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Human resource (HR) management is the process of managing employees throughout their tenure at a company, from their hiring to their exit. HR management includes several functions such as employee hiring, training, compliance management, and payroll management.
Because there are so many functions that make up HR management, manual approaches (such as using spreadsheets and paper documents) are inefficient and prone to error. Software can automate various HR functions and make them easier for HR personnel. In addition, it provides an organized database of employee information that can be quickly accessed by your team.
HR software stores employee information and documents in a central repository, giving HR teams instant access to employee-related information, reports, and documents. The tool helps them manage hiring processes, such as job posting and interviews, store documents, remit employee payroll, and track appraisals. It’s ultimate goal is efficient and smooth HR operations.
To help you select the right HR software, we’ve created this buyer’s guide with all the necessary information about purchasing a solution. Here’s what we’ll cover:
Human resources software is designed to help users manage employee information across different stages of an employee’s tenure, such as hiring, development, progression, and exit.
The software captures employee data and stores important documents (such as offer letters and W2 forms). This provides managers, payroll administrators, and auditors instant access to the information as needed.
This type of software also helps users manage different HR functions such as recruiting, onboarding, benefits and payroll management, performance management, compliance reporting and analytics, as well as time and attendance tracking.
The first step to selecting the right HR solution for your business is to understand the different types of HR solutions that are available. According to our research, there are three main types:
Core HR solutions: These solutions automate administrative HR tasks such as creating employee records, tracking benefits, and managing payroll. Investing in a core HR solution is the first step in digitizing your HR operations. Therefore, businesses that currently don’t use an HR solution should consider this option.
Workforce management solutions: In addition to maintaining employee records, these solutions let you schedule meetings and manage time-off requests. Businesses that need to better manage their expanding workforce should consider these solutions.
Strategic HR solutions: These solutions assist you in hiring candidates, training them, and carrying out performance appraisals. Key features of this software include applicant tracking, performance management, and learning management. Businesses that need to specifically improve their hiring and talent-grooming practices should invest in this.
Key question to ask your vendor before you buy: What types of HR solutions do you offer, and which would best fit my business requirements?
After learning about the types of solutions, the next step is to understand the deployment options. There are the two options for HR software:
Cloud-based deployment: These solutions are hosted by the vendor on its own servers or third-party servers and accessed via a web browser or mobile app. Cloud solutions have subscription pricing on a per user per month or flat rate per month basis. These suit small and midsize businesses as well as businesses with a “bring your own device (BYOD) policy, where employees can log in from their own devices such as mobile phones and laptops.
On-premise deployment: On-premise systems are hosted on a company’s own servers, requiring you to purchase and manage servers as well as network devices. These solutions have a one-time per user license cost and may charge extra for software updates. Businesses that have an existing on-premise infrastructure (such as an on-premise CRM or business phone system) or need to store data locally for security and compliance reasons (such as financial services) should invest in these systems.
GetApp.com recommends cloud-based systems for small and midsize businesses because the vendor manages all the technical aspects such as server maintenance and upkeep. For on-premise solutions, you need to hire IT professionals. Cloud solutions are also easier to scale up as you grow, and they allow you to increase/decrease your data storage and processing capacity when required.
Key question to ask your vendor before you buy: Taking into account the additional costs, such as training and migration, what is the annual total cost of ownership (TCO) of the cloud-based/on-premise system you offer?
For the long-term success of your HR solution, you need to ensure that it includes all the vital features. It’s also essential to categorize features as “essential” or “optional” so that you get a high return on investment, both in the short and long term.
Based on our research, here is a list of the common features of HR software:
Employee profiles: Manage employee information, such as designation, team, and reporting manager, in their profiles. This way, it’s available in one place for HR functions such as benefits, payroll administration, and succession planning.
An employee profile in ADP Workforce Now
Employee database: Store and manage employee data and documents such as employee codes, resumes, I-9, and W-2 forms. Perform keyword-based searches to find and access the information you need.
Creating an employee database in UltiPro
Reporting: Create reports on employee data such as performance ratings, years of experience, and attendance. Some solutions also provide compliance reports, such as on wages and hours, which help you comply with state and federal regulations.
Auditable database for compliance assessment in Quickbase (Source)
Self-service portal: Provide employees a secure portal where they can access important information such as their PTO balance and pay slips.
Self-service portal in Cezanne HR
Payroll management: Calculate payroll using the terms of employment (such as hourly pay, bonuses, and overtime) and then remit salaries to employee accounts. The feature takes into account hourly wages and overtime pay, helping you comply with state and federal labor laws.
Payroll management in Zenefits
Benefits administration: Manage employee data related to benefits such as health insurance, housing allowances, retirement benefits, and 401(k).
Managing health insurance benefits in UltiPro
Time and attendance: Monitor the clock-in time, clock-out time, and attendance records of your employees. Calculate the payroll of employees who have hourly wages and include overtime pay, so that your business is compliant with labor laws.
Attendance reports in People HR
Applicant tracking: Maintain candidate records and track applicants across the different stages of the recruitment process such as candidate screening, interviews, and background verification.
Candidate tracking in Keka (Source)
Key questions to ask your vendor before you buy: Do you offer a product plan that includes all the features I need? What is the total cost of ownership (TCO) of this plan?
In addition to the common features discussed above, there are some features that you may find useful based on your specific HR needs. While these features may not be relevant to your business now, it is good to understand them so that you can decide whether or not to add them to your HR solution in the future.
Onboarding: Manage documentation and other compliance requirements when inducting a candidate into your company. Some products offer e-signature functionality, which lets employees digitally sign compliance documents.
Performance management: Allow managers to conduct performance appraisals of their team members. Record employees’ historical performance data so that managers can track improvements in performance.
Compensation management: Track and manage all the components of an employee’s compensation such as payroll, bonus, and benefits.
Succession planning: Identify candidates for promotion based on predefined criteria such as their performance ratings and tenure.
Employee scheduling: Manage employee schedules based on different criteria such as overtime and employee absence.
Key question to ask your vendor before you buy: Apart from the common features, which other features in your product can be useful to my business?
Your HR solution should also be able to integrate with other software you use. Integrations automate data transfer between various applications, eliminating the need for manual data transfer. In this section, we list the important integrations that will enhance your HR solution.
Accounting software integration: Sync accounting entries to reflect employee salaries and payments to the benefits programs.
Payroll software integration: Transfer employee details, such as name and address, which are required to remit payroll to their accounts.
Time and attendance software integration: Sync the time and attendance records of employees with the HR system to calculate wages and overtime payments.
Key question to ask your vendor before you buy: Does your product offer an open API to integrate the HR solution with the applications used in my business?
The ability to interpret text-based instructions and make data-driven decisions means that artificial intelligence (AI) and chatbots have the potential to be of immense value for your HR functions. To reap these benefits, you need to be aware of these technologies and ensure that the vendor you select is building features to incorporate the trends.
In this section, we’ll describe in detail each trend and its impact on the HR software market.
AI to eliminate unconscious bias in hiring: Recently, companies are being called out for biased recruiting, which excludes people of color, women, the differently abled, and even people who aren't from the same alma mater. One fix is to use AI to make data-driven decisions based on skills, capabilities, and experience instead of gender or ethnicity. However, AI-based recruiting has received backlash for learning unconscious bias and eliminating diverse candidates from consideration. We expect vendors to address this issue and comply with anti-discrimination laws so that AI recruiting can be an HR software offering by 2023.
Chatbots to power employee self-service: The adoption of chatbots among small businesses is on the rise, and it is being added to HR solutions. A chatbot can make self-service more effective as it provides quick answers to employees’ basic queries. We expect chatbot-based employee self-service to be a core HR software feature by 2022.
Key question to ask your vendor before you buy: Are you planning to implement AI-based hiring and chatbot-based employee self-service in your offering?
We referenced the following documents while creating this guide:
GetApp human resources software catalog (Date accessed: 5/1/2019)
Top 5 Tech Trends for Small Business, Capterra (Date accessed: 5/1/2019)
Are AI Hiring Programs Eliminating Bias Or Making It Worse?, Forbes (Date accessed: 5/1/2019)
Anti-Discrimination Laws in USA, L&E Global (Date accessed: 5/1/2019)
Note: The applications selected in this article are examples to show a feature in context, and are not intended as endorsements or recommendations, obtained from sources believed to be reliable at the time of publication.