The Definitive Guide to

Human Resource Management SystemManaging a company’s human capital is no easy task.

From recruiting to training and development, HR has a growing plate of responsibilities that directly impact a company’s bottom line.

Most companies leverage multiple software solutions to help with these tasks, however this can be inefficient and costly. This is where Human Resource Management Systems (HRMS) come in.

HRMS solutions help companies save time, cut costs, and better leverage their most important asset – their people. Learn more with our Definitive Guide.

What is HRMS?

Human Resource Management Systems (HRMS) integrate all of the core and strategic HR functions into one solution. Common HRMS modules include:

  • Payroll
  • Time and attendance
  • Benefits
  • Recruiting and onboarding
  • Performance

HRMS history dates back to the late 1970s when the SAP R/2 was launched. SAP R/2 combined HR functionality with an Enterprise Resource Planning (ERP) database.  However, a dedicated HRMS (one without an integrated ERP) debuted in 1987 from PeopleSoft. Over the years, HRMS has also grown from being an on-premise solution to one being offered on the web.

HRMS is deployed in three different ways:

  • On-premise
  • Hosted
  • In the cloud (Software-as-a-Service)

Buyers can opt to purchase the software upfront and maintain it themselves or have the vendor host and maintain the solution via a subscription plan.

Did You Know? HRMS is also known as workforce management software.

Who Uses HRMS?

HRMS is available for many different company sizes and industries. Solutions tend to be targeted to:

  • Small businesses (less than 50 employees)
  • Medium-sized companies (50 to 200 employees)
  • Enterprises (200+ employees, multiple locations)
Did You Know? Some vendors sell HRMS solutions strictly dedicated to small businesses.

HRMS isn’t just used by the HR department, either.

Many HRMS solutions include self-service functionality so employees can manage and update their own personnel data without having to send it to HR. Managers can also use HRMS to keep track of employees’  attendance and performance. And companies with a dedicated payroll/accounting department use HRMS to perform payroll/benefit functions.

Additionally, recruiters and hiring managers use HRMS to manage applicant information, interviews and onboarding processes. If the solution is hosted by the business, IT is typically involved in any updates and maintenance. And finally, top executives can use analytical data in HRMS to get insight about new projects or business ventures and the labor needed to maintain them.

Pro-Tip: It’s important to get buy-in not just from the top executives but from users who will be accessing the software frequently. One way to get buy-in is via a solution demo.

Differences Between HRMS & HRIS?

Not only is HRMS commonly referred to as workforce management solutions, but it also can go by another name: Human Resource Information Systems (HRIS). HRIS, by definition, is a system that manages several HR components in one centralized view.

Is there a big difference between HRIS and HRMS?

We’ve interviewed three HR industry experts – and they’ve indicated the terms are interchangeable. They’re mainly used as marketing buzzwords to help improve search engine optimization.

However, Mike Maiorino, founder of HRMS Solutions, gave insight into how HRIS and HRMS can be different. HRIS includes common core HR processes, such as benefits, recruiting, training, workflow, compensation, reporting and self-service. HRMS has all of those components, but adds payroll, time and attendance, onboarding, analytics, performance and succession management.

We also want to note that some vendors use the term Human Capital Management (HCM) in their product names (e.g. Vibe HCM or Epicor HCM).

Did You Know? HRMS can be synonymous with Talent Management Software, however Talent Management Solutions tend to focus more on hiring and retaining talent and wouldn’t include functions such as payroll or benefits administration.

The best way to choose between HRMS and HRIS is to determine what modules and features your company needs and evaluate the available options from each vendor.

HRMS Modules

Here are some of the common modules included in an HRMS. Note that depending on the vendor, some modules are standard, but others may be optional.

Employee Database: Most HRMS systems include a centralized employee database, including names, addresses, roles, salary, date of hire and more. This type of database is beneficial to all businesses, but it’s especially helpful for larger organizations with multiple locations.

Payroll Management: The payroll module is standard in most HRMS solutions. It helps administrators maintain payroll records, and it records and tracks employee wages/salaries, deductions, direct deposit information and more. Administrators can also print off payroll stubs and send payroll stubs electronically to employees.

Time and Attendance/Scheduling: This module helps managers track employee attendance to minimize labor loss. They can also track hours, especially overtime hours. Some of the module’s features include time sheets, time clocks and biometric logon/log-off. Certain solutions can even allow employees to clock in and out via the Web or mobile devices.

Benefits Administration: The benefits module helps administrators track employee benefits, such as insurance, 401(k)s, vacation/sick time, FMLA and more. It also records employee information such as date of hire, marital status, number of dependents, and number of vacation/sick hours in order to comply with insurance, tax audits, and other regulations.

Recruiting/Onboarding: This module helps recruiters, HR and hiring managers track and manage candidate information (such as resumes and applications), as well as the interview process. Applicant information can be shared with everyone involved in the interviewing process. This module can include Applicant Tracking Systems (ATS) that allow the candidate to fill out an application online. Recruiters can also use this module to post job descriptions to job boards and social networking sites. Another feature of the recruiting module is onboarding. It helps HR  handle new-hire paperwork and other tasks prior to the employee’s first day on the job or during the first week. Note that in some HRMS solutions, the recruiting, onboarding and performance modules are incorporated into a Talent Management module.

Performance Management: Depending on the vendor, this module can stand alone or fall under the Talent Management category. The performance module allows companies to track employee performance online, from guides on effective performance reviews to the ability to have employees access their evaluations online. Performance appraisals can also include 360-degree reviews, where a manager can solicit input from an employee’s performance from other colleagues (such as peers or other managers), and this can be done straight from the module.

Training/Learning Management Systems: A Learning Management System (LMS) is a module that provides training and e-learning programs for employees. Managers and employees can access manuals, tests, scores and other content via a secure Web browser.

Reporting/Analytics: The analytics module helps HR and executives use real-time HR data (such as employee information and performance) to make better business and workforce planning decisions. For example, one employee in a division may go on maternity leave. The division manager and HR can rely on analytical data to determine whether to cross-train a current employee or hire a temp for her role. The module also includes reporting tools, such as standard and customized reporting templates.

Other modules include salary and compensation planning and succession management. Depending on the vendor, they can be either stand-alone modules or incorporated into a performance or Talent Management module.

Pro-Tip: Not all HRMS vendors offer all of the modules. It is best for companies to have a list of required features when researching options.

HRMS Features

HRMS solutions also include some common features, such as:

Self Service: This module allows employees to update their information without having to contact HR. Examples include address changes, direct deposit updates, W4 changes and adding emergency contacts. Employees can also track their vacation/sick time, insurance information, 401(k)s and performance reviews, as well as request time off.

Mobile Access: To recognize the growing mobile workforce, more vendors are including mobile functionality in their HRMS solutions. Depending on the vendor, the solution is either available as an app or via a Web browser on tablets and smartphones. Employees can use the mobile function to access their paychecks, update their information, submit vacation requests or manage other employee benefits. Also, employees can clock in and out via mobile.

Social collaboration: This feature is steadily growing in the HRMS space as HR and employees embrace using social media both on and off the job. Example of social collaboration includes linking job posts to social networking sites (i.e. LinkedIn or Facebook) or offering training programs via networking media. Some companies could even have their own social intranet where company content is posted or where employees can post statuses, inviting comments or likes.

Document management: Some vendors (such as CEIPAL or Ceridian Dayforce) offer document management functionality within the HRMS solution. This is beneficial for users, especially in the cases of employee handbooks, company memos or other documents that are usually paper-based documents that can be saved within the software. Many vendors offer Document Management Systems (DMS) as a stand-alone solution as well.

Did You Know? 78% of companies have internal programs to reduce paper usage, according to a Xerox study

HRMS Benefits

Using an HRMS comes with several benefits, including:

Attracting and retaining top talent – As Talent Management is a main part of HR, many HRMS include recruiting, onboarding and performance modules. There are some dedicated Talent Management and recruiting solutions that may not include all the features in one system (i.e. an Applicant Tracking Solution wouldn’t have onboarding features). Therefore, companies focused on not just hiring the best employees for the job, but retaining top talent will benefit from an HRMS.

Streamlining operations – HR can focus on more critical tasks, as employees and managers can update information at their own convenience right from the software. Information is also more centralized and accessible – users can access specific features more quickly. And finally, there is less reliance on spreadsheets or paper usage, especially for smaller organizations.

Improving adherence to federal and state labor laws and other legal/regulatory compliance – There are many labor laws, tax codes and other regulations that HR (and companies) need to keep track of and comply. HRMS helps with keeping track of new and changing regulations (i.e. ACA) and the solution is typically updated to reflect them.

Reducing expense of purchasing and maintaining separate software – Having to purchase and maintain more than one software tend to be costly. Having an all-in-one HRMS reduce that expense, which can be allocated for something else in the business.

Challenges of HRMS

While using an HRMS is beneficial, the software comes with some challenges, including:

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?

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 of data security if a vendor hosts a solution. Or they may not want the responsibility of hosting and maintaining the software on company servers. Also, there may be resistance from managers. For instance, if they handle performance reviews or time-off requests a certain way and HRMS changes that.

Only needing to use one or two modules at most – Some organizations may already have a dedicated payroll solution that works for them but needs an HRMS for talent management. Or they may only require payroll, benefits management and time & attendance, 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, TreenoHR includes many HR functions, but they don’t offer learning management or recruiting management.

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.

Pro-Tip: Before researching HRMS vendors, companies should list what goals they want the software to meet and what modules they are looking for.

HRMS Buyer’s Guide

Before purchasing any HRMS solution, it’s important to figure out what modules and features you’ll need. It’s a good idea to have a checklist with your requirements ready before looking at vendors.

Be sure to consider these seven key factors before making a purchasing decision:

1. Scalability – Do you have employees in multiple locations or are planning on expanding your business? If so, you’ll need an HRMS solution that can scale up or down to fit those needs.

2. Ability to integrate with existing systems – It’s important to find out whether an HRMS solution can easily integrate with any existing hardware, server or software, especially if it’s an on-premise solution. You’ll also want to make sure that data from any existing system (such as payroll information) can be automatically transferred to the new solution.

3. Input from users – All affected parties need to buy-in to the new HRMS solution, including top executives, IT, HR and payroll. One way to do that is get them involved in choosing the system – for example, have them participate in software demonstrations.

Did You Know? Successful implementation projects is due to communication – Key Interval Research revealed that 28% of the time miscommunication causes implementation failures.

4. Demo of the solution – Getting a demonstration of the solution can help you see how it works – and how it can fit into your company’s operations. As another way to test the software, some vendors offer a free trial before purchase (typically for 30 days).

5. Training and support during and after solution implementation – Know all the details about training options during HRMS implementation. Can the solution be easily used by non-technical employees? If not, does the vendor offer additional training? Choose a vendor that can provide training at your convenience, if possible – for example, having a rep conduct training sessions for multiple users onsite. Also, make sure the vendor provides support after the software is deployed, such as 24/7 tech or customer service support on the phone or Internet.

6. Cost – HRMS is offered at many different price points. When comparing prices from different vendors, be sure to take the desired features and various deployment methods into account. Web-based solutions are often cheaper than on-premise software. It’s also important to know what’s included in the base price for the solution. Some vendors charge extra for certain modules. Others only offer implementation, support and training at an additional cost. Keep this in mind when asking for a price quote.

7. Input from the vendor’s current or past customers – It’s important 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. You’ll want to get input on not just the positive experiences, but any issues as well.

Pro-Tip: Along with investigating support and training options, be sure to ask about any security procedures (e.g., how the information is kept secure), especially if the vendor hosts the solution.

Top HRMS Solutions

Finding and selecting a Human Resource Management System is easier said than done.

To narrow down your search, we’ve listed and profiled some of the most popular HRMS solutions:

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