What you need to know about human resource management systems (HRMS)

In the market for a shiny new human resource management system (or HRMS, for short)?

Well then, it looks like you've come to the right place 😎

Today, I'm going to give you a crash course on HRMS software, including what it is, how it works, and whether you should buy into the hype.

Okay, enough preamble. Let's do this thang.

What is a human resource management system?

Plain and simple, human resource management systems give your HR team more flex. To put it another way, they automate the stuff you don't like doing (payroll, anyone?), so you can focus on the stuff that makes your heart sing.

They support a number of key HR functions, like:

• Recruitment and staffing

• Compensation and benefits administration

• Training and development

• Performance management

• Employee relations

• Legal and compliance

• Workforce planning and analytics

• Talent management

• Employee engagement and wellness

• Diversity and inclusion

... And the list goes on.

As you can see, HRMS software covers a lot of ground. And for good reason. Your job ain't no slice. Human resources management systems are your greatest ally in managing the employee lifecycle end to end.

HRMS software versus HRIS: What's the diff?

You've probably come across the term "human resource information system" or "HRIS" for short. Now, you might be wondering how HRMS and HRIS are different...

They're not. Turns out, they're the exact same thing. So, that's settled. They can both be used interchangeably.

The history of HRMS software

For this section, let's be brief. My editor tells me the history of HRMS software is one big snoozefest, and guess what? I agree. But we have to include it for SEO purposes, so... sorry?

But know this: way back in the 1970s, when the likes of Led Zeppelin and Pink Floyd topped the charts, businesses were looking to automate people management. The first sub-function they tackled (naturally) was payroll. Then, they turned to employee record management, the hiring process, benefits administration, time and attendance, compliance reporting, etc.

Back then, HRMS was pretty rudimentary. Now, it's fully loaded with all kinds of fancy features.

Do I actually need a human resource management system?

Short answer: depends.

I know. Super helpful.

But look at it this way. If you're a lean team and you're budget strapped, you might not need all the bells and whistles that come with a human resource management system. Maybe you can bootstrap a solution out of free and/or low-cost tools. And spreadsheets. Lots of spreadsheets.

That said, if you are a big business or in the process of scaling, an HRMS system is likely to help. Like, a lot.

But let's unpack that a bit further.

Chances are, you'd benefit from human resources software if:

1) Your house is on fire (figuratively speaking)

Are you spinning too many plates, wearing too many hats, juggling too many balls, etc.? Feeling burned out and ready to call it quits?

If any of the above sounds familiar, now might be the time to explore a human resources information system. Beyond automating plenty of internal HR processes, these tools also prove employee self-service features, which can result in massive time savings for your HR staff.

2) Your onboarding experience... sucks

Don't sweat it. If you're struggling to create a great onboarding experience, you're not alone. Thankfully, a human resources management system can automate most of the paperwork associated with onboarding, making it a whole lot less overwhelming for you and your new hires.

3) Your employee turnover numbers aren't so great (you think 🧐)

Onboarding and off-boarding more employees than usual? Find yourself advertising openings for the same position multiple times a year? Saying goodbye to too many good people? Hate to say it, but you might have high turnover. Thing is, you wouldn't know it unless you're manually tracking your key performance indicators or have an HRMS to track them for you.

If any of the above sounds familiar, now might be the time to explore a human resources information system. Beyond automating plenty of internal HR processes, these tools also prove employee self-service features, which can result in massive time savings for your HR staff.

Beyond securely storing data and giving you insights, HR software can holistically elevate the employee experience, in turn decreasing turnover.

4) You don't have an employee self-service portal

Employees need one convenient location where they can manage their profile, access critical HR documentation, handbooks, schedule PTO and sick days, etc. HR teams need them just as badly to manage human resources.

5) You haven't formalized performance management—yet

You're going to formalize performance reviews... next quarter. Or maybe you already are, but have no way of documenting or analyzing the results. Whatever the case, without HR software to help you out, performance management can feel too much like a guessing game. An HRMS can help you formalize performance management and scale it across your organization by automating important touch points and feedback, collating documentation, streamlining communications, and providing transparency.

These are just five signs an HRMS could help. There are plenty others. For instance, maybe you're lacking centralized HR data or you find yourself running afoul of certain regulations... There are tons of ways HR software can help with workforce management.

The pros of human resource management systems

By now, it should be pretty clear why you'd want to implement a human resources management system. But in case it's not, let's elaborate.

1) Streamlined employee data management

HRMS consolidates your employee data in one place, leading to improved data accuracy, reduced manual errors, and enhanced compliance. That means less time for you having to circle back to correct costly and all-too-common payroll errors.

2) Enhanced employee self-service

Even though I mentioned this above, I'll do it again for all the folks at the back.

HR management systems let employees access and manage everything from personal information to benefits to time off through convenient and easy-to-use self-service portals. Beyond reducing your workload, they also increase employee satisfaction.

3) Improved recruitment and onboarding processes

HRMS streamlines recruitment processes by automating job posting, applicant tracking, and communication. An HRMS can reduce the time-to-fill vacancies and lead to an increase in new hire productivity.

4) Accurate workforce analytics and insights

HRMS provides data-driven insights into workforce trends, performance, and engagement. This allows for informed decision-making and strategic planning, which can have an outsize impact on talent practices and recruiting efforts.

5) Compliance and data security

HRMS ensures compliance with labor laws, regulations, and data privacy standards by centralizing data and automating compliance tracking.

These benefits highlight the positive impact of implementing a human resources management system on various aspects of workforce management and organizational efficiency. Keep in mind that specific results may vary depending on the organization's size, industry, and the chosen HRMS solution

The cons of human resource management systems

Now that we've taken a look at some of the upsides of HR software, let's explore some of its biggest drawbacks.

1) Implementation challenges and costs

Implementing HR software can be complex and resource-intensive. The initial setup, data migration, and training processes can lead to disruptions and high implementation costs. Much of this is dependent on your existing people, processes and technology, the vendor you select, and the implementation team you have at your disposal. In other words, YMMV.

2) User resistance and training

Employees and HR personnel might resist adopting new HR software due to unfamiliarity with technology or changes in their routines. Extensive training efforts are often required to ensure successful adoption. One way to keep employees engaged is to involve them in the procurement process.

3) Data privacy and security concerns

HR software can certainly improve your data privacy and security. Unfortunately, it can also do the opposite, depending on your data hygiene and information security. An HRMS stores sensitive employee data, which can raise data privacy and security concerns. If not properly secured, the system becomes vulnerable to data breaches and privacy violations.

4) Customization limitations

Many HRMS solutions offer a standardized set of features, which might not align perfectly with an organization's unique processes. Customizing the system can be challenging, time-consuming, and may require ongoing support from IT teams. Then, there's the question of deciding between best-of-breed versus integrated HRMS systems. A best-of-breed system excels in one function, like payroll, while an integrated system offers broad capabilities without depth in any particular area.

5) Dependency on technology and downtime risks

Reliance on an HRMS for essential functions means that any technical glitches or system downtime can disrupt HR processes and overall business operations. This risk can lead to frustration among employees and can impact productivity.

It's important to note that while HRMS can offer significant benefits, HR leaders should carefully consider these potential drawbacks and take steps to mitigate them during the implementation and ongoing usage phases.

Human resource management system features and capabilities

Okay, now that we've looked at the pros and cons of human capital management systems, let's unpack their features and capabilities.

Remember, no two human capital management solutions are the same. Some, like best-of-breed solutions, might offer expertise in one area, like talent management or benefits management. Others, might offer an integrated or all-in-one approach. It always helps to assess the needs of your HR function and broader team before evaluating vendors.

1) Benefits administration

• Feature: Centralized benefits management for employees, including enrollment, changes, and updates.

• Benefit: Streamlined benefits administration reduces administrative workload, minimizes errors, and enhances employee satisfaction by providing easy access to benefits information.

2) Employee records

• Feature: Secure storage and organization of employee data, including personal information, job history, performance records, and more.

• Benefit: Easy access to accurate employee data improves decision-making, ensures compliance with data protection laws, and facilitates effective workforce management.

3) Talent management

• Feature: Recruitment, applicant tracking, performance management, career development, and succession planning tools.

• Benefit: Effective talent management enhances recruitment, boosts employee engagement, and supports career growth, resulting in higher retention and a more skilled workforce.

4) Learning management systems (LMS):

• Feature: Tools for creating, managing, and delivering training and development programs to employees.

• Benefit: LMS improves employee skills, enhances job performance, and fosters a culture of continuous learning, leading to increased productivity and competitiveness.

5) Compliance reporting

• Feature: Automatic tracking and reporting of compliance-related data, such as labor laws, industry regulations, and data privacy standards.

• Benefit: Ensures adherence to legal and regulatory requirements, reduces compliance risks, and helps avoid penalties or legal issues.

6) Predictive analytics

• Feature: Advanced data analysis to predict trends, identify potential issues, and make informed decisions about workforce planning and management.

• Benefit: Data-driven insights enable proactive planning, optimize workforce utilization, and enhance overall organizational performance.

7) Payroll processes

• Feature: Automated payroll processing, including salary calculation, tax deductions, and direct deposit.

• Benefit: Reduces manual errors, ensures accurate and timely payments, and improves overall payroll management efficiency.

8) Workforce planning

• Feature: Tools to analyze and forecast workforce needs, aligning staffing requirements with organizational goals.

• Benefit: Enables effective resource allocation, minimizes labor shortages, and optimizes workforce structure based on real-time data and future projections.

Incorporating these features into an HRMS solution can lead to numerous benefits, including improved efficiency, better decision-making, enhanced employee satisfaction, and overall organizational growth. Keep in mind that the specific features and benefits may vary depending on the HRMS provider and the customization options available.

Finally, when shopping, be sure to assess your existing capabilities. Many of these features and capabilities may not apply to your business. Alternatively, you might already have them.

Your human resource management system and Earned Wage Access

Hopefully, you've gotten a better idea of how an HRMS/HRIS can turbocharge your HR department and deliver more value to your employees. While you're considering a human resources management system, you might want to take a look at Earned Wage Access (EWA).

To sum it up, EWA lets your employees access a percentage of their earned wages whenever they need them. In most cases, it requires zero lift from HR managers. Best part, it's proven to increase employee retention, boost employee engagement and employee performance. Many providers (like us 😉) have straightforward implementations with payroll providers, HCM solutions and PEOs that make activation easy.