How to Make the Right Choice Between HCM, HRIS, and HRMSPublished: 2022-12-21
To survive in the fast-paced modern marketplace, businesses must continuously look for ways to evolve.
This often means learning new tricks like using automated functional testing tools to improve your service delivery and bottom line.
It’s possible your regular processes are old and no longer serve your company’s demands.
One example is businesses turning their heads toward the benefits of HR software.
If you’ve considered testing the waters for HR software, you may have encountered terminology like HRIS, HCM, and HRMS. You might wonder what these systems mean and what they can help you achieve.
You’re not alone in this struggle.
HCM, HRMS, and HRIS all broadly refer to similar HR models. Why, then, are there different terms? These terms most likely emerged due to these technologies’ rapid growth and evolving capabilities.
The three categories do, however, occasionally differ in subtle ways.
Additionally, vendors add to the confusion by frequently using these terms interchangeably. It’s wise to never assume that a vendor that uses a specific term in its marketing inherently delivers certain features or has certain capabilities.
The differences were easier to spot in the past, making it more likely to rely on marketing terms to select the best service for your business. Products had a more restricted focus and were made to meet specific business objectives. Since each system has a distinct goal, it was straightforward to differentiate between them.
But that disparity has narrowed as the industry has grown. Companies have switched to the one-solution approach to address HR needs instead of choosing several solutions from various vendors.
Modern businesses seek a comprehensive package of features from a single supplier.
Over time, it has become more difficult to manage big data and diverse systems, like a data lake, meaning workflow processes can suffer.
So, vendors have adapted their service delivery to include extra functionalities in a single comprehensive package to meet market expectations. The drawback is that you can no longer be sure what services these phrases cover. Furthermore, what something signifies now could change within a year.
What does that mean for your business? To be sure you’re getting what you need, you’ll need to look further than the surface and master these terms and their capabilities.
We’ll discuss each of these solutions in detail and highlight their differences. With this information, if you decide to make the HR software switch, you can make the ideal choice that offers everything your company needs to thrive.
What Is HRIS?
HRIS (Human Resource Information System) is a platform to centrally store the personnel information required to carry out essential HR procedures. Without an HRIS system, HR staff members are forced to use a paper-based filing system or digital spreadsheets.
The manual approach may result in losing vital information, data input and storage inconsistency, and extensive human error.
HRIS software gives your business license to manage employee information, like addresses, names, social security numbers, work permits, and details concerning dependents, more quickly and accurately. Some HRIS systems produce reports on personnel data and HR indicators that might improve resource planning and management.
Additionally, operations such as email verification become more effective, take less time, and make organizational change much simpler when your HRIS software allows employee self-service.
Typically, HRIS systems offer the following features:
This involves supervising schedules, accrual balances, PTO, and keeping track of employee work hours.
Tax Compliance and Payroll
This includes managing payroll using accurately estimated salaries and taking care of employee benefits and tax deductions. Employee benefits are a factor that people value as being important when job hunting.
Tracking Personnel Data
To track personnel data, maintain a contact list, a description of each employee’s role, and personal data in an online personnel directory.
Employee self-service entails providing employees access to information and tools for changing personal information, signing up for benefits, and reviewing accrual balances. This transfer of responsibility also improves employee engagement.
Recommended HRIS use cases include:
- A large team carries out your regular HR, payroll, and employee benefits tasks.
- Automating your employee reviews and new recruit check-ins.
- Your documentation of performance improvement plans or performance warnings is lacking.
What Is HRMS?
Like strategies like using affiliate marketing tools, ensuring that a company achieves maximum productivity is a key objective of the Human Resource Management System (HRMS).
This objective is accomplished through increased employee productivity, which highlights the requirement for a system that supports the HR department in tracking and better understanding its workforce.
Therefore, although HRIS controls employee data, an HRMS narrows its sights on monitoring employee lifecycle management procedures, which serves more than just the needs of the HR department. Management can better understand the business consequences of workplace trends by leveraging the data produced by an HRMS.
The following elements can be found in HRMS applications:
It can establish performance evaluation criteria for employees and use them to assess their performances.
HRMS can help manage recruitment by posting job vacancies, collecting online applications, and keeping track of prospects.
HRMS automates paperwork and monitors training progress to simplify the hiring process.
HRMS can be used to leverage analytics and pull metrics for corporate trends and valuable information.
Like an HRIS promotes involvement throughout the hiring process, an HRMS allows businesses to do the same. The difference is that HRMS assists businesses in sustaining engagement by setting up tailored employee goals and regularly monitoring performance in a streamlined, unified system.
HRMS use cases include:
- Boosting your team’s internal performance and communication with tools like a small business phone system
- Digitizing documents, reports, and forms to reduce the amount of paperwork. Additionally, it lowers the cost of physical storage and paper usage.
- Reducing cases of human error in data entry and analysis by automating employee data collection and processing
- Automating routine and tedious tasks
- Improving data security with a cybersecurity analytics program
- Simplifying payroll processing by digitizing employee attendance management
- Reducing employee turnover by enhancing the business culture and career development potential.
What Is HCM?
HCM (Human Capital Management) refers to procedures used within a company to hire, oversee, and grow its staff. The goal of HCM practices is to increase an organization’s competitive advantage by leveraging the business value of its human capital, which is its workforce.
Learning and development programs, as well as health benefits for employees, can be a part of HCM practices.
Consequently, the HCM system includes fundamental HR processes for hiring, managing, and optimizing employees. You can use this information to support workforce activities like skill optimization efforts, offering attractive payment packages, raising human capital ROI, and promoting business expansion.
The following are some essential features of an HCM platform that your business may find useful:
An HCM provides effective benefit and payroll management, collection of employee information, and employee self-service portals.
An HCM can provide access to corporate documents, data, and a vast organizational knowledge base.
Free to use image sourced from Pexels
Effective Recruitment and Employee Management
An HCM aids recruitment and employee management by providing effective applicant tracking, recruitment, employee onboarding, training programs with an online training platform administrator, job board ads, performance monitoring, and overall management.
Recommended HCM use cases:
- Reducing the possibility of losing influential technical experts
- Improving cross-departmental knowledge sharing
- Encouraging employee engagement
- Increasing ROI for employee onboarding
- Improving retention and recruitment of talent
- Creating a positive organizational culture through optimized employer branding
- Workforce optimization and management
- Talent development—succession planning, competency mapping, learning, and development.
What Are the Key Differences Between HCM, HRIS, and HRMS?
The sophisticated tools available are a key distinction between HRIS and HRMS systems. While HRIS is more fundamental, delivering management functions for attendance and payroll, HRMS expands those features by providing features like reporting and performance management.
For a smaller business with more specific HR needs, HRIS is a suitable choice. However, user-friendly HRMS software that streamlines HR procedures and provides useful data might be advantageous for a business that wants to scale quickly and improve HR management.
The technology used in HCM and HRMS differs in other ways. With easy-to-use software that expedites activities and boosts productivity, HRMS supports the more extensive and complicated HR actions like performance analytics and recruitment management.
Compared to HRIS or HRMS, HCM is a more comprehensive management platform that includes all HRIS capabilities and provides even more advanced functionality.
The wide-ranging functions of HCM software make it a strategic approach to optimizing an organization’s human capital. Technology for human capital management integrates several elements to manage employee lifecycles and daily HR activities.
One key element HCM focuses on is talent/career development, which is among the top reasons employees resign.
Another example of HCM capabilities is talent development pipelines leading to retirement and pension pots.
Which Approach Is Best for You?
By examining the fundamental distinctions between HRIS and HCM, as well as HRMS, we have cleared up some of the confusion over the HCM vs. HRIS vs. HRMS debate. The next step is to evaluate your business needs and choose the most suitable HR software.
Whether you implement an HRIS, HRMS, or an HCM, your choice should be based on carefully examining the current situation and your business development objectives. You must arrive at an option that effectively links employees and workflows. After all, each employee is impacted by and contributes to your HR services and payroll performance.
With the right choice, administrative functions might be just the beginning. It can support your regular business operations, promote strategic expansion, lessen compliance risk, and increase employee engagement. Advanced technology and analytics can help you take your company to new heights.
You’ll be in a better position to confront labor, data, and technological trends head-on and expand strategically. All of these tools assist in managing staff, regardless of the size of your company. You must decide which objectives you want to achieve with your HR software and let that information guide your selection.
Remember that this is a delicate situation. Making the wrong choice might have significant consequences.
A lack of tailored HR technology can cost your company money and effort and even risk the integrity of its data. Functionality, pricing, data recovery, analytics, regulations, and customer support are a few factors to consider while investing in HR software.
Systems that consolidate several facets of HR in one location boost security, efficiency, usability, and operational cost savings.
Additionally, the correct human resource management software aids in managing HR-related duties for your business and promotes a smooth onboarding process for new hires and prospects.
Productivity and efficiency can be improved by using HR software that offers a user-friendly, self-service platform that supports digital onboarding and workforce management procedures.
Choose Your HR Software Carefully
Workforce management problems, including recruitment errors, orientation, skill development, payroll, employee benefits, performance evaluation, and others, are all addressed by HRIS, HRMS, and HCM.
As a result, the three approaches have overlapping characteristics and functions. Although the terms are sometimes interchanged, HRMS is occasionally regarded as the more comprehensive form of HRIS, and the two generally have more functions in common.
HCM is the most comprehensive option since it includes both standard HRMS components and additional special functions.
It’s important to review the advantages and functions of a solution against your objectives to ensure that it satisfies your organization’s requirements for HR software.
This is a guest post from Pohan Lin:
Pohan Lin is the Senior Web Marketing and Localizations Manager at Databricks, a global Data and AI provider connecting the features of data warehouses and data lakes to create lakehouse architecture via Databricks orchestration. With over 18 years of experience in web marketing, online SaaS business, and eCommerce growth. Pohan is passionate about innovation and is dedicated to communicating the significant impact data has in marketing. Here is Pohan’s LinkedIn.