Learn More About HRMS & HCM Software
What is HRMS & HCM Software?
Human resource management systems (HRMS) and human capital management (HCM) software are HR technology platforms made up of multiple connected modules that manage a range of HR functions. They help companies manage key administrative and strategic tasks, including storing and organizing employee data, recruiting new talent, evaluating employee performance, and managing training programs. These large HR suites combine more tactical administrative functions with longer-term talent management and workforce planning. Combining all these functions into a single system facilitates the seamless transfer of data between modules and provides opportunities for automation to help employees deliver HR services more efficiently.
What Does HRMS Stand For?
HRMS stands for human resource management systems. In addition to HRMS, buyers might also see other acronyms being used to describe HR software suites. Such terms are often used interchangeably to refer to HR suites with multiple modules, and different software companies offering products with similar functionality may use different terms. But there can be differences, like the ones below:
- HRIS stands for human resources information system. These are typically platforms that manage personnel information, policies, and procedures for an organization. They include a Core HR module to collect and store employee data and may also include modules for payroll, benefits, and compliance, among other functions.
- HCM stands for human capital management. These are platforms that generally incorporate functions of an HRIS, but add functionality for talent management and workforce planning. This could include performance management, employee engagement, career planning, time and attendance tracking, forecasting labor needs, and succession planning.
- HRMS or human resource management systems offer modules that can manage the entire employee lifecycle, from recruitment through succession planning.
For the purposes of this guide, HRMS refers to multimodule systems that manage a range of HR functions.
What Types of Human Resource Management & Human Capital Management Systems Exist?
Bundled HR suite
Some HRMS products are sold as a single bundle, meaning the system includes multiple modules for different HR functions and that the modules must be purchased together in a single platform.
Modular HR suite
In this model, an HRMS product includes multiple modules that can be purchased in certain combinations or package levels, or individually, according to which functions the buyer needs.
HRMS & HCM for small and mid-sized businesses
While a comprehensive HR suite may once have been only accessible to large businesses, there are a growing number of HRMS products on the market that cater specifically to small or mid-sized businesses. These offer many of the same benefits of products designed for larger companies but they are designed to serve businesses with numbers of employees in the dozens or hundreds rather than the thousands.
HRMS & HCM for enterprise
An HRMS designed for enterprise-level businesses (those with more than 1,000 employees) will offer similar modules as those designed for smaller businesses. However, enterprise products must be able to scale to service thousands of employees, something not all HRMS products are designed to do. They may offer more customization for payroll and compliance needs that change because the company is in multiple jurisdictions. Enterprise buyers also need tools to support complex organizational structures and advanced analytics to make sense of large volumes of data.
HRMS & HCM for multinational companies
Businesses that span multiple countries need an HRMS that can help the business stay in compliance with different laws and regulations. These platforms can manage recruiting, benefits, payroll, and other areas with custom workflows depending on the needs of the company and the countries they do business in.
What are the Common Features of HRMS & HCM Software?
HCM & HRMS are often large suites, sometimes consisting of more than a dozen modules. The features of these products vary depending on the kinds of modules that are available. Each module is like an individual product on its own, with a distinct feature set.
Each HCM & HRMS will include some combination of these modules:
Core HR: A basic part of any HRMS or HCM software is its central employee information database, also known as core HR. These modules store employee records, including personal information, benefits, job classification, employment history, and compensation information. Platforms commonly include self-service functionality so that employees can view and update their information as needed.
Benefits administration: From defining benefits packages to streamlining benefits enrollments, the benefits management modules in an HCM or HRMS help HR professionals simplify benefits processes for themselves as well as employees. These modules enable HR specialists to customize their company’s benefits offerings, including creating rules for different employee groups or specific users. Employees can then access a self-service portal where they can enroll in benefits at the appropriate time, view their existing elections, and make changes as necessary.
Payroll: Processing payroll with the aid of the payroll module in an HRMS helps HR professionals ensure their calculations are accurate and that payments are efficient. Payroll modules enable administrators to set up payroll processes, automate calculations, and send payments to employees.
Recruiting: Depending on the product, an HCM or HRMS might have basic recruiting functionality or a range of tools to help users source, attract, interview, and ultimately hire candidates for open positions. Most systems will at least have an applicant tracking system for organizing candidate information and managing workflows during the hiring process. Some systems add additional functions like recruitment marketing capabilities, career pages, automated sourcing, and communication features for getting in touch with candidates.
Onboarding: The onboarding module in an HRMS helps HR teams streamline the process of getting new hires ready to be productive in their roles. These modules track tasks that newly hired employees must complete, organize documents, and facilitate communication between the company and the new employee before their first day of work.
Performance management: A key part of the talent management tools in an HCM or HRMS, performance management modules manage processes around evaluating and developing employees. Basic functions include conducting performance reviews, giving employees feedback, and managing goals.
Learning management: Many HCM and HRMS products have a corporate learning management system (LMS) built-in, which can streamline the delivery of online training materials and courses. The core functions in an LMS include making course material available online, offering a content creation tool or integrating with one, and tracking learner progress. An LMS also keeps records of which training employees have completed for compliance purposes. More robust LMS modules may also include advanced course authoring capabilities, an on-demand content library, the ability to manage in-person trainings, and mobile device compatibility.
Workforce management: From managing employee schedules to forecasting labor needs, HCM & HRMS products come with a range of functions for both day-to-day workforce management as well as strategic workforce planning. Time and attendance functions help companies automatically calculate hours for workers, manage employee absences, schedule employee vacations, and manage overtime. Businesses also use these tools to create employee schedules, enable employees to sign up for shifts, and manage schedule conflicts and changes. Analytics tools track various workforce metrics to give managers insight into workforce performance over time. Some platforms also have predictive capabilities so that companies can forecast future labor demands and plan accordingly.
Compensation management: Also within the talent management umbrella, modules for managing employee compensation are often included in an HRMS. Compensation tools help organizations set compensation budgets, view existing compensation levels, review merit increases, and generate reports that provide a view of compensation across the business. Because these modules are integrated with the rest of the HRMS, they facilitate the seamless transfer of updated compensation data to other parts of the system, including payroll and core HR.
HR compliance: A key responsibility of HR departments is maintaining compliance with applicable laws and regulations. Compliance management modules help businesses stay abreast of changing regulations in areas such as work eligibility, healthcare, and data reporting and ensure the business’s policies meet regulatory compliance. These modules manage documentation such as employee handbook acknowledgment forms or Family and Medical Leave Act paperwork. Having all compliance information housed in a single system that integrates with the rest of an organization’s HR data helps organizations stay compliant with their jurisdiction’s regulations.
HR analytics: A major benefit of an HRMS or HCM system is being able to collect and store large amounts of organizational data centralized in a connected system. But in addition to collecting the data, HRMS products help organizations convert it into actionable insights through generating analytical reports or dashboards. These reports can analyze a variety of metrics, such as employee turnover, compensation levels, labor trends, employee demographics, and HR technology usage. Leaders can use this data to make decisions that impact employee retention or business growth.
What are the Benefits of HRMS & HCM Software?
Consolidate HR data: Using an HRMS or HCM platform that includes modules for managing all of a business’ HR functions also means that the data collected by those modules is stored in a single database. One of the benefits of that approach is a reduction in data errors, since the central HRMS system provides a single source of truth, meaning multiple modules can rely on the same data. That means employee data only needs to be entered once and can then be accessed by all of the interconnected modules or software that integrates with the HRMS. Reduced data entry saves HR professionals time and also reduces the potential for human errors. HCM software also allows you to get the data you want on-demand.
Improve HR staff efficiency: Having a single system that contains all or the majority of a company’s HR processes means less switching between apps to accomplish a task. For example, when onboarding a new employee, an HR professional could quickly switch between the recruiting, onboarding, core HR, and benefits administration modules in the HRMS, rather than having to use four different apps for those tasks. Centralizing data also streamlines the work that HR staffers have to do to ensure compliance with applicable laws and regulations since they need to rely on a single system rather than monitoring and gathering information from multiple systems. Another feature of HCM software is the automation of existing HR processes.
Optimize business operations with analytics: Centralizing processes in an HRMS facilitates more advanced analytics reports and dashboards, giving business leaders insights that might not have been available if the data from multiple sources was not integrated into a single system. HRMS products often have substantial numbers of pre-built reports so that businesses can better understand different aspects of their operations, such as staff turnover, adoption of training initiatives, or labor needs. Users can also customize these reports and dashboards to analyze specific metrics that they are interested in. Many HRMS & HCM products also integrate with third-party software, so if a business wants to add a new tool to their software stack, they will be able to share data between systems.
Streamline recruitment: Recruiting new talent to an organization can be a complex endeavor, with recruiters having to manage sourcing candidates, setting up interviews, and conducting evaluations, all while competing with other organizations seeking to fill similar roles. HCM & HRMS centralize multiple recruiting functions so that the process runs smoothly, both for candidates and for recruiting staff.
Improve employee experience: Robust talent management modules have become a more common offering in modern HCM & HRMS products, giving HR managers a new set of tools for providing a superior employee experience. This includes conducting effective performance conversations, delivering meaningful learning experiences, providing fair compensation, and helping employees plan their career trajectories. Along with those features often come analytics reports that help managers identify issues that may lead to employee turnover and take action to prevent employees from leaving.
Who Uses HRMS & HCM Software?
HR departments, personnel, and team members of all size companies from small businesses to enterprise-sized companies use HRMS & HCM software to maintain core and strategic HR functions. Small businesses and startups often have one person or a small HR team dedicated to managing HR processes. Larger companies likely have HR departments that utilize an HRMS to manage processes across the organization, perhaps even in multiple countries. Employees and managers within a company might also use certain aspects of an HRMS, such as its performance management system or learning management system, while others such as the payroll module would be mainly used by the HR team.
What are the Alternatives to Human Resource Management Systems?
In some cases, buyers might find that a certain module in an HRMS or HCM software does not provide the same robust functionality that a standalone version of the same software would offer. In that case, the company might want to purchase the standalone product to get the functions that their organization needs and integrate it with their HRMS.
Smaller businesses may also not need all of the modules in an HRMS and may opt instead for a core HR software with a more limited feature set.
Challenges with Human Resource Management Systems
While HCM & HRMS can benefit HR teams, they also come with their own challenges:
Lack of integrations: Part of the appeal of an HRMS is that the modules that are part of the system integrate with one another automatically. But sometimes, a company wants to add a software product made by a different vendor because the module in the HRMS does not meet the company’s needs. For example, an HRMS might include a basic applicant tracking system in its recruiting functions, but the user may want to buy a separate recruiting automation platform to add more advanced candidate sourcing capabilities. However, the HRMS might lack the ability to integrate seamlessly with that new product. Buyers should consider choosing an HRMS that integrates with a variety of third-party systems so that it shares data effectively with the buyer’s existing tech stack as well as products that they might purchase in the future.
Lack of customizability: Human resources software suites are often marketed as “all-in-one” products that cover any function the HR department needs. But buyers should make sure “all-in-one” doesn’t mean “one size fits all.” The ability to customize an HRMS or HCM system to fit a company’s existing processes is a crucial factor in whether the new HR technology will be widely adopted by the organization and used successfully by its employees. For example, the payroll module in an HRMS should be able to be customized according to that company’s specific payroll practices. Without the ability to customize the modules in an HRMS, users might find themselves looking for additional products to fill those gaps in functionality.
Cost: An on-premises enterprise-level HCM or HRMS is likely too expensive to fit within the budgets of small businesses. To serve smaller customers, many vendors offer their platforms in tiered editions, often in a SaaS model in which buyers pay monthly for cloud-based HR software. This can lower the up-front investment required to license a legacy on-premises system. Still, the price might be a barrier to entry for some businesses.
Implementation: A HRMS is a significant investment for any company, both in money and in time. Implementation of an entirely new HR system takes months, if not years, depending on the size of the organization. Buyers should consider what kind of support the HRMS seller provides to ensure implementation is efficient and effective and whether it makes sense to hire a third-party consulting firm to assist with implementation.
How to Buy Human Resource Management Systems
Requirements Gathering (RFI/RFP) for Human Resource Management Systems
When gathering requirements for an HRMS, buyers should consider the full range of HR processes across the organization and how a new HRMS would ideally help them better manage those processes. This process should involve stakeholders who oversee different HR-related tasks, such as payroll, learning and development, and employee evaluation. Buyers must evaluate which HRMS modules (and features within those modules) are essential and which are nice-to-have. For example, a business might want an HRMS with strong self-service HR capabilities but is planning to retain its existing LMS, so finding an HRMS with robust learning management isn’t as important.
Compare Human Resource Management Systems Products
Create a long list
There are hundreds of HRMS-type products on the market, so the initial stages of comparing HRMS products will require crafting an initial list of solutions that meet the company’s basic feature requirements. This should include must-have modules like payroll and core HR but might also include modules that are important to the business such as talent management modules. At this stage, also consider the company’s reputation and the experience of other buyers who are at similar companies by reading reviews from real users on G2.com.
Create a short list
After a long list has been created, it’s time to look at each product in more detail to determine if it will meet the company’s needs and deserves to be put on their short list. This should include evaluating additional features of each product beyond the ones identified as essential to determine if that additional functionality would benefit the organization. At this stage, buyers should also consider how well each HRMS integrates with third-party software, and consider eliminating products that wouldn’t integrate well with other software the buyer intends to continue using. Buyers can use the compare feature on G2.com to evaluate differences between their shortlisted products.
By the time the company is ready to conduct demos, buyers should have a sense of the features that products on the short list offer and be ready to evaluate how effectively those features meet the organization’s needs. Sellers should walk the buyers through how each HRMS module works and how the modules work together to create a great user experience. Consider how easy the interface is to use and how quickly employees would be able to implement it into their daily workflow. Buyers should also ask about the ability to customize certain modules to meet the specific needs of their business.
Selection of Human Resource Management Systems
Choose a selection team
The selection team should include several stakeholders from the HR team, which will be the biggest user of the system. It might also be prudent to invite feedback from other parts of the organization since employees and managers in other parts of the business will likely use some of the HRMS modules.
After narrowing in on a preferred product, it’s time to negotiate a pricing package. Buyers must consider the pricing model of the software, such as whether the seller charges a one-time licensing fee for the software or a monthly fee based on how many employees will be using the product. HRMS sellers often group modules into different packages, so a business needs to consider which package of functionality will best meet their needs. There might be room to negotiate to add certain functions from a higher package without raising the price of the contract. Multi-year commitments also create room for negotiating discounts.
Because an HRMS touches so many aspects of a company’s operations, the final decision should be reviewed by company leadership, in consultation with the HR team and other relevant stakeholders.
How Much Do HRMS & HCM Systems Cost?
How HRMS and HCM systems are priced varies depending on the seller. Some sellers offer their software in a perpetual license model—pay an up-front fee and earn the rights to install the software, either on a company’s servers or with a hosting provider. Recently, many HRMS vendors have moved to a SaaS model, in which buyers pay a monthly fee that varies depending on how many users or employees the company has and on which HRMS modules the company wants as a part of its package.
Return on Investment (ROI)
When calculating ROI, buyers should consider whether their HRMS or HCM software will contribute to increased productivity or efficiency on their HR team, saving time and money compared to their previous methods of carrying out essential HR processes. Those efficiency improvements will have to be weighed against the up-front and ongoing costs of the HRMS and whether other solutions on the market could accomplish the same goals.
HRMS & HCM Software Trends
As employers have shifted toward more flexible work arrangements for employees, HCM & HRMS sellers have been working to adapt. HR suites are increasingly including features aimed at serving the needs of a more remote workforce, such as increased development of mobile apps, tools for remote onboarding, e-signatures, and functionality for measuring employee engagement. Self-service tools and ticketing systems for employee HR needs also help HR teams meet the needs of all employees, no matter where they work from. Because employees are more likely to be distributed across different jurisdictions, it’s even more important for many buyers that an HRMS can handle complex payroll and compliance requirements that change depending on where each employee is based.
Employee management for freelancers and contractors
Organizations that need talented employees are no longer just looking to hire them full-time—they are also hiring freelance workers. That poses a challenge to some HRMS & HCM products, which are more frequently designed to manage a full-time or part-time workforce. For businesses that employ freelance workers to help out with special projects, buyers should consider whether HRMS modules such as compliance and time tracking are well equipped to help them manage their freelance workforce. If not, the business might want to consider adding a freelancer management system that integrates with the HRMS.
Focus on the employee experience
The competitive market for top talent has made employers reevaluate how they are supporting their employees and in what ways they can improve the employee experience. Employees want to know that they are fairly compensated, that they can learn and grow in their job, and that their feedback is valued. An HRMS can help in these areas with modules for compensation management, learning and development, and employee engagement. As workers have more choices of companies to work for than ever, businesses can set themselves apart as employers by providing a superior experience for employees.