HR software, also known as human resource management software (HRMS), is designed to automate and streamline various HR tasks such as recruiting, onboarding, payroll, benefits allocation, and performance management. By doing so, these tools make HR functions more effective and less time-consuming.
Let’s face it, a lot of what we understand of HR is still paper-based. HR Tech wants to move these tasks away from people so that it exists in a completely digitized space. HR professionals who aren’t familiar with HR software may be skeptical of foregoing tried and trusted processes. We’ve written this article as an entry-level explanation to help you get the gist of why adopting HR software is for the betterment of your company.
Let’s take a closer look at what human resources software is, and why these tools are such an integral part of modern PeopleOps.
The value HR Software can add to your company is multi-faceted. In this article, we’ll unpack what a core HR software is, as well as the key features and functions HR pros care about most when they buy software for their companies. We have also called in our editor and HR expert, Alison Hunter, for some first-hand perspective drawn from her years of working at the intersection of people and technology.
What is HR Software?
HR Software is a group of software tools and platforms that gather, store, and process people data for organizations. The term “HR software” can imply different solutions.
A human resources management system, also referred to as an HRMS, is an all-encompassing workforce management platform that hosts every aspect of a company’s people-related work.
The terms human resources information system, or HRIS, and human capital management software, or HCM software, are used almost interchangeably with HRMS, but these are different types of HR software that provide a similar service. Please do consult our guide on what differentiates these software types for a detailed understanding of their functions.
The vast majority of HR software systems on the market are cloud-based, which means you can:
- Operate it in your web browser (no need to install software),
- Access it from any device (including phones if the tool has a mobile-friendly interface),
- Centrally upgrade and update the platform’s functionality (so there is no need to do software updates on individual devices throughout your organization.
If you have a large non-corporate workforce, you'll want to make sure your HR software has a strong mobile-first experience either via an app or mobile-friendly interface. This makes it possible for workers who don’t use a computer to still use the tool.
On the flip side of cloud-based software (that lives online), you get on-premises HR systems. To use on-premises software, you must buy a licensed copy of the software that is installed and updated on your internal server and/or individual devices. This is not as user-friendly as cloud-based solutions and will require more input from IT, but there are benefits in terms of cyber security and control. On-premises or stand-alone software makes the most sense in regulated industries like healthcare and finance.
Key Features of HR Software
Employee Data Management
Say you have an employee who has worked for the company for twelve or fifteen years. They started as an intern, and gradually matured into management. As a valuable and loyal employee with a goldmine of institutional knowledge, you want to ensure they are happy with their rate of internal mobility, remuneration, and general employee experience.
The challenge is in keeping tabs on their data. To be quite frank, an employee like this may have a company history that predates the HR department. If you want to know their whole story, where would you look? Dusty old copies of performance reviews, a labyrinth of documents and spreadsheets on your company server?
In the words of Alison Hunter, “I think many people would be shocked to learn how far behind the field of HR is when it comes to technology. This isn’t true across the board – there are a lot of awesome software products that are received eagerly by tech-savvy HR teams, but there are still teams who use pen-and-paper rather than spreadsheets and e-signatures .”
HR software helps businesses capture accurate, up-to-date information about every employee’s career journey, tenure, performance, training records, and general details. As opposed to pulling this information from various files, HR workers can access it all from a single employee profile. A full-picture view of the employee helps HR make informed decisions when it comes to their career plan, rewards, and remuneration.
This captured HR data can also be accessed and analyzed by the software so that you have essential people data about individual workers and the workforce as a whole readily available. This makes it possible to easily and effectively track your key HR metrics, such as employee turnover, retention, and headcount. Doing so can help to accurately identify trends, optimize your HR processes, and make data-driven workforce decisions.
A manual recruiting process is tedious and time-consuming. For roles with a high number of applicants, doing everything via phone or email can also easily lead to a poor candidate experience where candidates hear nothing from you for weeks on end, and it can contribute to employee burnout.
According to Hunter, “Recruiters tend to be enthusiastic go-getter types. They are known to be context-switching champions who thrive in a fast-paced environment, but this velocity has limits. For sustainability, you have to find the right tools to super-charge this already super-charged group.”
HR software with automated recruitment and talent management features allows businesses to create job postings, post them on job boards, and track applications with minimal input. Some software even offers resume parsing which makes identifying your top-tier candidates fantastically fast. Because you can automatically move candidates forward in your hiring process, or notify them that you’re not, they don’t have the undesirable experience of being ghosted.
The best HR information systems that do not have native applicant tracking abilities will integrate with an applicant tracking system (ATS). If you have an ATS in place, or if you consider buying one, it is worth checking what HRIS integrations are included before adding to your HR Tech stack.
“When companies make onboarding an afterthought, they miss out on some critical moments in the employee lifecycle– moments they’ll never get back. You won’t get another chance to make a good first impression, create a sense of safety, or introduce core values,” says Hunter.
HR software can have pre-built workflows to help new hires complete paperwork and familiarize themselves with company policies and procedures. As a fair amount of these steps can happen online, it is also possible to have an automated pre-boarding journey ready once a candidate accepts your offer of employment. The benefit of preboarding is that it gets a lot of administrative steps out of the way before their first day in the office. Instead of signing papers, a preboarded new hire can rather spend their first day getting to know their colleagues.
Payroll and Benefits Administration
While a lot of great HR software solutions have built-in payroll functionality, it is fairly common to have integration between separate HR and payroll software solutions.
Either way, this feature allows businesses to effectively manage payroll, taxes, and benefits for employees, such as health insurance, retirement plans, and paid time off.
Payroll software can automate the process of calculating and distributing employee paychecks, as well as tracking taxes and deductions. Additionally, benefits software can help businesses manage employee benefits such as health insurance and retirement plans, and provide employees with access to their own benefits information.
Some HR software solutions have the ability to track and manage employee performance, including setting goals, providing feedback, and conducting performance evaluations. This can help businesses identify and address performance issues, as well as recognize and reward top performers.
Naturally, information about an employee’s performance can be sensitive. Yet, a paper-based report can easily be misplaced or fall into the wrong hands. With an HRIS, this data is kept within the system, so employees and human resources benefit from access control for secure and accurate record keeping.
Time and Attendance Tracking
An integrated or native solution for tracking employee time through your HRIS (including clocking in and out, and managing time-off requests) makes it easy to accurately manage wages, PTO approvals, and overtime.
SaaS-based HR software is regularly updated with local and federal regulations. This helps businesses to stay compliant with labor laws and regulations, such as tracking employee hours worked, overtime, and wage and hour laws.
As mentioned above, HR software allows you to control who has access to employee data. It, therefore, has the added benefit of ensuring that employee records are kept confidential and secure in compliance with privacy laws.
As Alison Hunter points out, “Automated compliance management is a life-saver. This aspect of HR is too important to leave anything to chance.”
An HRIS with an employee self-service portal feature allows employees to manage and update their personal information, benefits, time off, and other HR-related tasks.
Because you can pre-program reminders that go out to your team, you can even set up regular prompts for them to periodically check and update their employee information. In a fully integrated HR system, updating their details in one place will also update all company records with their new information in real-time.
HR software with mobile accessibility allows employees and managers to access the system from their mobile devices, which can be particularly useful for businesses with remote or mobile employees.
Integration with Other HR Tech Systems
We touched on this previously, but it’s worth mentioning again. Your HR software does not exist in a vacuum, so there is no need to enter the same information at multiple touchpoints. Integration via APIs and standard plug-and-play features allows the HR software to work with other systems your company uses, such as your accounting system, time and attendance tracker, and benefits systems.
The specific features that are most important to you will depend on the needs of your business. Evaluate the features and capabilities of different HR software solutions before making a decision.
When choosing HR software, it's important to consider the specific needs of your business. For example, If your business has a large workforce, you may need enterprise-level software that can handle a large amount of data and provide advanced reporting capabilities. If your business has a remote workforce, you may need software that can be accessed from anywhere.
Benefits of HR Software
Looking at the list of features above, you may be interested to know how much of your daily HR management can be handed over to your HR software. After all, the ROI of paying for a software solution is largely dependent on the people-hours it saves.
Here are just some examples of administrative tasks that, with a set-up and well-running HR software, your HR team no longer has to worry about.
HR Functions you Can Automate with HR Software
Recruiting and hiring process administration:
HR software can create job postings, post them on job boards, and track applications.
Capturing and reporting on employee life cycle data:
The old chestnut “what gets measured gets managed” is highly applicable to people data. Yet, without a centralized source of truth, companies struggle to keep track of data points to do with recruiting efficiency, retention, employee engagement, career development, etc., much less measure these statistics against past benchmarks. The impact data-driven decision-making can have on your overall business success is immense.
Walking new employees through onboarding processes:
HR software can have an automated workflow where new hires complete paperwork and familiarize themselves with company policies and procedures. “A self-onboarding feature is more impactful than you may think,” Hunter says. “People have all kinds of different learning styles, and the best way to be sure everyone is up to speed is to accommodate them as much as possible.”
Payroll and benefits management:
If there’s one place any organization needs pinpoint computer accuracy, it’s paying employees.
HR software can automate the process of calculating and distributing employee paychecks, as well as tracking taxes and deductions. Because your payroll is hooked up to accurately captured time tracking data, you know your people are paid fairly. HR software can also help businesses manage employee benefits such as health insurance and retirement plans, and provide employees with access to their own benefits information.
Examples of Good HR Software Solutions
There are many good HR software vendors on the market, but some of the most well-known and reputable include:
ADP is one of the largest and most well-known HR software vendors. The platform offers a comprehensive HR solution for businesses of all sizes, including payroll, benefits, and compliance management.
Zenefits is a cloud-based one-size-fits-all HR platform that offers a range of solutions, including benefits, payroll, and compliance management.
Bob is a global online platform that encompasses all aspects of HR. It is a remarkable HR software because of how easy it is for employees to use.
BambooHR is a tried and tested cloud-based HR software. As it’s one of the top names on the market, a lot of well-known large companies run their entire workforce off it.
Gusto is a cloud-based HR software vendor that offers a range of HR solutions, including payroll, benefits, and compliance management.
This is by no means an exhaustive list and there are many other great HR software vendors on the market. We’ve spent hundreds of hours researching and testing the best HR software vendors to create our HR Tech Buyer Guide for HR Software that we recommend you consult before making a purchase decision.
When we asked for examples of good HR software solutions, Hunter said: “The best HR solution is the one that fits your needs and your budget. It is easy to be swayed by what is hot at the moment, but it’s important to do your homework. Instead of letting vendors tell you what you need, be informed enough to tell them exactly what you are looking for.”
Pricing Structures of HR Software
Although some financial outlay and adoption is inevitable in integrating an HRMS, the ROI of doing so is significant. By automating repetitive tasks such as tracking employee attendance, calculating payroll, and managing employee benefits, HR software can save businesses a lot of time and money.
A great way to validate your outlay is by quantifying the ROI in dollars. We have an online course in determining the ROI of HR Tech that can help you do that.
The pricing of HR software solutions can vary widely depending on the features and capabilities of the software, as well as the size of the business. Generally, there are three main pricing models for HR software:
This is for a SaaS product model which involves paying a recurring fee, typically on a monthly or annual basis, to use the software. Subscriptions are the most commonly seen pricing model for HR software and can offer a more flexible and cost-effective option for businesses.
Pricing structures for subscription-based software can work on set plans (basic to enterprise level) that provide a certain number of seats (users), access to more features as the price goes up, or caters to a certain company size.
BreezyHR is a good example of a solution that works this way. The vendor offers everything from a free bootstrap plan that is an ideal HR software solution for a small business or startup, to a business plan that would work well for an established company.
A number of vendors offer subscription-based HR software plans for free. These are usually limited in the number of users that have access, or the features included in the plan. Bear in mind, the intention of offering free plans is to market the software, so they will give you just enough functionality for free to make you want to buy the whole tool.
Subscription-Based According to Module Access
Broad spectrum HR software vendors that offer various tools let you pick the models (features) you want access to.
The more functions you add to your HR software’s access, the more you can do with it. Rippling is a good example of this. Their offering includes an HR piece, a finance piece, a learning management system (LMS) and lots more. Companies can choose from a shopping list of tools and features offered by the vendor, and pay accordingly.
This model involves paying for HR tools based on the number of users or transactions. This is less common for HR software, but it can be a good option for businesses with a fluctuating or seasonal workforce.
A One-Time License Fee
This model involves paying a once-off fee to purchase the software outright. This is typically the most expensive option, but it allows businesses to own the software and use it indefinitely.
Inevitably though, the copy you have will become outdated and you’ll purchase an updated version of the tool.
Other Factors that Determine the Cost of HR Software
To some extent, the type of software, cloud-based or on-premise can affect your outlay besides the price of the tool.
Cloud-based software is generally less expensive to set up and maintain, but it does require a strong internet connection.
On-premise software is often more expensive to set up and maintain, but it can offer greater control over data and security. If you don’t have an internal IT department, consider the cost of call-outs for updates and workarounds.
It's also a good idea to consider the long-term costs of the software. With a subscription-based tool, you may be able to afford the mid-range plan, but when your company grows you’ll want to graduate to a high-tier plan that is more expensive.
More financial outlay to consider are the additional costs for training, customization, and onboarding support. If your vendor offers these services with your plan, you can save a lot.
Some Last Thoughts on HR Software
No doubt, the benefits of HR software are tangible and profitable. Overall, it's important to evaluate the features and capabilities of different HR software solutions and compare them to the specific needs of your business and your HR staff before making a purchase decision.
HR software is a powerful tool that can help businesses streamline their HR processes, improve efficiency, and make better decisions about their workforce. With the advancement of technology and the increased demand for remote work, HR software is becoming an essential tool for businesses of all sizes and types.