To choose the best HR software, it’s important to first understand the different types of HR software and essential features to look out for. Then, consider the size of your company and whether the HR software integrates into your tech stack.
Types of HR Software
There are three main types of HR software:
- Human resource information systems (HRIS): At its core, an HRIS is a database that stores employee information and runs automated reports. It’s for HR teams and employees to manage and update employee information and typically, but not always, includes basic HR functions, such as payroll, benefits administration and time-tracking features.
- Human resource management systems (HRMS): An HRMS layers additional functionality on top of the HRIS, drawing from a wider set of data to support not only employees and HR staff but also managers. To that end, an HRMS typically includes recruiting features, an applicant tracking system as well as performance management and employee engagement tools.
- Human capital management (HCM) software: An HCM solution stores the most data of the three types and thus offers even more sophisticated functionality to support HR at a strategic level, such as predictive analytics and workforce planning, to ensure that people management aligns with overarching business goals. An HCM system often syncs with other parts of a business through a customer relationship management (CRM) or enterprise resource planning (ERP) platform.
These terms are often mistakenly used interchangeably, and some providers refer to their product using a label that doesn’t match the breadth or depth of its features. So, it’s crucial to look past the provider’s marketing language and check out the extent of its product’s functionality to assess what type of HR software it is.
Essential HR Software Features
Core features of HR software include payroll, benefits administration, automatic alerts and reminders, e-signatures and mobile access.
- Payroll: Payroll software helps HR staff or payroll administrators run payroll more efficiently and error-free through automatic payroll runs, compliance checks, tax filing and other helpful features. Payroll is essential because paying your employees correctly and on time should be a key priority.
- Benefits administration: For employers offering benefits to their employees, benefits administration tools help them select the right benefits package. They also help companies administer benefits in a manner that’s compliant with federal regulations such as the Affordable Care Act (ACA), the Consolidated Omnibus Budget Reconciliation Act (COBRA) and Employee Retirement Income Security Act (ERISA).
- Automatic alerts and reminders: HR teams typically juggle several different tasks, so HR software’s automatic alerts remind them to complete tasks, such as running payroll and collecting new hire benefits elections, in a timely and compliant way.
- E-signatures: The ability to electronically send, sign and submit documents streamlines and accelerates workflows such as the onboarding process, as opposed to printing out, scanning and sending emails back and forth.
- Mobile access: Mobile app availability is an essential feature, especially for primarily remote workforces. Mobile app versions of HR software enable on-the-go access to functions your employees might need to check on anywhere at any time, such as a candidate messaging tool for recruiters to stay connected with job candidates.
Company Size Considerations
An HRIS, HRMS and HCM broadly serve the needs of small, midsized and enterprise businesses, respectively. However, to arrive at the HR software solution that’s best for your company, take current size and needs into account while also considering anticipated workforce and business growth that will require more data and more sophisticated features.
ADP, Rippling, Sage and UKG are all vendors that provide a range of products to different market segments, so they’re worth checking out if you anticipate a lot of future growth in headcount. That way, you can add on features as needed or upgrade to a new price tier or product from that vendor.
BambooHR targets small to midsized business needs. So, if you anticipate remaining relatively small (at around 1,000 employees or fewer) and serving a niche market, BambooHR is an excellent choice.
Paycor and UKG Pro are designed for enterprise businesses because they include advanced tools such as predictive analytics and competitive benchmarking data. Generally speaking, enterprise businesses employ more than 1,000 employees, thus having enough head count volume and budget to invest in an HCM system.
Software Integrations
If you’re looking for modular, à la carte-style solutions such as ADP or a less comprehensive HR software system, such as BambooHR or Rippling Unity, you’ll need to ensure that those systems will communicate with other applications your company currently uses. For instance, if you opt for your current payroll software over BambooHR’s payroll add-on, you’ll need to make sure your payroll software will communicate with BambooHR.
Moreover, the HR software solution might integrate with your other software applications, but the ease of implementation will depend on whether your IT team or the vendor’s support team will need to manually build APIs to get the two (or more) systems to communicate with one another. Some HR systems have built-in integrations to work with other software, while others require manual API connection or don’t work at all with a particular solution.
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