The ultimate guide to HR software

HR Software is simply a people management solution, often referred to as a Human Resources Management System (HRMS). It handles a range of HR related processes, including recruitment, onboarding, time tracking, annual leave, career development and stores employee data in one spot.  

Think, easy employee management, tighter HR processes, and – more often than not – automation that keeps the whole team on track and notified.  

Most companies opting for HR software often have specific pain points they want to overcome. Whether they’ve grown at speed and now managing headcount is a struggle, or they’re finding themselves bogged down in admin tasks with little time to focus on big picture planning. 

As today’s workforce becomes more dynamic and diverse, working in HR can become incredibly challenging. With low unemployment rates threatening increases in employee attrition and high demand for a successful HR operation, it’s no wonder that 82% of global leaders agreed that the HR function is more critical now than ever. After all, if people are the most important part of your business, it’s imperative that HR (and the software that supports it) can keep up.  

Next, let’s take a look at the types of HR Software that exist.  

The difference between HRIS, HRMS and HCM. 

You may have heard of HRIS, HRMS and HCM being used interchangeably, and whilst all can be used to refer to HR software, there are subtle differences in these technologies that we’ll go into here.  

HRIS – Human Resources Information System 

Think of HRIS as your go-to organiser for all things employee-related. It’s fantastic for keeping track of essential employee data, like personal details, job roles, payroll, and attendance.  

Your reliable system for managing employee data and daily HR tasks. 

Ideal for: HR teams looking to streamline administrative work and maintain comprehensive employee records. 

HRMS – Human Resources Management System 

HRMS takes all the good stuff from HRIS and adds even more powerful tools! Beyond data management, it helps with recruiting new talent, onboarding, performance reviews, and employee development.  

A comprehensive tool for managing all HR functions, from hiring to performance management. 

Ideal for: Businesses that want a robust system to handle not just HR records, but also the more dynamic aspects of managing people. 

HCM – Human Capital Management

HCM is the superstar that combines the features of HRIS and HRMS and takes it to the next level with strategic planning and talent management. It focuses on aligning your workforce with your business goals, helping you nurture and develop top talent. 

A strategic powerhouse for aligning your workforce with your business objectives and fostering growth. 

Ideal for: HR leaders and executives aiming to make strategic, data-driven decisions that support business growth. 

HR Software is a digital solution designed to help HR teams manage their employees and their data, manage repetitive HR tasks with ease, provide insights through HR reporting and keep you compliant with HR legislation. 

It allows you to transfer most HR tasks, processes, and admin to an online system. Historically, and for many smaller businesses, HR administration was managed using a considerable amount of excel spreadsheets and paper documentation to keep employee records and processes up to date. However, software eliminates the need for this process, and provides a more secure and accurate way to keep your data in one place.  

Each arm of the HR function has dedicated, automated processes to eliminate the physical paper-trail, allowing your business to effortlessly expand over time, if it needs to. For example, ATS (also known as Applicant tracking software) sits within HR software and enables the electronic management of the entire hiring process.  

Reducing the admin burden 

Managing administrative tasks manually can be a real headache, especially in HR. From approving annual leave, checking timesheets, conducting interviews, screening candidates, managing performance reviews, and preparing monthly board reports, HR departments often face an overwhelming administrative burden. 

Manual tasks also bring the risk of errors, which can lead to compliance issues and costly mistakes. Plus, time spent on these tasks means less time for important activities like managing employee turnover, boosting engagement, succession planning, and hiring. CIPD recently reported that 57% of employers have hard-to-fill vacancies, and 29% anticipate significant problems with filling hard-to-fill vacancies over the next few months.  

And let’s not forget how this affects your employees. If tasks like requesting time off, attending training and development courses, or doing any other HR task is cumbersome for your employees, it will leave them with a bad impression of your business. 

In many companies, life before HR software was filled with drawn-out processes for the simplest tasks. Booking annual leave or updating personal details involved filling out forms, getting approvals, and waiting for acknowledgements – pretty lengthy for a simple task! 

HR software automates repetitive HR admin and brings your processes online. Employees can self-serve and manage their HR requests, while you streamline onboarding, performance reviews, and recruitment – it has the power to give you back the time needed to focus on your strategic HR efforts, making your department more efficient and your employees happier. 

Reporting 

The right HR software can transform how you manage and understand your people data, making it a breeze to find, analyse, and report on the information that matters most to your business. It empowers you, your managers, and senior leaders to make smarter, more informed decisions that positively impact your team. 

Whether you’re tracking employee attrition rates, analysing headcount trends, or monitoring the success of your recruitment process HR software ensures every decision is backed by solid data. Nice! Plus, it simplifies creating reports and presentations with automated, whizzy dashboards and easy-to-read charts, graphs, and tables. 

That’s powerful insights in a jiffy! 

Compliance 

Regardless of the size of your company, compliance is a vital element of your success. Suppose you are maintaining your employee records in outdated, cobbled-together software, or worse, in an Excel spreadsheet. In that case, likely, you’re not generating the reports you need to keep your company out of hot water.  

From accurate timekeeping, payroll and tax updates to consistent record-keeping and detailed reports, HR technology should be a top priority to help you manage compliance with confidence. 

Types of HR software 

There are three main types of HR Software: on-premise, cloud-based, and hybrid. Let’s take a dive into each! 

Option 1: On-premise system 

Ideal for businesses with strict data security requirements and in-house IT support. Unlike cloud-based software, an organisation that opts for this type of software will have full control over maintaining and updating the infrastructure. 

 Keep your sensitive information safe and sound within your own walls. A larger initial investment, as well as internal additional IT resources, may be required to maintain upkeep. 

What you can expect from on-premise HR Software: 

• Takes time, personnel and equipment for set up  
• Purchase and maintain server hardware  
• – Long term planning – requires strong commitment 
• Large upfront costs  
• Tangible assets which could be resold  
• Slower, costly upgrades  

• Requires additional time and software for security 
• Tape/CD/DVD backup or additional service  
• Access to servers and storage in-house – Optional Internet connection (website hosting) 

Option 2: Cloud-based system

Say goodbye to tedious installations and hello to flexibility! Access your HR system anytime, anywhere. Plus, automatic updates ensure you’re always up to date. If you’re a growing business, cloud-based systems are easy to scale to fit the requirements of your evolving business, and are easier to set up than its counterparts.  

What you can expect from cloud-based HR software: 

• Fast startup – No server hardware  
• Subscription model – lower commitment  
• Monthly or yearly fees 
• No tangible assets 
• Rapid deployment of upgrades 
• Monitored network and server security 
• Off-site backup facilities  
• No physical access to servers or storage  
• Requires an Internet connection 

Option 3: Hybrid system

Combine the benefits of on-premise and cloud-based systems. Keep sensitive data secure on-site while enjoying the convenience of remote access. However, like the on-premise system, there may be larger startup costs and additional IT resources required to keep the system in full working order, above what you would need for a cloud-based system. 

Remember, the perfect system is the one that aligns with your business needs. 

It’s safe to say that HR software can make work life a whole lot easier for HR Directors, Managers, and employees alike, in a multitude of ways! Let’s take a look at some of the major reasons why. 

It’s a time-saver!  

When you’re trying to juggle the daily workload within a fast-paced HR department, anything you can find to alleviate the strain is most likely at the top of your list.  

Enter HR Software. More specifically, automation. 

Automation is the helping hand that takes care of the nitty gritty and keeps the team moving forward. Think of it like a personal assistant that never drops the ball: organised, precise, speedy, eyes on everything.  

No longer will you have to set reminders for important reoccurring HR tasks, or painstakingly sift through data or processes to check whether they comply with HR legislations. Automation can set reminders, distribute documentation, automate background checks, enrolment, and flag discrepancies – to name just a few.  

With nifty automated workflows, you could save the whole team a boatload of time across all different elements of HR. Customisable workflows can be spun to suit the current processes in your business, or provide the foundation to scale your business to new heights without increasing the pressure on your team.   

Snazzy software features like this can come at a cost depending on their complexity – we’ll cover this in the chapter how much does HR software cost.  

Saving you even more time… 

Not to go on too much, but we have to mention how an integrated HR & Payroll system hits the nail on the efficiency head.  

HR and payroll teams regularly stumble over hurdles in their day-to-day due to their systems not talking to one another. Often needing to manually enter and re-enter data into two systems. As you can imagine, even those with the keenest of eyes will run into discrepancies or a mismatch of credentials from one system to another. Not only does this double-data entry approach take up valuable time, so does putting mistakes right too.  

That’s why an all-in-one HR and payroll system is a game-changer for HR and finance teams. It’ll cut your data input time in half, reduce mistakes in payroll and HR, and improve the overall performance of your business  

It helps build high performing teams 

The employee experience is a major competitive advantage. Securing the right talent remains once of the biggest challenges for employers, especially now that top performers typically have higher expectations for what constitutes a great work/life experience. So where does HR software come in? 

Straight off the bat – it plays a major role in delivering an employee experience that is engaging and expresses the culture of the business. Providing a more digital centric working environment and creating a strong culture fit throughout the onboarding experience for example, can set the precedence for employee sentiment from the hiring stage. Think friction free applications, automated interview scheduling, candidate self-service and reminders to keep everyone on track throughout – a game changer!  

Once through the door, employees are able to work faster, stay productive and alleviate workload stress by leveraging self-service systems that help complete basic, yet time-consuming transactions quickly – such as submitting expenses, making a big difference for busy teams. Speeding up administrative tasks leaves more time for employees to do the work they enjoy, leading to greater job satisfaction and overall better performance.  

Overseeing the day-to-day management of all of this are the line managers. The truth is line managers are the secret to building high-performance teams. We hear you – that’s a lot of pressure! But software can take the pressure off. It helps HR line managers to engage more effectively with their team, essentially cutting down administrative headaches to give them more time to coach their team, gather feedback and create action plans to drive the team forward.  

In-software notifications notify managers and employees of performance reviews, annual leave requests, sickness and more, so employees are guaranteed effective admin management, and line managers have clear oversight of their team. 

It keeps you compliant, and your data secure  

Handling your people data without a flexible system to ensure your processes keep up with legislation – not ideal! But fear not, HR Software takes this in its stride. 

Great HR Software likes to keep things organised, centralised and easy to update so you can keep things like a full audit log of disciplinaries, absence, HR complaints and escalations in one employee profile. So, should you need to act it’s all in one spot, and not sitting on someone’s desktop.     

And if you opt for Payroll Software that speaks directly to your HR Software you can bank on calculations in line with payroll legislation, guaranteeing accuracy – oh, and not forgetting – compliance with things like minimum wage, pension enrolment and all the bits that fall in between.   

Allows more time for strategic HR 

To have up-to-date data securely hosted, in one spot means one thing: reporting precision!  

It’s no surprise then that great software gives businesses the metrics they need to make meaningful workforce decisions. Deep dive into your absenteeism rate, time used to hire, employee performance and the potential revenue earned by employee – the list goes on.  

With accurate data at your fingertips presented beautifully in reports and dashboards, influencing stakeholder buy-in is much easier. That HR initiative you wanted to get off the ground – well – now you have the data to prove the benefits and align your team to a shared vision.  

It can be hard to strike the right equilibrium when trying to balance commercial objectives with people strategy. With the right system in place, you can track KPIs on an individual, team, or company-wide level. Managers can track the performance of their employees and (with the help of HR Software) make lightweight of spotting under and overachievers to drive performance in the right direction before it becomes a problem. Meanwhile, employees have sight of overall company goals and how they contribute towards achieving them for complete transparency. Not bad!  

So, now we know what good HR Software looks like – but what are the risks of getting it wrong, not investing in it at all, or sticking with outdated software that’s no longer cutting the mustard?

One big problem – employee turnover.  

Outdated HR tech can have real pesky consequences for businesses and their teams. A recent market analysis revealed that 18% of small and medium-sized businesses (SMBs) still don’t use any HR software for basic HR tasks. 

Not having modern tools can cause a bunch of issues that hurt both company efficiency and employee engagement. Moorepay’s latest HR Survey report found that over half of respondents experienced the same or worse churn rates compared to the previous year. Although over a quarter of businesses saw an improvement, the overall trend still shows a persistent problem.  

We already know that the recruitment market is tough: finding top talent is competitive, not to mention expensive! So, keeping employee turnover to a minimum is key, especially if you’re a growing business. But companies without an updated HR system to effectively manage employee engagement and retention may struggle to keep their head above water.

Communication barriers 

Communication issues are another big problem caused by outdated HR tech. According to Gallup, 74% of employees feel they miss out on important company information and news,. Showing a widespread issue of miscommunication in workplaces everywhere.  

Outdated HR systems often lack the features needed to streamline communication, such as centralised platforms for announcements, updates, and feedback. This can leave employees feeling disconnected and undervalued, which further contributes to dissatisfaction and turnover. 

However, the outlook isn’t all bleak.  

Embracing modern HR technology can turn these challenges into opportunities. With the right tools, businesses can enhance their HR processes, leading to more efficient management and happier employees. Advanced HR software can facilitate better communication, provide valuable insights into employee engagement, and help implement effective retention strategies. 

By investing in up-to-date HR technology, companies can create a more connected, informed, and satisfied workforce. It improves the overall work environment and sets the stage for sustained growth and success.  

The cost of HR Software will greatly depend on your business requirements; the size of your business, what processes you already have in place and what processes you want to build. Not surprisingly, it’s hard to give an exact answer to this without understanding your business requirements. 

Vendors that offer off-the-shelf HR systems should be able to provide you with a monthly quote upfront, but this has its drawbacks. Due to the off-the-shelf nature of the product, you may find that it doesn’t allow you the same type of agility and flexibility that your large, or growing business may need.  

If you’re looking to get an accurate, no-obligation quote for software that’s going to deliver to your expectations, it is best to talk to a vendor advisor directly. HR software is often designed to be flexible, customisable, and highly configurable to adapt to your unique business needs. By exploring the features you want with an advisor, you’ll be able to tailor your product fit and gain a clearer understanding of how much HR software will cost your business.  

With Software-as-a-Service (SaaS) models, HR software is delivered on a subscription basis and hosted in the Cloud. This means you can access powerful HR tools without the hefty upfront costs. Plus, with Service Level Agreements (SLAs) in place, you can rest assured that both you and your software provider are on the same page when it comes to service expectations.

Other costs you’ll need to factor in: 

• Implementation  
• Internal resource 
• IT maintenance 
• Ongoing support/ training 

• Cost of additional users 
• Upgrade costs 

Looking to invest in HR Software but not sure where to start – don’t worry. We’ve compiled a list of some of the things you’ll want to think about before narrowing down your choice.  

In today’s modern workplace, the prevalence of Cloud-based systems (think Zoom, Skype, Dropbox, Google, and Slack) makes the decision between on-premises and cloud systems an easy one.  

But for those businesses that have not yet adopted cloud-based systems, the decision to make this change can prove to be a rather difficult one. It’s important to think about where your company is today, and where it’ll be in 5 years’ time when making the decision between implementing a cloud-based or on-premises system. 

Here’s a few things you should consider when choosing the right software for your business: 

1. The question on everyone’s lips: how much will it cost? 

As we mentioned earlier, the majority of HR software vendors will have a fixed, monthly, or upfront price per user depending on the level of access and features required. 

 In addition, vendors may offer a modular system where you can add or remove the features your business needs as and when needed – much like you would a bolt-on for your mobile phone. Find out what’s included in this fee and whether there are any added costs for things like implementation, support, or training. How much are any additional modules and how easy are these to add or remove?  

If you’re looking to integrate your existing systems with HR software, find out whether there are any costs associated with this and factor these into your evaluation process.  

And yet, bear in mind that cheaper doesn’t always mean ‘better’ for your business. While cost is clearly a defining factor in some cases, try to focus on the suitability of a system and how it meets your requirements – rather than ruling vendors in or out purely based on price alone. 

2. What integrations are available? 

You are no doubt already using some business-critical pieces of software to streamline your business. In some cases, you’ll be able to integrate HR software with the tools you and your team already know and love.  

Some HR systems will have native integrations making it easier to connect with different apps (think Google Docs or leading CRMs), but most HR software providers also offer an open API (Application Programming Interface) to link your existing systems with your HR system. 

A sure-fire way to keep data and important documents up-to-date and succinct across your range of systems.  

Whether that’s triggering HR workflows, posting open vacancies to job sites, integrating with existing T&A systems or payroll; the availability and kind of integrations available to you should play a key role in your decision-making process. 

3. What support and training will my business need? 

The provision of support can play a huge role in the success of any business software. Your entire team will need to get-to-grips with the software, so this isn’t one to be overlooked.  

Get clear on the type of support your selected software vendor provides: what time do they operate? How long does it usually take to resolve different types of queries?  

Find out how support is accessible, too. For example, can you get help over the phone or is everything managed via an email or ticketing system? How soon can you expect tickets to be acknowledged? 

It is‘s key that the help you need with your HR software is available to you and your employees as and when you need it. 

A critical factor in the ongoing success of any HR software is making sure that everything’s smooth sailing for your employees whilst using the system. Confidence to use the software to it’s full potential makes for a sharp – and happy – – team. Given that every one of your employees will likely be using it in some capacity, to book annual leave, sign documents or claim expenses; it’s important that training is thorough and your team’s given time to adjust to your new software.  

[ Top tip: Try involving a few team members in the decision process to gain early buy-in and help get a ‘user’s’ perspective of the system too.]  

From line managers, to employees, to administrators: each user group will most likely have completely different tasks to complete to their counterparts. Managers will need to understand how to approve holiday requests, monitor absences and schedule performance reviews. Whereas their team members will need to be able to request holiday, check documents and submit expenses. 

Take the time to understand what costs are associated with your vendors training options, whether these are ongoing sessions and whether you are likely to need internal resource or not to keep users using the system correctly.  

Normally, you’ll agree a set number of hours with your vendor as you see fit to train your HR team, managers, and employees. This may be delivered online or onsite depending on the vendor you choose and your preference. Up-to-the-minute vendors will usually have a comprehensive library of training videos, how to guides and webinars that go hand in hand with the rest of your training package.  

4. Can it scale as my business grows? 

Is your business going for growth? Looking to keep things agile? Maybe both? If so, you’re going to want systems around you that can keep up with your business’ plans and meet your needs now and as your business changes.  

How? Have the “What if..?” conversation with HR and the wider leadership team to get every base covered. It’ll help understand how better to evaluate vendors and choose the right system for your business – now and in the future.  

Next, relay this back to your vendor to make sure that your chosen HR software can join you for the journey.  

How easy is it to add or remove employees? Can modules be added later when required? Can the system handle international requirements if you plan to grow globally? 

Having a clear idea of your business goals and how you need your HR software to work for our business will set you up for success.  

5. How long does HR Software take to implement? 

First things first: you’ll want to map out the go-to processes from the no-go processes in your current system. This ensures that your new system remains lean, and implementation time is spent only on effective processes, or new ones that will propel the business forward.

Really ask yourself whether your processes are effective. Automating processes that no longer suit your business should kick it to the curb – use this opportunity to think about how you’re doing things.  

Now think about how this will translate into your chosen HR software. What workflows will you need? What does your chain of approval look like? Who needs access to what? What are the key steps involved in your processes? Granted, there will be some process change and it is important to remain open-minded to new ways of doing things. 

So, how long does it usually take to implement?  Well, that really depends! 

Most software vendors normally have a ‘plug and play’ option or a highly customisable option that will take longer to implement due to its bespoke nature. The software provider you have selected, as well as your business requirements, will depend on which style of implementation works best for you.  

Be honest about your expectations and work with your provider from the beginning to map out implementation timescales that are realistic for both you and the vendor. 

Things like resource availability, how your current data is set up, and the complexity of your business can all play a part in how quickly the turn-around might be.  For example, if you’re data is sitting in an unfit-for-purpose HR system, or scattered across a bunch of spreadsheets, this is going to slow down your implementation process.  

However, for a medium-sized business, it can take anything from 4-6 months to find, evaluate, buy, and implement HR Software. 

Check to see if your provider has a dedicated implementation team to keep the project on track, and who you can touch base with on a regular basis. Implementation/ Account Managers will usually update you on the progress, responsibilities, and deadlines, and answer any queries you may have about the project along the way.  

Your provider should also be able to give you examples of customers who recently changed over to them – ask them how it went! 

Ah, this is a tricky one to answer! But in short, there’s no ‘best software’, there’s only the best software that best fits to your business’ needs. Let’s be honest – no one knows the needs of your business better than you do, but if you’re still looking for a bit of friendly advice to help you with your decision-making, we’ve got a few pearls of wisdom we can share with you.  

Free HR Software 

Looking to save some cash while getting your HR needs sorted? Free HR software can be a lifesaver for small businesses with fewer than 10 employees. These tools can handle the basics like employee records, time tracking, and even some benefits management. They’re like the friendly neighbourhood handyman: great for small jobs, but they might struggle with bigger projects. If you’re planning to grow or need more advanced features, you might outgrow these free options faster than you think. But hey, for small teams on a budget, they can be good starting point. 

Paid HR Software 

Ready to step up your HR game? Paid HR software comes with all the bells and whistles to make managing your team a breeze. Think of it as moving from a basic toolkit to a professional-grade workshop. These platforms offer comprehensive features like advanced analytics, seamless integration with other business tools, and top-notch support. While the list of options can be overwhelming, narrowing down your must-have features will help you find the perfect match. Yes, it costs more, but the efficiency, accuracy, and employee satisfaction you’ll gain are worth every penny. 

National vs. International HR Software 

Got a team spread across the globe? Then you need HR software that’s up to the challenge! National HR software is great for businesses operating within a single country, as it’s tailored to local laws and regulations. But if your employees are scattered worldwide, you’ll need international HR software that can handle different sets of legislation and compliance standards. It’s like choosing between a local café and an international coffee chain: both serve great coffee, but the chain knows how to cater to diverse tastes and needs. The right international HR software will ensure smooth operations and happy employees no matter where they’re based. 

Why not have a chat with a few providers, and maybe quick browse around the internet to see what sort of software might fit you best.  

ROI – The Big Picture 

While trusting your gut might get you so far, ROI is probably a better measure to base your business decisions on. Getting an accurate gauge on ROI for your brand-new and sparkly HR software before you take the plunge is best practice.  

To do this, you’ll need to know: 

• The estimated value of any resulting gains 
• The total cost of your software 

You’ll then need to run the following calculation: 

ROI = Net gain (total revenue – total cost) / total cost x 100

Hopefully, after running the ROI calculations, the HR software package you’ve selected should have a positive ROI, ultimately giving you the thumbs up to go ahead with your investment.  

Whilst this ROI is a good place to start, consider calculating the other important metrics that new HR software may have on things like improved efficiency through better processes, headcount reduction, lower employee churn, improved accuracy etc. This will give you a more holistic understanding of how HR software will positively impact your business’s bottom line over time.  

Thinking about investing in HR Software? Well, you’re right on time! Exciting transformation is happening in the HR landscape. Innovative technologies are promising to make managing your workforce easier and more efficient than ever. 

Generative AI 

Let’s talk about the buzz around generative AI. While almost 90% of businesses aren’t currently using generative AI in their HR departments, the potential it holds is enormous. Imagine software that can generate job descriptions, screen CVs, engage with employees via chatbots, schedule interviews, and handle data management and reporting. These aren’t futuristic fantasies – they’re just around the corner! 

Interestingly, nearly a quarter of businesses plan to dive into generative AI within the next 12 months. This shift means we’re about to see a wave of automation and intelligence in HR tasks that have traditionally been time-consuming. For example, AI can quickly sift through hundreds of CVs to find the perfect match for a job, or a chatbot can provide instant answers to employee queries about benefits or leave policies. 

Investment in recruitment 

Speaking of the future, according to Zippia, 97% of companies are planning bigger investments in recruitment technologies in 2024 – no surprise there – as recruiting the right talent into your business is no easy feat. 

Almost half (47%) of these investments will be in AI technologies. This trend signals a growing recognition of the value that advanced tech can bring to HR functions. 

What does this mean for your business? 

Well – for businesses looking to invest in HR software now, the future holds promising advantages: 

• Efficiency boost: With AI handling routine tasks, your HR team can focus on more strategic activities like talent development and employee engagement. 

• Data-driven decisions: Modern HR software provides powerful analytics and reporting tools. You’ll be able to track attrition rates, headcount trends, and recruitment success with ease, making your decisions more informed and impactful. 

• Improved employee experience: Automated processes mean quicker responses and smoother interactions for your employees. This leads to higher satisfaction and engagement, which is crucial for retaining top talent. 

• Competitive edge: Early adoption of these technologies can set you apart from competitors. You’ll be able to attract and retain talent more effectively, thanks to streamlined processes and better insights into your workforce. 

It looks like the future of HR software is about leveraging AI and advanced technologies to enhance efficiency, make better decisions, and improve the overall employee experience. Investing in these technologies now can position your business for success. So, get ready to embrace the future of HR!