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HR Glossary  /  HR Software
HR Software7 min read
Table of Contents:

What is HR Software? Overview, Benefits & How to Choose the Best One

Human resources software is a digital solution that simplifies all HR tasks, from onboarding new hires to managing payroll and benefits. Basically, it’s talent management, HR, and payroll software. This guide will present a complete HR software glossary, explaining what it is, how it benefits businesses of all sizes, and how to choose the ideal HR system for your company.

HR software is a digital platform designed to simplify and automate the many tasks that fall under the HR umbrella. In the past, HR teams relied on paper-based systems and siloed databases, making it a challenge to manage employee information, track processes, and stay in compliance. HR software eliminates these headaches by offering a centralized, secure system for managing the entire employee lifecycle, from recruitment to retirement—all of which can be done from a mobile app in some cases.

These are some key features of most HR systems:

  • Centralized data storage
  • Advanced reporting
  • Integration capabilities
  • Customizations
  • Employee self-service
  • Different tracking functions

What Is Cloud HR Software?

Traditionally, HR software could be installed and run on your company's own servers (on-premise). However, cloud-based HR software has become increasingly popular. Cloud HR software is a web-based application, meaning it's hosted on secure servers by a service provider and accessed through an internet browser. It’s online HR software offered as Software as a Service, or SaaS. The best HR software is now typically offered as SaaS.

You already know what HR software exactly is. But the question that now arises is, “Why is HR software so important for companies?” We’ll answer it in this section by taking an in-depth look into HR software key benefits:

Increased Efficiency and Reduced Costs

As HR solutions are also payroll software and automate repetitive tasks like onboarding and leave requests, businesses can significantly cut down costs by minimizing errors that typically come from communicating decisions employees prefer keeping private—such as requesting paid time off for some family leave.

Simplified Data Management and Organization

An HR software solution provides a centralized platform for storing and managing all employee data, from resumes and payroll information to performance reviews and training records —which eliminates the need for paper-based filing systems and makes sure all data is readily accessible and up-to-date.

Improved Employee Experience and Performance

A study found that giving employees more independence makes them feel more engaged, and take greater responsibility. HR tools do exactly this by allowing employees to manage their own data and track their progress with self-service portals. It also allows new hires to access company policies and information easily on their own, or employees to request time off without having to confront their managers.

Informed Decision-Making With Data Analytics

HR systems software provides advanced reporting tools that give you access to key data about your workforce. You can track key metrics like employee turnover, engagement, and performance to make data-driven recruitment, training, and talent development decisions.

Simplified Compliance Management

HR software helps maintain compliance with ever-changing employment regulations by offering built-in features and automated workflows. This reduces the risk of fines and penalties associated with non-compliance.

Advanced Security and Data Protection

HR software offers robust security measures to keep sensitive employee data safe. These measures include features like access controls, encryption, and audit trails to preserve data privacy and prevent unauthorized access.

Scalability and Flexibility

Cloud-based HR software solutions are usually highly scalable, allowing you to add or remove users as your business grows easily. Since they have a user-friendly layout that's multiplatform, employees can use the features from their desktop computers or from a mobile app. In both cases, they simply have to log in.

The world of HR software can seem complex at first glance. Numerous HR solutions are available, each with its strengths and functionalities. Here, we'll break down the most common types of HR software to help you understand how they can benefit your organization.

Human Resource Information System (HRIS)

HRIS is the foundation for HR software. It acts as a centralized database for all employee information —from basic details like contact information and salary history to performance reviews and training records— keeping everything organized and readily accessible. Small start-ups without a consolidated HR team, whose CEOs need to take care of these tedious administrative duties, can greatly benefit from this system.

  • Focus: Core HR data management and simplifying administrative tasks.
  • Key features: Centralized storage for employee data (demographics, contact details), payroll processing, benefits administration, and basic reporting.
  • Scalability: Ideal for small to medium-sized businesses needing to consolidate employee data and automate essential HR processes.

Human Capital Management (HCM)

HCM software builds upon the foundation of HRIS by taking a more holistic approach to talent management. It covers the entire employee lifecycle, from attracting and onboarding to developing their skills and maximizing their contributions to the organization. HCM systems typically include all the features of an HRIS, plus additional functionalities like recruitment management and time off tracking tools.

  • Focus: Comprehensive HR management focusing on process automation and employee self-service.
  • Key features: All functionalities of HRIS, PLUS recruitment management, performance management tools, time and attendance tracking, and employee self-service portals for tasks and updates.
  • Scalability: Ideal for organizations of all sizes seeking to automate workflows across the entire employee lifecycle.

Human Resource Management System (HRMS)

HRMS is the most comprehensive type of human resources software, offering all the features of HRIS and HCM, plus a strong emphasis on the administrative and strategic aspects of HR.

  • Focus: Strategic employee management and workforce optimization—employee development and performance.
  • Key Features: All functionalities of HCM, PLUS talent acquisition tools (ATS), advanced analytics for workforce planning, functionalities for managing complex global workforces, and robust talent development features.
  • Scalability: Ideal for large enterprises with a global workforce.

Applicant Tracking System (ATS)

An Applicant Tracking System (ATS) automates the recruitment process by managing all aspects, such as job posting and hiring. The ATS acronym is known even by candidates because it's the dreaded tool that sifts and screens resumes around keywords. But for HR representatives, it does much more, since it allows them to focus on sourcing the qualified, adequate talent.

  • Focus: Optimized recruitment and candidate management.
  • Key features: Job posting across multiple platforms, applicant screening tools, interview scheduling, candidate communication tools, reporting on recruitment metrics.
  • Scalability: Ideal for organizations of all sizes looking to improve their recruitment efficiency and candidate experience.

Selecting the right HR tools can feel like searching for a needle in a haystack. With numerous options boasting an array of features, it's crucial to approach your decision strategically. Here's a roadmap to guide you through the selection process and help you choose the perfect fit for your organization:

  1. Identify Your Needs

    • Current HR challenges: Start by evaluating your current HR processes. What are your biggest pain points? Are you struggling with manual data entry, inefficient recruitment, or a lack of employee engagement?
    • Company size and growth: Consider your organization's size and future growth plans. A small startup will clearly have different needs than a large enterprise with a global workforce. Choose a scalable solution that can accommodate your projected growth.

  2. Prioritize Key Features

    • Core HR functions: Payroll, benefits administration, and employee data management are essential features for most organizations. Make sure that the software you choose offers these core functionalities.
    • Additional functionalities: Depending on your specific needs, consider features like an ATS for easier recruitment or performance management tools for effective feedback and goal setting.

  3. Evaluate Budget and Integration

    • HR software pricing: Set your budget upfront and choose a system that offers your needed functionalities within your price range.
    • Integration capabilities: If you already utilize other business software systems, like accounting or CRM software, consider how well the HR software integrates with these existing solutions.

  4. Usability and Security

    • User-friendliness: Check the software is user-friendly for both HR professionals and employees —as a complex and unintuitive system will lead to frustration and hinder adoption.
    • Security features: Choose software with advanced security measures like data encryption, access controls, and regular backups to safeguard confidential information.

Research and Comparison

  • Read Customer Reviews: Gain a glimpse into the user experience by reading customer reviews and ratings of different HR software options.
  • Free trials and demos: Take advantage of free trial periods and software demos vendors offer. This allows you to experience the software firsthand and assess if it meets your needs and expectations.

Additional Considerations

  • Cloud-Based vs. On-Premise: Cloud-based solutions offer flexibility and accessibility, while on-premise solutions may provide more control over data security. It's also a matter of setup: Not every company has an on-premises framework server to host an HR solution.

Can HR software help in compliance with employment laws?

Yes, HR software can help you comply with employment laws by automating tasks like tracking filing deadlines and sending out alerts for potential compliance issues. Also, some HR solutions are GDPR-compliant, which means they'll help an orderly transition into GDPR-regulated markets when the time comes.

What is the typical cost of implementing HR software in small- to medium-sized businesses?

HR software costs vary depending on features, number of users, and deployment model. Some offers range from $10 to $100 per user per month for small- to medium-sized businesses. Some vendors, like TalentHR, allow users to start for free.

How do you evaluate the ROI of HR software?

The ROI of HR software can be measured by factors like reduced administrative costs, improved employee engagement, and better decision-making through data analytics. In a way, an HR software allows any company representative, from the CFO to an HR intern, to measure its ROI without resorting to external data points or complicated calculations. This is because HR solutions offer metrics that help establish benchmarks and evaluate progress in employee performance, for example. And if employees are performing better thanks to a better onboarding experience, which was the positive effect of using HR tools, then there's a clear ROI approach.

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