effectively manage every phase of the employee lifecycle from recruitment to exit. It will provide key insights that improve operations and identify risks so you can take preventative action. Building a list of requirements with input from key stakeholders and conducting thorough product and vendor analysis will put you on the path to a fruitful HRMS implementation.