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How To Choose HR Software In 5 Easy Steps

The HR software selection process is an important one, as the right HR software can have a huge impact on an organization’s ability to recruit and retain top talent. 

A recent survey by PwC found that 36% of HR leaders are likely to switch vendors when their current HR software subscription ends. 

The same study found that the top challenges HR managers face when it comes to technology projects are budget and integration with other tools. 

Keep reading for a breakdown of the different types of human resource software, as well as a step-by-step guide to the software selection process. 

top 10 hr challenges screenshot
Source: PwC

What is HR software?   

HR software refers to the broad array of tools used by human resources professionals to manage and automate HR processes. These include:

  • Recruitment software
  • Talent management
  • Onboarding
  • Benefits administration
  • Payroll
  • Time and attendance tracking
  • Performance management
  • Employee engagement
  • Succession planning
  • Document management for regulatory compliance. 

While HR technology is primarily used within the HR department to manage administrative processes, it is increasingly being applied to distribute some of the HR admin load across the rest of the organization. 

With features like electronic forms, automated prompts and reminders, and employee self-service portals; tasks like capturing and updating employee data, generating reports, and communicating with employees can be streamlined significantly.  

HR software can help companies to reduce manual tasks, cut labor costs, make HR departments more effective, and improve employee productivity and performance.   

Types of HR software

There are a variety of different types of HR technology that address different HR needs throughout the employee life cycle

While some tools are specialized for a specific purpose, such as recruitment or learning and development, others are more holistic and seek to consolidate all HR operations in one platform or suite of products. 

It’s worth keeping in mind that, while it may seem like a great idea to pick one enterprise tool that can handle every HR process, within these systems some modules or functions are typically better than others. Specialization can have its benefits. 

Here’s a quick breakdown of each of the main types of HR software:

Core HR software

Core HR software generally refers to systems used to store and manage employee information in a centralized database. 

This information includes employee profiles, contact details, employee benefits and payroll data, leave or paid-time-off (PTO) balances, and other employee data, as well as employee documents like contracts and tax forms. 

Core HR software encompasses both human resource management systems (HRMS software) and human resource information systems (HRIS software) and is also sometimes referred to as human capital management (HCM) software. Payroll software is a subset of core HR software.

Recruitment software

Recruitment software, such as an applicant tracking system (ATS), helps companies to manage the hiring process from candidate sourcing to onboarding. 

The tools typically offer features that facilitate job listing creation, help distribute the job post, parse, manage and track job applicants, organize and filter applicant data, communicate with applicants, and schedule interviews. 

Recruiting software helps to automate the hiring process by allowing recruiters and hiring teams to pre-screen candidates as well as automatically reject or follow up with applicants using preconfigured response templates. 

Using artificial intelligence, ATS tools can identify top talent by scanning resumes and cover letters for specific keywords, skills, education, or other relevant factors. 

Onboarding software

Onboarding software serves to streamline and improve the employee onboarding experience by consolidating the entire onboarding process in one place. 

This includes collecting employee data and completing important forms pertaining to tax information and benefits, as well as granting new hires access to details about their role, team, and managers, information about workflows, processes, and company policies, as well as key training materials. 

Good onboarding software enables new hires to hit the ground running and spend their first days on the job getting to know the company and forming connections, instead of being bogged down by paperwork.

Performance management software

Performance management software helps companies to plan and implement employee performance evaluations. This, in turn, makes it easier to identify which employees are top performers and which ones need a little help to maximize their potential. 

Most performance management solutions offer features that help managers to translate company strategy into measurable objectives or key performance indicators (KPIs) for individual employees—and to gauge how well the employee’s performance aligns with these objectives. 

A performance management platform makes it easy to create and schedule employee performance reviews and assessments and send automated reminders so that everyone’s on the same page. Most also offer dashboards that give management an overview of performance in individual teams as well as throughout the organization. 

Learning and development software

Learning and development software is designed to facilitate employee training and development, empowering employees by building their knowledge and skills. 

Whether you develop your employee training materials in-house or outsource them to an eLearning company, you’ll need a learning management system (LMS) on which to host and organize your training materials, as well as document, track, and report on your educational initiatives.

An LMS enables you to create and deliver a wide range of educational courses and training programs using a multitude of different learning methodologies, media types, and assessment frameworks.  

Related: Learning Management Systems (LMS) for Small Businesses

Jargon-busting

Jargon is just the worst, and it’s pretty much unavoidable when it comes to buying software. 

Below, we’ve rounded up some of the more common jargon terms and acronyms you might encounter and provided a brief definition.

  • UI – User interface. This refers to the look and feel of the part of the software users interact with. 
  • UX – User experience. This refers to the software’s intuitiveness or ease of use.
  • SaaS – Software-as-a-Service. This refers to software for which you pay a subscription instead of purchasing it outright. It gets serviced and updated and typically comes with technical support included. 
  • AI – Artificial intelligence. This refers to advanced computer algorithms that use data analytics to recognize patterns and perform decision-making functions in a similar way to a human. 
  • RFI – Request for information. In the procurement process, this refers to the practice of asking a vendor for product details and specifications that can be used to make more accurate comparisons. 
  • RFP – Request for proposal. This is like an RFI, except that the vendor is given more information about your organization’s needs and asked to submit a proposal explaining why their product is the best solution.
  • Employee self-service. This simply means that the software has a portal that allows employees to sign in and do things like update their employee data, review their benefits, or submit a paid time request themselves, without needing to ask an HR professional for help.

HR software selection in 5 easy steps

The HR software selection process doesn’t have to be complicated. Below, we’ve broken it down into five steps.

Step one: identify needs

Before you dive into the software selection process, take time to understand what your organization's specific needs are. 

Having a clear picture of your human resource department’s needs is vital to selecting the best HR software for your company.

Here are some questions to get you started:

  • How is the HR system you currently use (if any) falling short?
  • What are the most common pitfalls and challenges faced by the human resources department?
  • What are the biggest obstacles you face in cultivating a positive employee experience?
  • Which HR processes are the most time-consuming? Could they be streamlined with the right software capabilities?
  • Which HR software solution(s) are you already using? How will any new software you purchase fit into your larger HR system?
  • What are the most frequent HR admin-related employee complaints?
  • What are your company’s policies and regulatory requirements with regard to considerations like data security, supplier diversity, vendor contracts, etc.?
  • How tech-savvy is your team? The software you select shouldn’t be more complex to set up and use than your team can manage. 
  • What is your budget? What kind of return on investment (ROI) would you expect to see?

Step two: research vendors

It’s time to do your homework and familiarize yourself with the leading HR software solutions for your use case. Luckily, the web is full of informative websites (like this one) comparing various HR software tools to one another. Reading a handful of these is a good way to get an overview of your options.

As you do your research, keep track of the tools that perform well across the board and consider which factors you’re willing to compromise on and which ones are non-negotiable. This will be important in the next step (making a shortlist). 

Here are some questions to ask yourself:

  • Who are the top vendors for your use case?
  • Which are the best rated in their category?
  • What is each tool’s top-rated feature?
  • What do customer reviews and testimonials have to say? What are the most commonly reported benefits and drawbacks?
  • What kind of onboarding, training, support, and other resources does the vendor offer? 
  • Is robust documentation available?
  • Do the tool’s features meet your needs?
  • Does the software integrate with the HR tools you’re already using? 
  • User interface: is it visually appealing?
  • User experience: is it intuitive to navigate and easy to use?
  • Is this tool simple or complex enough for your human resource management needs? 
  • Does it offer the flexibility or customizability you need as an HR professional?
  • Does it cater to small and medium-sized businesses or is it more suited for enterprise use?
  • Does it offer robust security standards and comply with data privacy regulations and best practices? Is an on-premise option available?
  • Does the pricing meet your budget? Is the pricing clear? Is the price warranted based on the software’s capabilities? Are certain key features only available in more expensive pricing tiers? 
  • Does it offer a demo? A free trial?

Step three: make a shortlist

Now it’s time to dive deeper and narrow your selection down to just a handful of the best human resource management software solutions. In the course of your research, you likely identified several vendors that stood out. 

Compare these top contenders head-to-head and see which one comes out on top. 

  • Read comparison blogs and review sites
  • Look for case studies that demonstrate the tool’s ROI
  • Have your HR personnel weigh in on which HR tool they think is the best fit
  • Take the time to study their websites and take notes of any questions that arise
  • Send each vendor a request for information (RFI) so you can compare your options point for point
  • Schedule a call with their sales rep and go through your questions
  • If you want to be really thorough, send each of your shortlisted vendors a request for proposal (RFP). This will include key information about your company, your specific needs, a vendor questionnaire, and any specific proposal submission rules they should follow, such as submission deadlines.

Step four: test drive your shortlisted vendors

Take advantage of any free trials and demos available and play around with each tool to get a sense of its UI, UX, and capabilities. Implement it on a small scale and test it out, taking note of any limitations or difficulties you run into. 

If feasible, get feedback from as many employees as possible. As the ultimate users, their input can help you notice shortcomings you might not have considered.

If the software you’re favoring doesn’t offer a free trial, try it out on a monthly basis before committing to an annual billing cycle. Sure, it’s generally cheaper to pay for software annually, but not if you chose the wrong one and end up having to backtrack and buy another one! 

Enterprise clients that have more negotiating leverage can be fairly demanding. If this is you, be sure to stipulate a trial period and/or cancellation clause in your service level agreement.

Step five: implement and onboard

Make sure employees are comfortable with your human resources software and feel confident using it. 

The main reason companies fail to see ROI on software purchases is failing to follow through on implementation and properly integrate their shiny new tool into day-to-day operations.

Effective change management is crucial. For employees to use your new software, they need to understand how it benefits them (e.g. it saves them time/their PTO requests get approved faster) and know how to use it. 

Here are some tips to help with this.

  • Clearly communicate that you’re adopting new HR software and what this will mean for employees. Invite employees to come forward with questions.
  • Take advantage of any onboarding and training offered by the vendor and make it mandatory for employees to complete this training within a realistic timeframe.
  • Charge someone with the responsibility of spearheading implementation and being a point of contact for any questions (and feedback) employees might have.
  • Make employees aware of any self-service resources available and make sure they know how to log a support ticket if they run into difficulties.

Ready to make your HR software selection?

Do you feel ready to go forth and make an informed software procurement decision?

If you’re aware that you need to invest in—or upgrade your—HR technology but you need some help getting executive buy-in, have a look at our post on How To Make A Business Case For HR Software

Plus, for specific HR tech recommendations, check out our curated shortlist of 10 of the best HR software.

Related Lists of Tools:

By Tim Reitsma

Tim is the co-founder and General Manager of People Managing People, an online publication focused on building a better world of work. He is experienced with people & culture, leadership, business strategy and operations with a focus on building great teams who are excited about their craft and their organization. With over 15 years of leadership experience, Tim has always been guided by his core values: faith, family, curiosity, and fun. He is a coach, mentor, speaker, advisor, and an active volunteer in his community. Tim loves spending time outdoors with his wife and two kids as well as mountain biking in the north shore mountains.

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