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Have you ever been asked “What is an HRMS system”? I have—often! So in this article, I will explore what an HRMS system is, how it works, and how they could benefit you.

We'll cover:

First up...

What is an HRMS?

A human resource management system (HRMS) is a software application used by HR professionals in the management of human resources aka people. They work by integrating a number of related HR functions into a single platform.

HRMS systems are designed to support different functions of your HR department such as payroll management, recruitment, benefits administration, employee data management, employee performance management, training, and competency tracking. 

What’s the Difference Between an HRMS and an HRIS?

HRIS is an acronym for human resource information system and is used interchangeably with HRMS. Its usage spans back to the 1980s when IT solutions were commonly referred to as management information systems (MIS). Later on, when HR management systems were upgraded, MIS changed to HRIS.

Today, after further technological evolution of the HR management system beyond the storage of employee records, HRIS is referred to as HRMS. The two terms are used synonymously to refer to HR software in an organization, specifically the human resource management software system used to record employee data.

History of HRMS

The history of HRMS systems can be traced back to the 1970s when companies hoped to automate payrolls and instigate better workforce management. Computer use was limited back then and companies relied on manual entry in conducting employee evaluation.

Mainframe computers came in and were used to calculate deductions and worker earnings, track payroll liabilities, and print paper cheques.

Among the first companies that came up with a complete HR system was PeopleSoft in 1987. Their system included employee record management, benefits administration, time and attendance, employee recruitment, compliance reporting, payroll, and compensation details. HR professionals were now able to better automate the employee lifecycle and also improve on workforce decisions.

The rapid evolution in internet usage toward the end of the 1990s improved HR processes. Paper-based job ads were quickly getting phased out and replaced by electronic job boards. Payroll management became fully electronic by the year 2000 when employee self-service and direct deposit became widespread. 

Cloud-hosted HR services came in around this time and by the 2010s this service had become mainstream, accessible to all sizes of organizations at affordable rates.

Today, HRMS and HRIS have completely taken over and continue to incorporate the latest technologies. For example, comprehensive HR software now comes with in-built predictive analytics and artificial intelligence, helping organizations with tasks like detecting workforce trends and parsing candidates during recruitment.

Functions of HRMS

An HRMS helps your HR function work more efficiently and accurately by keeping secure records and automating basic processes. A well developed HRMS will support HR teams in the areas of: 

Employee Management

The best HRMS system will provide support for employees across their employment life cycle, from application to ongoing training and promotions. Employee management may also include the collection, storage, and analysis of staff documents and data.

There may also be features such as PTO tracking, vacation request, benefits administration, and certification statuses. One popular feature of HRMS is employee self service, empowering employees to access and update their own information, book time off, etc.

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To retain top talent and improve employee engagement, most companies take charge of optimizing their workforce to remain resilient during change (sometimes referred to as (human capital management). HRMS systems can provide you with the business information data you need to see what’s working within your workforce and what needs to be improved. 

Employee Engagement

HRMS can help with keeping your employees engaged by assisting in the acquisition of new skills, developing a career path, and providing recognition (ie. reviews or awards) for your staff. Hiring, firing, and retiring shouldn’t be the only opportunity to touch base with employees. An HRMS facilitates of positive feedback cycles, continued growth, and personal satisfaction.

Payroll Management

One of HRMS software’s primary functions since its inception has been payroll management. Through the self-service functions in the HRMS system, employees can change elective deductions, tax withholdings, direct deposit accounts, and also retrieve their earnings statements.

Workforce Management

HR management teams carry employee evaluations, manage their time and attendance, instill disciplinary actions, and also ensure employees work in a healthy and safe environment.

Related Read: 10 Best Workforce Management Software Of 2023

Importance Of HRMS In An Organization

HRMSs are what constitute as core HR software and help grease the axles of smooth-running businesses today Benefits include:


HR specialists no longer have to spend as much of their time on routine updates like manually updating employee information. HRMS systems accurately capture and integrate all the information into the system.


Error-free financial data reporting is among the many benefits that organizations have been able to enjoy through using modern HRMS systems.

Employee Self-service

Secure self-service features that are integrated into HRMS systems have led to more productivity. Less time is wasted consulting HR professionals on what is already accessible from the HRMS systems. For example, employees can easily access forms like W-2s by themselves and also generate payment statements.

Centralized Storage

All employee data is integrated into one place, making it easy to retrieve and share with just a few clicks. This improves the security of sensitive information since access to different files and information can be encrypted and hidden behind assigned permissions.

On-demand Reporting

Sharing reports with other departments is as easy as a click on the computer mouse. No tedious work of having to sort different Excel sheets.

Promotes Culture of Self-service

Employees rely on themselves for various tasks, like generating payment statements and W-2 forms.

Improved Data Management

HR professionals can navigate and manage huge amounts of data with the help of an HRMS solution. Searching, filtering, and reporting on data also becomes much easier.

Fewer Systems to Manage

One good HRMS is enough to serve an entire organization for a variety of crucial purposes. HR processes are unified rather than having separate tools for payroll, hiring, benefits administration, and so on. 

Fast Recruiting Processes

HR professionals can rely on automation solutions that remove some of the administrative burdens of onboarding new hires without compromising the recruitment process. If applicable, a native applicant tracking system also offers additional features such as artificial intelligence to help with parsing candidates.

HRMS Security

HRMS security is an important feature that companies should not overlook. Your HRMS should have role-based access to its workforce, system segmentation for various departments, two-factor authentication, data encryption, and a strong password with good reset policies.

Choosing An HRMS

I hope you now have a good answer to the question “What is an HRMS system?” as well as their features and benefits. Now you’re ready for the next step; namely, figuring out how to choose the best HRMS system for your needs. 

To help with this, check these out:

We assessed all the leading HRMS systems so you can easily compare and identify those that best suit your needs. 

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Tim Reitsma
By Tim Reitsma

Tim has deep experience in HR, 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.