The headline of this post was designed to get your attention by making a statement that seems all too obvious: not all HR software is the same. You know that. But do you know what makes software packages different? More often than not, the differences boil down to function. Those differences are not minor. How your HR software functions partially determines how well HR itself functions.
Most in-house HR departments and HR outsourcing partners are familiar with what is known as the human resources information system (HRIS). Then there is the HRIS payroll system, a software package that offers basic HRIS functions combined with payroll administration. But that’s not all. There are two other types of HR software packages:
- Human resource management system (HRMS).
- Human capital management (HCM).
The terms HRIS, HRMS, and HCM are used interchangeably when talking about HR software. But in reality, all three types of systems offer a different level of functionality. That is the point of naming them differently. For any company to get the best out of its software, HR personnel need to know what their needs are and whether their software is meeting those needs.
The HRIS is an entry level human resources package that is deployed for the purposes of collecting, storing, managing, and analyzing HR data. It essentially acts as a database for information relating to employees and their work. An entry level system often includes modules for onboarding, benefits administration, and basic payroll information.
Small companies with limited HR resources are most likely to invest in an HRIS package. The same goes for smaller companies that outsource HR functions on a budget. As entry level software, HRIS platforms are not as heavy on the features as the other two options, but they can still offer a lot of bang for the buck.
If the HRIS package is an entry level package, the HRMS would be an intermediate level solution. A typical HRMS platform includes all the basic functions of an HRIS package with additional features for managing HR tasks. For example, integrated payroll processing and tax reporting is generally on the table.
Some HRMS platforms offer employers the ability to establish individual accounts for each worker, accounts that allow employees to login to view and manage their own information. There also tend to be additional functions for company owners and senior managers.
The next option is the HCM. This is an HR software suite that combines HRIS functions with payroll, tax reporting, talent acquisition and management, workforce planning, and analytics tools. More or less everything the HR department needs to do its job is all in one central environment.
If the HRIS were comparable to a two-door coupe, the HCM would be a fully equipped SUV with all the bells, whistles, and capabilities you could think of. It is also going to have some features that you probably don’t want or need.
Not an Easy Decision
Faced with so many choices for HR software, choosing the right one is not necessarily easy. Consulting with an expert who understands HR software is a pretty good idea. If you are planning to outsource HR functions in the future, it might be wise to get a handle on the different types of software before you start shopping around.