What is An HRMS?
A human resource management system (HRMS) is comprehensive software that integrates core and strategic HR functions into one solution. It typically features an employee self-service portal and a centralized database. It also automates administrative processes, streamlines recruiting and reduces turnover.
The global HRMS market is expected to grow to $30 billion
by 2025
Source: Grand View Research
54% of companies are increasing their spending on HR Technology
Source: HR Technology Market 2019
Small businesses experienced a 28% of companies plan to replace their HRMS solution within the next 12 months
Source: HR Technology Market 2019
POPULAR HRMS TOOLS
Types of HRMS Software
There are two common types of HR software:
Specialized HR software
Specialized HR software focuses on one module or HR function, such as recruiting or payroll. It typically has advanced functionality and many features. It's generally offered by smaller vendors that can focus on incorporating emerging technology into their platforms. Best-of-breed solutions in the HR market are usually specialized software.
Comprehensive HR software
Comprehensive HR software (often referred to as HRMS, HRIS or HCM software) covers many modules and has broad functionality. It's generally provided by large software vendors that have stayed competitive over the years by acquiring and integrating smaller vendors and specialized software. It benefits companies that want a single, integrated solution to cover their HR needs.
Typical HRMS Modules
Although a single HRMS solution probably won't include every HR function, here are the typical modules found in many platforms:
Applicant tracking
An applicant tracking system (ATS) helps recruiters, HR and hiring managers track and manage candidate information and the interview process. Companies can create career portals and post positions to job boards and social networking sites.
Learning Management
A learning management system (LMS) provides training and e-learning programs. Employees can access manuals, classes and even educational games. Managers can assess employee training for completion and compliance purposes.
Payroll
Payroll software helps administrators maintain accurate payroll records. It calculates and tracks employee wages/salaries and deductions. Administrators can also print checks or manage direct deposits.
Talent Management
A talent management system module tracks employee performance using competency guides, goal-setting and reviews. The module can also help HR managers plan for talent succession and talent gaps.
Benefits
The benefits module helps administrators track employee benefits, such as insurance, 401(k), vacation/sick time and FMLA. It also records employee information to help companies comply with insurance, tax audits and other regulations.
Onboarding
The onboarding module helps HR handle paperwork and other tasks related to new hires. Forms can be completed with e-signatures. It can also introduce employees to company policies, team members and upcoming projects.
Reporting and analytics
The reporting and analytics module helps HR and executives use real-time employee and performance data to make business and workforce decisions. The module also includes reporting tools, such as standard and customized reporting templates, to help with compliance.
Time and attendance
Time and attendance, or time clock, software tracks employee attendance and hours. Employees can clock in and out using timecards, passcodes, physical devices, mobile devices or biometric devices.
Common HRMS Features
HRMS solutions commonly have the following features:
Self-service portals
Self-service portals allow employees to track and update their info without having to contact HR, including addresses, emergency contacts, direct deposit accounts, W-4s, vacation/sick time, insurance, 401(k)s and performance reviews. Employees can also request time off.
Mobile access
Mobile access is becoming common with HRMS solutions. Depending on the vendor, the solution may be available as an app or accessible through a web browser on tablets and smartphones. Employees can use mobile functionality to access the self-service portal and clock in and out.
Employee database
HRMS systems typically store info in a centralized employee database with uniform records that can be accessed across the organization, no matter the location. Administrators can limit access to sensitive info by user or department.
Social collaboration
Social collaboration is a newer feature in HRMS solutions. It includes job posting to social networking sites, training programs via networking media and social intranets.
Document management
Some vendors offer document management functionality, which stores employee handbooks, company memos and other documents.
HRIS vs. HCM vs. HRMS: What's the Difference?
HRIS, HCM and HRMS are acronyms used for comprehensive HR software. It's easy to get them confused because these terms are used inconsistently and interchangeably.
Although you should always check which individual modules are included in a comprehensive HR software, here's some guidance on these ambiguous terms might be used:
| HRIS | HRMS | HCM | |
|---|---|---|---|
| Applicant tracking |  | | |
| Self-Service portal | | | |
| Central database | | | |
| Analytics | | | |
| Training | | | |
| Compensation & benefits | | | |
| Onboarding | | | |
| Talent Management | | | |
| Payroll | | ||
| Time & attendance | | ||
| Performance tracking | |
Top Benefits of HRMS
Using an HRMS system has the following benefits
Streamline hiring
HRMS software has applicant tracking functionality that streamlines the hiring process using resume analytics, progress dashboards and communication tools. Companies can create a branded, professional career portal on their website. An HRMS solution can transfer applicant information to the employee database after they're hired.
Onboard more efficiently
It's important to keep employees engaged from the start. With an HRMS solution, they can sign administrative documents electronically, catch up on company news and business goals, and join virtual social networks of colleagues. On their first day, they'll have more time to tour the facility, set up their equipment and hit the ground running.
Increase employee engagement
HRMS solutions boost engagement through continuing education. Hiring speakers or holding physical classes can be expensive. HRMS offers a cost-effective alternative with e-learning modules to help employees improve their skills and performance at their own pace. This type of professional development not only promotes employee engagement, but also prepares future leaders within the company who might otherwise leave.
Reduce data entry and HR questions
Employees often have specific questions about their salaries, benefits and time off. Answering them, however, can take up a huge chunk of your HR manager's day. With a self-service portal, employees can view and update their information any time, anywhere. This reduces data entry and administrative tasks for the HR department.
Automate payroll and compliance processes
An HRMS automates payroll processes and compliance records, reducing costly errors. It calculates wages and salaries, deducts the correct amount of taxes and benefits, prints checks and executes direct deposits. It can also schedule reminders when compliance forms are due, require employees to digitally accept communications and deliver compliance training.
Improve employee feedback and performance
HRMS solutions empower employees to take their performance into their own hands. With the performance management module, employees can monitor their progress, make improvements between scheduled reviews and develop their future goals. Managers can give more relevant feedback, recognize achievements, and plan future assignments and talent succession.
Understand employee turnover
HRMS solutions can communicate with employees even after they leave a company. Because they've had time to understand their reasons for leaving and now have the space to be direct, their insight can be valuable. This information can be combined with other metrics collected by the software, such as demographics, performance, promotion wait time and compensation ratio, to create a clearer picture of employee turnover.
Support data-driven strategies
An HRMS not only records information, but it can also generate reports and analyze real-time key performance indicators, such as time-in-position or time-to-achieve goals. This data can help you develop evidence-based strategies that are more likely to get buy-in from senior management. Some solutions even offer predictive analytics that can give you more certainty in your workforce decisions and insights for future recruitment and retention strategies.
Types of HRMS DEPLOYMENT
HRMS is deployed in three different ways:
Cloud
Software and data are hosted on a remote third-party server. Under a software-as-a-service (SaaS) model, companies pay a subscription fee to access the software through the internet. Vendors are responsible for software maintenance and updates. The data server provider manages the hardware and ensures data security and backup. Because of their low up-front costs, more intuitive interfaces and best-of-breed capabilities, cloud HRMS solutions are often deployed by small and medium-sized businesses.
On-Premise
The software is installed and customized on the company's own hardware and servers. The company typically pays a one-time license fee to purchase the software and is responsible for the maintenance, security and backup of the software and data.
Many large, multinational companies already use on-premise HRMS solutions that they purchased and installed years ago before cloud deployments became more common.
Hosted
Hosted deployment is similar to on-premise. The main difference is that the company pays a monthly fee to keep data servers at a third-party data center. The data center is responsible for staffing, bandwidth and support of the servers. Hosted deployments are increasingly rare.
Types of HRMS Buyers
HRMS solutions are available for many different company sizes and industries. Solutions tend to be targeted to:
Large and enterprise-level companies
Larger buyers have many business divisions and may operate in multiple countries, making HR compliance a major issue. They also have many employees and need to manage scheduling and payroll on a larger scale. These companies benefit significantly from having an employee self-service portal and may need an applicant tracking system to coordinate between internal and external recruiters.
Small and medium-sized businesses (SMBs)
SMBs typically have few internal HR employees. An HRMS can help these companies automate payroll and compliance, create a job listing website and maintain an accurate database of employee records. They're more likely to choose a cloud HRMS deployment because of the low up-front costs and scalability.
Best-of-breed buyers
Best-of-breed buyers are relatively common, as the average large company now uses over 9 HR software solutions. Although these buyers may have an HRMS for its self-service functionality and centralized database, they'll also purchase and integrate best-of-breed solutions for specific HR functions, such as applicant tracking or payroll. Because they value productivity over expense, they often seek the most advanced software in each market.
HRMS Pricing
HRMS solutions vary widely in not only price, but how they charge customers. We'll review the common pricing plans to help you better understand your options.
Per employee, per month
In this model, you pay a monthly fee for each employee at your company, whether they use the software or not. There may be additional fees for implementation, but overall expenses are based on how many employees you currently have and intend on hiring in the future. Per employee, per month prices usually range from $1 to $10.
Per user, per month
Your company only pays a monthly fee for the administrative users of the software, which typically include HR staff and senior executives. Be aware that if the HRMS solution has an employee self-service portal, all employees with access may be classified as “users.” Per user, per month prices generally range from $5 to $20.
One-time payment
This option is more common for on-premise HRMS deployments. A company pays a large initial fee to purchase and install the software. There are often additional fees for support, maintenance and upgrades to the software. One-time payments typically range from $10,000 to $100,000.
How to Choose an HRMS
Because HRMS solutions vary widely with their features and pricing, it's important to carefully research your options before committing to one. Here are the steps you should take before choosing an HRMS solution:
Identify your company's needs
First, get input from users, which include HR staff, senior management, IT, payroll and employees.
What are the problems with the current HR system? What are the opportunities to streamline routine processes, reduce administrative errors and improve HR metrics like retention and cost-per-hire?
Consider your company's specific operations. Do you have employees in multiple locations or countries? Do you need to schedule shifts and have employees clock in and out of work? Do you hire using external recruiters or your own team?
Create a shortlist
Research vendors that best fit your needs. In addition to current requirements, you should also consider implementation and scalability.
Can the HRMS solution be easily integrated with existing systems, and how much support does the vendor offer with deploying the software?
If you plan to grow the company, can the solution handle more users and employees? Does that affect the pricing structure, and will it require upgrades?
Once you've answered these questions, you can put together a shortlist of vendors whose offerings match your needs.
Contact vendors
Begin contacting vendors on your shortlist. You'll want to request a demo of the solution to see how it works and if it fits into your company's operations. You might also consider testing the software through a free trial, if the vendor offers it.
It's important to fully understand the vendor's pricing structure, which is based on features, number of users and level of support. Some vendors charge extra for specific modules. Others only offer implementation, support and training at an additional cost. Keep this in mind when asking for a price quote.
Conduct due diligence
Once you've completed a demo of the HRMS solution and have a better understanding of price and services, you'll want to get references from a vendor's existing or previous clients.
The vendor will give you the names of clients with good experiences, but ask for companies that have similar needs to yours (e.g., businesses with under 50 employees or companies with employees in multiple locations). When contacting the reference, ask if there have been any issues with the vendor or the solution.
Challenges of HRMS Software
What are the main challenges HRMS software?
Figuring out goals for using the software
Businesses may not be sure what goals they have in mind for using HRMS. Do they want to focus on hiring and retaining talent? Or do they want to track an employee's lifecycle within the company? What do they expect to get out of using the software? It's important for businesses to carefully list their goals for an HRMS prior to selecting a solution.
Resistance from IT, top executives and managers
Getting buy-in not just from users, but IT and executives is important. For example, IT may have concerns about data security if a vendor hosts a solution in the cloud. Or they may not want the responsibility of hosting and maintaining the software on company servers. Also, there may be resistance from managers who are used to handling performance reviews or time-off requests a certain way.
Limited use cases
Some organizations may already have a dedicated payroll solution that works for them, but need an HRMS for talent management. Or they may only require payroll, benefits management, and time & attendance modules, but not anything else. It may be more beneficial for them to purchase dedicated solutions.
Finding a solution with all desired modules
Some HRMS solutions may not offer certain modules. For instance, one solution may include many functions except for learning management and recruiting management. Finding a solution with the exact modules needed can take time.
Issues for companies with locations in multiple countries
Some solutions may not be compliant with the laws for every country, which means companies may need to consider a country-specific solution.
Issues for small businesses
Most HRMS solutions are built for medium-sized businesses or larger. This means the software may have modules and functionality that are unnecessary for small businesses. HRMS solutions may also have corresponding costly price tags, which can be too expensive for companies on tighter budgets. Another possible issue is that HRMS solutions are often designed for larger hierarchical organizations, which may not be easy to use for companies with smaller, less complicated structures.
HRMS Market Trends
Better Buys has asked industry experts for their thoughts on HRMS trends in 2019. Here are several market trends based on their insights:
People analytics leverages artificial intelligence and data-driven strategies
Artificial intelligence (AI) and machine learning will let business leaders view and analyze many types of employee data through easy-to-consume dashboards and reports. These new technologies will improve people analytics and create workforce insights that are smarter and more agile.
HRMS solutions can also monitor employees through continuous performance reviews and deliver real-time recommendations for informed decision-making throughout the employee life cycle. Some solutions can even predict if key employees are likely to leave.
Mobile access is becoming a necessity
Mobile devices provide greater accessibility to employee info for HR managers on-the-go. Features like communication tools and alerts can improve business decisions in the field.
Mobile access is part of a larger trend of consumerization of HRMS technology, which means the software is becoming more intuitive and user-friendly.
Network-based teams are the new normal
HRMS solutions are built to manage company business structures and employee data. But in the past few years, companies have shifted to employees working in multiples teams on cross-functional projects. Teams may include internal and external contract workers.
HRMS solutions will need to adapt to network-based teams. Payroll and benefits modules will need to account for contract and contingent workers.
