What is an HRMS?
6 min. Read
Last Updated: 02/18/2021
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What is an HRMS, and how can it improve your business's human resources functions? While the number of emerging HR technology options available to businesses of all sizes has streamlined many traditionally burdensome processes, it's sometimes difficult to determine exactly how one HR system compares to another, or to decide which is the right fit for your organization's needs.
What is an HRMS?
Here's a look at what an HRMS (human resources management system) is designed to do, how it compares to other types of HR systems, and what role an HRMS can play in your business.
An HRMS is designed to manage common HR functions, including but not limited to employee compensation, benefits, and performance.
There can be confusion when considering other HR software solutions. Here is clarification on these terms:
HRMS vs. HRIS vs. HCM
An HRMS may include the same capabilities of an HRIS (human resource information system), such as compensation reporting and employee training. An HRMS also allows businesses to use technology to implement their HCM (human capital management) strategies. This can include, among other things, performance review management and salary planning.
Here are the main differences between the three systems:
With an HRMS, employees can take on specific clerical tasks related to their personal information (thus giving HR professionals more time for other duties). Also, security is a key feature of an HRMS, which employs authentication steps to limit access to those defined as "authorized users."
Additionally, many HRMS platforms can be customized to meet specific organizational and user needs, thus streamlining workflow and other processes. Processes favorably impacted by HRMS include:
- Payroll management
- New employee recruitment and onboarding
- Maintaining employee attendance records
- Performance review evaluations
- Benefits administration
- Learning management systems
- Employee scheduling and self-service
An HRMS offers a central location to store critical business data, and provides employees with access to information specific to their compensation, performance, benefits, or paid time off. It can also provide organizations with the analytics and insights they need to make critical HR and other data-driven business decisions.
An HRIS assists businesses in planning more efficient use of HR resources. This type of software is used for:
- Entering and tracking HR data
- Managing an employee database
- Tracking applicants
- Benefits administration
- Payroll processes
- Work scheduling
As a software solution for these and related HR functions, an HRIS helps HR teams maximize the successful elements around hiring, retention, and overall employee performance.
Human capital management refers to the overall approach a company takes to managing its people. This "people-centered" approach encompasses all of the strategic and technological elements needed to address a wide range of HR-related activities.
HCM offers businesses the ability to report and analyze human resource data to make better strategic organizational decisions. HCM solutions often cover such activities as:
- Compensation and benefits
- Talent management
Integration plays an important role in HCM systems, as integrated data provides deeper insights and can enhance the ability to make holistic decisions affecting overall human capital management strategies. Proper integration requires technology that reflects the wide range of functions companies need to optimize their human resources.
Benefits of HRMS software
As noted, HRMS software applications help businesses in the management of all human resources functions and related systems throughout the lifecycle of a company's workforce. It serves this valuable function, while also helping businesses remain in compliance with changes to laws and regulations related labor and tax.
Here are some aspects of HR that an HRMS is also designed to help manage:
Recruiting and hiring
An HRMS can help HR professionals manage the many moving parts associated with the recruiting and hiring process. Many of these systems are also designed with global capabilities that serve the talent management needs of international organizations, including the ability to manage information and reports in a variety of languages, currencies, and employment laws as they relate to specific regions.
Payroll and benefits
Organizations vary in when and how they complete payroll and HR functions across departments, but an HRMS can help ensure that all parties impacted by payroll (including the employee) have access to accurate information. With an HRMS, employees can manage their own compensation information, including digital access to paycheck stubs, tax records, and workplace benefits information.
Paid time off
If an employee's benefits package includes the accrual of a specific number of days off that are earned based on the number of hours they work each week, an HRMS can help HR and the employee track and manage this information. An HRMS empowers employees to independently access their benefits status, including the amount of paid time off they've earned or have already used at a specific point in time.
Because an HRMS also includes cloud capabilities, this system can simplify a variety of processes associated with performance management. For example, employees can access the system to review established performance goals. The cloud-based system can also streamline processes that involve multiple stakeholders, such as the collection of 360-degree reviews completed by any number of employees.
Policies and procedures
Many businesses have some type of employee handbook or set of rules and expectations that staff are required to follow and adhere to. But those in highly regulated industries may face additional complexities when it comes to making certain that staff is aware of current legal and compliance standards. An HRMS empowers businesses to deliver digital training modules to employees that they can complete online, and captures employee signatures acknowledging that they have read and agree to various policies and regulations.
Planning and analytics
An organization's future success depends on its ability to plan a future recruitment and retention strategy based on industry trends. While salary isn't the only driver of employee satisfaction, an HRMS can provide key insights about compensation and benefits relative to current trends in an industry. An HRMS' customized reporting and benchmarking analytics capabilities also make it possible for HR departments to measure activity relative to goals and industry benchmarks.
As more and more information is transferred and stored digitally, a business should have the tools needed to keep personal, sensitive employee data secure. Key elements of effective HRMS security include:
- Segmentation. Ensure that specific information is available only to specified individuals or job requirements.
- Two-factor authentication. The system should employ advanced two-factor authentication technology for an additional layer of data security.
- Password and reset policies. It's imperative that user passwords (revolving around recommended complexity and strength) be altered and reset at least every 30 days. This helps maintain a defense against unauthorized users attempting to acquire sensitive employee or business information.
With security in mind, an HRMS empowers HR teams to transition cumbersome, paper-based processes into the cloud — significantly reducing the potential threat of hackers other unauthorized users gaining access to files.
Choosing the right HRMS software
The choice and implementation of the best HRMS for your company can boost employee productivity and improve your business's status as an "employer of choice." But, like virtually all other business-related software, all HRMS options are not alike. Keep these tips in mind when making your selection:
- Determine if a system's fundamental functions offer solutions to maintaining compliance in an organization that continues to change and evolve.
- Compare and contrast software solution vendors to assess their track records in this field.
- Through diligent research, narrow the choice of which software technology addresses your company's specific needs and provides the most effective employee user experience.
An HRMS can help streamline hiring, onboarding, employee benefits management processes, and other HR functions. It can also provide organizations with the analytics and insights they need to make HCM and other data-driven business decisions.