What Is HR Software and How Can It Benefit Your Business?
HR software first cropped up in the 1970s when companies needed to store employee data on large mainframe computers to help meet regulatory standards.
These were the first human resource information systems (HRIS) which, with the significant advancements in computing, are much more powerful today.
The size of the HR software market is now huge and is expected to grow significantly, with new solutions continuously cropping up continuously.
Use this guide to help you understand what HR software is and how it can benefit your business.
What Is HR Software?
HR software refers to any software application that supports key HR functions within an organization. Organizations purchase HR software to make HR processes more efficient and effective and improve the workplace for both HR and non-HR staff.
Typical use cases include better data management and security, automation of key processes such as payroll, and richer insights into the workforce for data-driven decision making.
Benefits Of HR Software
HR software can benefit individuals and teams across your business in numerous ways.
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How HR software benefits HR departments
Here's how HR software benefits HR departments:
- Automation of administrative tasks: HR software automates routine tasks such as employee data management, attendance tracking, and payroll processing. This reduces manual workload, minimizes errors, and gifts HR staff time to focus on more strategic tasks.
- Enhanced recruitment process: Platforms such as applicant tracking systems and recruitment CRMs help to manage job postings, screen applications, and communicate with candidates. This can speed up the recruitment process, provide a better candidate experience, and improve the quality of hires.
- Improved employee onboarding: Specialist onboarding software or modules can streamline the onboarding process by automating aspects like document submissions, training schedules, and initial assessments.
- Learning and development: Tools like learning management systems help to design training programs, provide easy access to training materials, and measure the effectiveness of L&D programs.
- Employee self-service portals: Many HR systems offer self-service portals that allow employees to manage their own personal information, benefits, and other HR-related tasks. This empowers employees and reduces the administrative burden on the HR department.
- Data management and analytics: Tools such as HR analytics software helps HR departments get insights into workforce trends, performance metrics, and compliance issues. This data can be crucial for strategic planning and decision-making.
- Legal compliance: Keeping up with labor laws and regulations can be challenging. HR compliance software or modules help ensure compliance by updating systems in accordance with new laws and by maintaining proper records for audit trails.
- Improved communication: These systems often include tools that facilitate communication between employees and HR staff, such as information repositories, messaging platforms, and feedback tools. This can ensure that HR issues are resolved more promptly and increase engagement.
- Performance management: Performance management tools help track employee performance, set goals, and conduct performance reviews. This helps in managing employee development more effectively and aligning individual goals with business objectives.
How HR Software benefits employees
Since much of HR’s work is focused on supporting employees, it makes sense that HR software should benefit employees too.
Here’s how HR software enhances the overall workplace experience:
- Improved HR products and services: HR and People Ops teams have more time and can leverage software to collect data and feedback and use it to create better products and services that improve the workplace experience.
- Easy access to information: HR software typically includes employee self-service portals that allow individuals to easily access and manage their personal information, helping create a better employee experience.
- Efficient onboarding: For new hires, HR software streamlines the onboarding process, making it quicker and more structured. Employees can access necessary documents, training materials, and schedules through the system, helping them to settle into their new roles more comfortably and efficiently.
- Improved communication: Many HR systems facilitate better communication within the organization through integrated messaging systems, announcements, and updates. This helps in keeping employees informed and engaged with the company’s happenings.
- Better performance management: Tools such as performance management software help employees set goals, track performance, and receive regular feedback from their managers. This can enhance personal growth and career development, making it easier for employees to meet their professional objectives.
- Time management: With features like time tracking and leave management, employees can easily apply for time off, track their work hours, and manage their schedules.
- Better training and development: Team members can use the aforementioned learning management systems to create career maps and tailor their learning and development journeys.
How HR software benefits the overall business
Ultimately, any new tool should benefit the business in some way. Here’s how HR software can help provide competitive advantage:
- Time savings and automation: Automates repetitive tasks like payroll, benefits administration, and compliance tracking, reducing manual effort.
- Improved accuracy: Minimizes human errors in processes such as payroll, record-keeping, and compliance documentation.
- Centralized data management: Stores all employee information in one place, making it easy to access and update.
- Enhanced compliance: Helps organizations stay compliant with labor laws, tax regulations, and data protection policies.
- Better talent management: Streamlines recruitment, onboarding, and performance tracking, improving hiring and retention.
- Improved employee experience: Self-service portals empower employees to access pay slips, request time off, and manage benefits.
- Data-driven decision-making: Provides analytics and reporting for better workforce planning, turnover analysis, and performance evaluation.
- Scalability: Supports growing businesses by adapting to changing HR needs.
- Cost savings: Reduces administrative costs associated with manual HR processes.
- Enhanced security: HR software can help protect sensitive employee data through encryption and access controls.
Who uses HR Software?
There are tons of different HR software tools available nowadays spanning the spectrum of talent management.
All team members will interact with your HR software to some degree, whether it’s accessing their pay statements through the employee self-service module, submitting a time-off request, or participating in a performance review.
Additionally, you'll see enterprise HR software designed for large international companies as well as small business HR tools that are scaling fast.
As we’ll go into, the multi-user factor is important to remember when choosing the appropriate tool for your organization.
Types Of HR Software
We’ve already name-dropped a few above, but here are some of the most common types of HR software and what they do:
Human resource information system (HRIS)
An HRIS (or human resources information system) is a type of core HR software that primarily helps store and manage employee data but usually comes with a number of core HR features.
Key features include centralized employee data management, payroll processing, benefits administration, attendance tracking, applicant tracking, performance evaluation, and self-service portals.
Check out our pick of the best human resource information systems to help you simplify your HR operations and manage your employee data efficiently.
Human resource management system (HRMS)
Similar to HRISs, HRMSs are advanced software solutions that encompass many of the core, strategic functions of human resource management. The capabilities of an HR management system define how effectively HR software can support your team’s objectives.
An HRMS encompasses employee data management, payroll and benefits administration, recruitment and onboarding, performance evaluation, time and attendance tracking, learning management, and HR analytics.
Check out our selection of the best human resource management systems for more info. If your team is small or your budget is limited, you may find a better fit in this list of small-business HRMS software instead.
Applicant tracking system
ATSs are designed to help improve the recruitment process by making it more efficient for everyone involved.
Typical recruiting software features include job posting to multiple platforms, interview scheduling, CV screening tools, and recruitment analytics.
For more, check out our pick of the best applicant tracking systems or our list of the best recruiting software designed for small businesses.
Payroll software
Payroll software is a crucial tool used by HR and finance teams (there’s debate as to who) to track employee work hours, pay rates, vacation accruals, paid time-off, payroll taxes, payroll deductions (like federal and local taxes), and more.
These tools automate the majority of payroll processing, ensuring accurate and timely payment of wages, tax withholding, and compliance with employment laws.
Check out our pick of the best payroll software for a deeper dive.
Performance management software
Performance management is notoriously difficult to get right. Performance management software can help by digitizing the performance review process and helping to set and track goals, analyze productivity, and record achievements.
They also incorporate modern elements like collecting 360-degree feedback from team members, continuous feedback loops, and one-on-one check-in tools.
Additionally, they can also assist with succession planning by identifying skill gaps that need to be addressed for long-term strategic planning.
Check out our pick of the best performance management software for a deeper dive.
Learning management system (LMS)
Learning and development, like performance management, is another one of those crucial functions that’s difficult to get right.
LMSs can help by providing a centralized space for creating, delivering, and tracking educational content and courses.
They include tools for educators to manage course materials and for learners to access and engage with these resources. The purpose is to simplify the educational process, make it more accessible and effective, and support a diverse range of learning needs.
Check out our pick of the best learning management systems for more info.
Benefits administration software
Similar to payroll administration, anyone in charge of benefits administration in an org will be quite attached to their payroll administration software (unless it’s rubbish of course).
That’s because it helps benefits administrators manage ongoing tasks such as reconciling monthly costs with payroll, assisting staff with plan or dependent changes, and generating reports to ensure legal compliance.
They normally include employee self-service portals that simplify the enrollment process for new hires, walking them through all the options available to them.
Check out our selection of the best benefits administration software for more deets.
Employee engagement software
Employee engagement, employee satisfaction, employee experience—it’s all the same thing really.
Anyway, employee engagement software focuses on improving employee satisfaction and engagement through features like feedback tools and employee recognition platforms.
Check out our pick of the best employee engagement software for a deeper dive.
Cloud HR software
There’s a growing trend of organizations adopting cloud-based platforms to manage their human resource functions, replacing traditional, on-premise systems.
Popular with SMEs and startups in particular, advantages of cloud-based solutions include greater accessibility and scalability and decreased maintenance but at the potential cost of diminished data security and customizability.
For more info, check out our pick of the best cloud based HR software.
How To Choose HR Software: 8-Step Process
If you're thinking upgrading HR software or investing in a new HR software solution might benefit your organization, the next step is finding the right fit.
Here’s a step-by-step process for choosing the right HR software for you:
1. Business needs and vision
The first step is to write out the vision for HR and ensure it aligns with the business strategy, direction, and vision.
The benefit of this is that it will ultimately help create buy-in from key stakeholders and decision-makers on your leadership team.
For example, if the plan is to hire internationally, then maybe a global payroll solution would be useful.
2. Identify pain points and gather requirements
Pain points in this context are the specific difficulties and inefficiencies a company experiences in its current HR management processes, which HR software aims to address and alleviate.
Common pain points to look out for include time spent on manual processes and data discrepancies.
Top tip: Get input from all your key stakeholders, including people who are responsible for different parts of your HR functions, since they will all have different needs.
Combining strategic needs with pain points will help you map out your HR software requirements.
3. Current process steps
Current process steps are the ways you're currently doing things in your HR department.
This should cover all your core HR tasks, such as how you handle employee records, leave requests, hiring, and onboarding.
Start by listing out the main processes, the steps for each process, who is responsible for each step, and the time each process takes you.
4. Define measures of success
You should now have a good idea about what you need from your new tool.
This could be more efficient admin, quicker turnaround on filling roles, or better training delivery.
If you can save time and resources by implementing HR software, is it possible to demonstrate the return on investment? Dan George’s excellent article on HR financial literacy is a useful resource here.
5. Get initial buy-in and approval
Present your findings from the above steps to find out if you have buy-in from your HR leaders to continue or if you need to shut the process down. If you have verbal approval, keep going!
6. Contact vendors
Shop around, request a few demos, and share your requirements in advance with each software provider you meet with. Doing so will help them demonstrate how their software can improve your HR function according to your needs.
If the platform you’re interested in doesn’t have all the features you need, how easy would it be to integrate with other HR systems? What are the total costs of the HR software vs the benefits?
Some more vendor specific questions to ask:
- 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?
- 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?
- 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 or free trial?
7. Build the business case and get approval
Using the above data, it's time to write your business case.
This doesn't have to be a 10-page document, it can be as simple as a one-page memo.
This doesn't have to be a 10-page document, it can be as simple as a one-page memo. Decision-makers are looking for answers to the following questions:
- How much does it cost?
- What pain points will the software solve?
- If we didn’t invest in the software, then what?
- How long will it take to implement?
- Why do we need to invest now
- What is the ROI of implementing this software?
For a deeper dive, check out our article how to make a business case for HR software.
8. Make a decision
Congrats! You have the approval to go ahead with your vendor of choice. Next up is implementation of your HR software, onboarding, and training. Fun times!
Navigating the Next Steps
HR software isn't a magic bullet, but it can certainly improve your data management processes and make your human resources operations more efficient.
We encourage you to explore the world of human resources software further.
Luckily for you, People Managing People has been reviewing different subsets of HR software for years, so we've done a lot of the leg work for you already.
Our list of the best HR software is a great jumping-off point, or you could talk to one of our knowledgable advisors.
Need expert help selecting the right Human Resources (HR) Software?
If you’re struggling to choose the right software, let us help you. Just share your needs in the form below and you’ll get free access to our dedicated software advisors who match and connect you with the best vendors for your needs.
