What is a Human Resources Management System (HRMS)?

Is your HR department taking advantage of a human resources management system (HRMS)? Even if they are, this acronym may not be familiar. An HRMS is a technology tool for managing your workforce and all the moving parts that go along with it, like benefits, payroll, performance, engagement, and more.  

HRMS may not be in your daily vocabulary, but it’s essential to know the ins and outs of all types of HR technology. That way, you can be sure your HR team is using the tools that best fit its needs, including the best HR management software. 

Let’s look at the definition of an HRMS, why they’re important, their benefits, top HRMS features to look for, and when to tell if it’s time to invest in (or upgrade) a new technology solution.

Definition of an HRMS

Human resource management (HRM) has lots of moving parts because managing people is complex. But, many people management tasks are boring and take valuable hours to complete. They’re also extremely important and need to be completed with accuracy — in addition to the plethora of other work HR teams do daily. 

That’s where human resource management systems (HRMS) come in. An HRMS is a suite of software applications HR teams can utilize to handle tedious work, reducing mistakes and freeing up their valuable time. HRMS may also be used interchangeably with HRIS, or human resources information system.

These are just a few of the people management processes HR is responsible for — and that human resource management software can help simplify:

• Gathering and verifying employee information during hiring and onboarding
• Maintaining accurate, compliant records for employees, both present and former
• Managing payroll and time-tracking for full-time, part-time, and contract employees
• Calculating and distributing PTO, sick days, and other paid leave benefits 
• Administering insurance benefits, including medical, vision, dental, life, and more
• Handling all other employee benefits programs
• Basic employee performance management, including review cycle management
• Analyzing employee data

Top HRMS Functions & Features

As the HR system at the core of people operations for many teams, HRMS support many important functions that are integral to hiring, engaging, and retaining your employees. Keep reading to learn more about these functions.

Compensation and Benefits Management

Payroll and benefits management is one of HR’s main, and most important, responsibilities. An HRMS takes tedious payroll management tasks out of HR’s hands. Tax withholding, employer contributions, reimbursements, benefits elections — it’s all handled by the HRMS. The software also allows employees to take control of their pay and benefits with self-service options. 

Candidate Relationship Management

HR isn’t just responsible for fostering a positive relationship between employees and companies — they need to do the same for candidates. An HRMS is the hub where great candidate experience begins. It can help your team speed up their hiring processes and build a seamless, consistent experience for candidates from application to onboarding. It’s also a repository of talent your recruiters can nurture in case they’re the right fit for future job openings. 

Compliance and Data Management

Businesses are required by law to collect and verify a variety of data from candidates and employees. They need to run background checks, verify qualifications, and keep thorough records for every employee, including proof of eligibility to work and termination records. An HRMS can safely retain complete, accurate, and compliant digital records.

Employee Performance and Engagement

Employee performance measurements are used to inform merit increases, promotions, and recognize outstanding work, but that’s difficult to execute manually. An HRMS can help HR and hiring managers to administer fair performance reviews and spot performance trends for even more insight. It can also provide the tools to conduct employee engagement surveys and analyze those results.

Training and Development

HRM software provides a platform for HR to put together training programs and development plans for employees. They can ensure new hires complete required training modules, like anti-harassment courses, and review important company policies and procedures. An HRMS can also support employee development through performance insight and aligned goal-setting.

Trend Analysis and Forecasting

39% of HR leaders say getting insights or access to data analytics is a top challenge when it comes to managing people — but it doesn’t have to be. An HRMS can generate user-friendly, easy-to-read reports on a wide range of employee information. HR teams can use those reports to inform decisions about benefits changes, DEI initiatives, and other strategic choices.

Pros and Cons of Using an HRMS

There are many advantages to adding HRM software to your team’s core HR toolkit. An HRMS takes over the tedious parts of your HR team’s work so they can be more efficient, make fewer mistakes, and focus on the strategic parts of their jobs instead of the administrative ones. It can help with strategy, too, by producing valuable, actionable reports from your employee data.

But, there are also some disadvantages to be aware of. Let’s learn a few pros and cons of an HRMS.

Pro: Saves valuable time

With an HRMS, your HR team will spend less time manually entering employee data into multiple systems. Instead, they can enter it once, saving priceless hours and reducing those tiny data entry mistakes that can turn into giant problems. An HRMS can automate tons of other time-consuming tasks, too, like distributing onboarding paperwork and sending performance review completion reminders.

Con: Implementation is a big task

Implementing an HRMS doesn’t happen overnight. It will more than likely take at least a few weeks to set up a new HRMS, and you’ll need to train employees on how to use it.

Pro: Simplifies compliance

Paper recordkeeping doesn’t hold a candle to digital recordkeeping with an HRMS, especially considering the compliance aspect of HR. There’s lots of paperwork involved in onboarding, managing, and offboarding employees, whether required by law or by your company, and sometimes even laws about retaining those records. Stay organized and compliant with an HRMS.

Pro: Centralizes candidate and employee data

Like most software today, HRMS are cloud-based systems, which means anyone with appropriate permissions (like a user account) can access the HRMS from anywhere they have an internet connection. It also means any changes in the system update in real-time, ensuring that users are always seeing the most recent information.

Pro: Simplifies payroll and benefits

Mistakes in this area are one way to lose trust with your employees fast — accuracy, security, and speed are non-negotiable when it comes to payroll and benefits. Using an HRMS that integrates with your providers ensures new employees are on the payroll and enrolled in benefits fast and that all employees receive accurate, on-time paychecks.

Con: Less customizable

An HRMS sometimes lacks customization, given the large number of functions it serves, while best-of-breed solutions are focused on one specific function and have more flexibility.

Pro: Helps businesses stay competitive

The old ways of managing people are not only inefficient and inconvenient for your HR team, but also damaging to your business reputation — it’s all too clear to employees when companies are behind the times. An HRMS enables fast, modern HR processes so your team can focus on attracting, engaging, and retaining A Players.

Why HRMS Are Important For Businesses

In addition to the myriad benefits we listed above, human resources software is necessary because:

• It would be hard to point to a tedious, repetitive task that we don’t automate to some extent — why not in HR?
• Your business needs to stay competitive with other employers that are using technology for HRM and focusing HR efforts on strategy.
• HRMS work with HR strengths and weaknesses to maximize efficiency and enable strategic innovation.

There’s no need to elaborate on the unprecedented events we’ve all experienced since early 2020, including the ups and downs of the job market that continue today. During the pandemic, 74% of workers said they’d experienced burnout, and employee engagement dropped from 36% in 2020 to 32% in 2022. As a result, employees’ expectations changed and their priorities shifted, kicking off the Great Resignation. Now, employees are looking for employers with shared values, work-life balance, appreciation for their work, and opportunities to grow. 

“Pre-pandemic, customers were considered a company’s most important consideration for long-term value creation, but that has now shifted to employees,” said speaker, consultant, and author Heather McGowan. 

HR teams across industries have risen to the occasion, and between rapidly changing work environments, safety requirements, and labor demands, successfully demonstrated their agility, creativity, and necessity. It’s apparent that human resources are an essential strategic business partner and not just an administrative department. 

Not to mention, HR professionals are employees, too, and they’re not immune to the effects of burnout and disengagement. A strategic business partner shouldn’t be bogged down in manual tasks, and none of your employees should be without the resources they need to achieve their goals. 

That’s why your business needs an HRMS. Give your HR team access to software tools that not only make their jobs easier and decrease errors but also inform better decision-making and help them build efficient, effective processes so you can retain and empower your valuable HR employees.

The HR technology market is growing rapidly. After receiving more than $14 billion in investments in 2021, HR technology has seen $9 billion in investments in the first half of 2022 alone. That indicates investors expect more and more companies to turn to technology.

ClearCompany integrates seamlessly with your existing payroll and benefits providers to offer all the benefits of an HRMS combined with our award-winning Talent Management Platform. Help your HR team make fewer mistakes, stay organized, and maintain compliance, and generate reports that give you even deeper insight into both your employee data and your HR team’s processes. 

Discover a complete Talent Management Platform designed to work with your HRMS and make life easier for HR teams at companies of all sizes and industries. Sign up for a personalized demo with the ClearCompany experts.