A human resources management system (HRMS) helps businesses manage and automate their core HR processes such as employee data storage, benefits administration, time and attendance, and payroll. In addition, an HRMS provides talent management capabilities such as recruiting, onboarding, performance management, goal planning, learning and training, compensation, and succession planning.

A modern HRMS helps to replace traditional labor-intensive spreadsheet and paper-based processes. An HRMS also reduces human error and automates repetitive and time-consuming manual processes. This allows HR team members to focus on higher-value and, ultimately, more rewarding work.

HRMS history

In the 1970s, larger companies were digitizing some of their basic processes, particularly data-heavy and error-prone functions like payroll and accounting, but these early human resources management systems were limited in scope. By the 1990s, more powerful mainframe computing and the rise of the Internet allowed businesses to digitize and automate a wider range of core HR functions like records management, benefits administration, and recruitment workflows. 

Today, with the growth of smart technologies and cloud connectivity, HR processes are no longer limited to transactional data. A modern HRMS can gather and integrate data to adjust reporting structures in real time, based on regional variances in infrastructure, laws, and regulatory compliance. These systems also automate workflow and leverage artificial intelligence (AI) to create smarter and more streamlined processes.

HRMS, HRIS, HCM, and HXM – making sense of the acronyms

Human resource management systems (HRMS), human resource information systems (HRIS), and human capital management (HCM) are HR terms that are often used interchangeably but have a few key differences. HCM is an umbrella term that is used to describe the broad set of practices and software that an organization uses to manage its workforce, from recruitment to retirement.

A HRIS is typically built on a database of employee information and is used to support core HR processes that are more linear and quantitative in structure, like payroll processing or managing time and attendance. In comparison, HRMS software is a more all-encompassing solution that contains all the data management structures of an HRIS but also incorporates more qualitative and complex functionality and talent management. Additionally, the best HRMS solutions use smart technologies like AI, machine learning, and cloud connectivity to help personalize and intelligently automate functions.

The overarching term of human experience management (HXM) represents a cultural shift to recognizing the importance of the entire employee experience and the business value of engagement at the heart of HR. Due to technological advancements and connectivity, businesses are now able to get a clear end-to-end picture of their workforce from all angles. This has helped companies realize the measurable value of prioritizing the employee experience and using a people-first approach to underpin the HR administrative functionality that surrounds it. This more holistic approach represents a change in the prioritization and management of HR processes.

Diagram showing the relationship between HXM, HCM, HRMS, and HRIS
Diagram showing the relationship between HXM, HCM, HRMS, and HRIS

Why is HRMS software so important today? 

For many years, businesses have considered the use of new technologies and ways to better automate their HR processes. When the pandemic hit, it brought with it massive and unprecedented changes to the workforce. HR teams were forced to – very suddenly – begin using new technologies to support and manage a newly remote and distributed workforce.

After implementing HRMS software, home appliance giant Whirlpool saw a 20% reduction in HR operating costs

At first, many of these transitions were problematic, but now, more than a year on, HR leaders have become more creative and adaptive in their practices. An SHRM article tells us that this has ultimately turned out to be a good thing. With their entire workforce becoming remote – almost overnight – HR teams became the “first responders” of the business world, and many other departments and team leaders have taken their lead. In the wake of the pandemic, many companies suddenly became aware of just what a goldmine of data and people analytics they had in their HR departments – and how that information could help them inform decisions and strategies across the business.

Today, HRMS software is invaluable in helping businesses organize, understand, and streamline this rapidly changing world of work. HRMS solutions put complex HR processes in one place, giving businesses centralized employee data storage, automation capabilities, and embedded AI and advanced analytics. Additionally, sophisticated, user-friendly talent management capabilities help ensure that businesses are recruiting, developing, and retaining the best talent in their industries.

Who uses HRMS software?

Many of the areas listed below have traditionally been quite siloed – feedback or new data in one would not necessarily have made it to the other. A modern HRMS not only optimizes and improves the processes for each of these professionals, but also ensures that the data they gather and feedback they give gets shared – and is able to inform the wider body of people analytics.

HRMS software components

HRMS software can provide clarity and simplification. Bringing workforce data together in one place not only makes things easier for the business, but also provides insights and analysis from disparate sources and departments to deliver increasingly accurate and actionable recommendations and reports.

Here are the different elements of an HRMS solution:

  1. HRIS: Core HR and payroll

    Employee self-service: HRIS tools help both employees and team leaders to clear away the clutter of legacy and paper-based HR administrative tasks. Self-service, mobile-friendly capabilities help to increase workforce productivity and transparency in myriad areas, such as employee data management, reporting and analytics, time and attendance, and payroll.

    Benefits management: With an increase in hybrid workplace models, businesses struggle more than ever to keep up with the many benefits requirements across the United States. Automated benefits administration can dig HR teams out from under this mountain of paperwork and free them up to provide the knowledgeable advice and guidance that employees value in these crucial areas of their lives. Self-service, mobile-friendly employee portals further empower workers to keep an informed eye on benefits for themselves and their families.

    Time management: Payroll leakage is the result of inaccurate timekeeping practices by employees and managers and can cost businesses up to 2.5% of their total payroll expenses. While sometimes intentional, it is often due to errors from outdated systems and inaccurate manual practices. But fortunately, it’s one of the more highly preventable areas of operational loss and can be greatly mitigated with the use of intelligent HR software solutions. HRMS tools are highly customizable and can be synchronized with holidays, accrual, and other business rules. Automatic calculations of time and pay are integrated with payroll functions and employees have self-serve access to help them gain the full view of their timekeeping.
  2. Talent management

    Recruitment and onboarding: Despite an enormous COVID-19-driven spike in unemployment in the past year, employers are finding a shift in attitudes and expectations and are finding it difficult to find available candidates. HRMS solutions can help employers optimize the recruitment process to make sure they can find and attract top talent. This includes better support for global talent sourcing and candidate relationship management. It also supports more comprehensive applicant tracking and streamlined processes to support succession planning.

    And for new hires, HRMS onboarding tools can provide a portal for new employees – including paperless and automated new hire workflows and a more engaging and personalized training and onboarding process.

    Performance and compensation management: Performance management can be challenging, requiring businesses to balance both qualitative and quantitative data while remaining objective. HRMS tools can help to manage employee goals and reviews, delivering continuous performance management alongside guided action planning.

    Managing compensation can also be a tricky proposition requiring the assessment of multiple factors both inside and outside the business. HRMS software can help effectively support compensation planning and design.

    Learning and professional development: Growth and career development are crucial parts of the employee experience. HRMS tools use smart technology to deliver a more personalized and engaging learning experience – connecting people, information, and experts across the business and beyond. For employees, this helps them better structure their time and career planning goals. Mandatory learning and compliance training can be easily scheduled, and more long-term aims like leadership development and succession planning can be incorporated into their calendars in ways that best suit their unique needs and commitments.

    Sales performance management: As any business leader can tell you, their sales teams are at their best when they’re out there selling and nurturing leads. An HRMS helps businesses streamline and centrally manage sales-related issues like commissions, territories and quotas, and even agent performance.
  3. Analytics and workforce planning: Data-driven insights are key to aligning HR with the overall corporate strategy. With metrics and KPIs, reporting, predictive workforce modeling, and AI-powered analytics, HR leaders can better support strategic and operational planning as well as budgeting and performance management.
  4. Employee experience management: With an increased focus on the employee experience, businesses must look for innovative ways to better understand why employees feel the way they do about their experiences at work, starting as a candidate to the day they leave and everything in between.

    Voice of the employee (VoE) technologies and tools to gather this information include 360-degree feedback assessments, surveys, behavioral and sentiment analysis, and more. Using these insights, organizations can personalize each employee’s experiences across their lifecycle, boosting engagement and productivity.

HRMS systems and the next steps to digital transformation in HR

Digital transformation in HR and any major operational change will always meet some initial pushback and inertia – as well as incur some inevitable risk. The best way to prepare for an operational change is to start sharing and communicating about the project aims and goals. When there are open lines of communication between your team leaders, executives, and HR specialists you can start to break down walls. Effective change management and planning strategies can help better prepare your teams to secure buy-in early on.

The list below highlights some important checklist items as you embark upon your HR digital transformation.

Explore HRMS software today

Learn how SAP SuccessFactors HXM solutions help manage the entire employee lifecycle – from recruiting and onboarding to payroll and performance management.