What is a HRMS?

A human resources management system, or HRMS, is a collection of software programmes used to manage human resources and related procedures across the employee lifetime. A human resource management system (HRMS) allows a company to completely comprehend its personnel while remaining compliant with evolving tax laws and labour regulations.

HR leaders and employees are the major users because they are in charge of day-to-day workforce operations as well as compliance and performance reporting. HR is not the only department that benefits. Companies can provide self-service for typical activities to managers and employees, which is a significant selling point for younger hires. An HRMS can be used by executives to generate data on worker trends and their business implications.

Given that HR-related costs are among the most expensive that a firm incurs, HRMS integration with the accounting system is crucial for finance departments. Leading suppliers will go above and beyond basic accounting to assist a company in extracting more financial insights from HR data.

HRIS vs HRMS

You may hear the terms “HRIS” (human resources information system) and “HRMS” used equally. The origins of this can be traced back to the 1980s, when IT departments were widely referred to as management information system (MIS) departments. When HR information and processes were automated, a subset of MIS called HRIS was established.

Electronic recording and maintenance of employee records was a critical HRIS function. As a result, many HR professionals use the abbreviation HRIS to indicate when human resource records, processes, and reporting become electronic through the use of software.

HRIS became HRMS as technology advanced and the system expanded beyond keeping personnel records. Today, the terms are still used interchangeably to describe software systems that capture employee data and automate HR activities at businesses.

HRMS’s History

Payroll was the first HRMS function to be digitised in the 1970s, as corporations sought to automate human resource management. However, mainframe technology was required to compute a worker’s earnings, withhold deductions, print a paper check, and maintain payroll liabilities. The payroll process would not become entirely electronic until the early 2000s, with the widespread adoption of direct deposit and employee self-service.

In the late 1980s, PeopleSoft was among the first to pioneer a more comprehensive HRMS system. It provided employee record management, recruiting, time and attendance, benefits administration, compensation, compliance reporting, and other capabilities to help HR managers automate more of the employee lifecycle and make smarter workforce decisions, in addition to payroll.

With the rise of the internet in the late 1990s, the benefits of automation were extended to even more HR operations. Electronic job boards, for example, have supplanted paper-based help-wanted ads, providing recruiters and candidates with new avenues to engage. By the 2010s, cloud technology had become commonplace — HR departments of all sizes could now purchase a suite of applications without investing in costly computer hardware or IT people to manage and maintain the system.

What comes next?

More HRMS innovation is expected in 2020 and beyond. Many current systems include machine learning and predictive analytics, and the arrival of real artificial intelligence will enable businesses to forecast future skill requirements, detect workforce trends, and match best-fit individuals to open positions more quickly.

Why is HRMS important?

While HR expenses, particularly office space, are changing due to transitions to a work-from-home model, organisations must still precisely measure labour costs to maintain revenue per person KPIs. An approximate estimate says that base pay plus employment taxes and benefits typically add up to 1.3 to 1.5 times annual salary.

Furthermore, organisations with overburdened human resources departments should implement self-service capabilities. There’s no reason for an HR professional to spend time aiding a manager with routine changes to hours worked, or assisting employees in accessing paperwork.

Fortunately, reliable financial data reporting and secure self-service are only two of the many advantages of a contemporary human resource management system.

An HRMS’s Functions

When deciding which HRMS is best for your firm, think in terms of functional components. Modern systems, in general, cover seven aspects with varied degrees of emphasis.

1. Candidate management

It refers to the process of making job offers to applicants and promoting your brand to both the outside world and present workers who may want to apply for internal opportunities or give recommendations. Critical for firms that prioritise the candidate experience — from applying to resume management to interview scheduling to making offers and onboarding.

2. Employee engagement

People who are more engaged tend to create higher-quality work and completely embrace the company’s values and objectives, so how an employee communicates with leadership and coworkers is critical. The HRMS is frequently used to finish a training course, learn a new skill, chart a career path, achieve recognition, or become a mentor.

3. Employee management

There’s a reason why this job is frequently referred to as “core HR.” Provides a centralised interface to aid in the analysis, reporting, and compliance procedures. It is the place where you organise your workforce into organisational units such as departments or locations, set reporting connections between managers and employees, and match payroll to accounting cost centres. Personal information is captured and stored here, and this function is at the heart of initiatives to provide employee self-service, maximise reporting, and improve HR service delivery.

4. Optimization

A key selling feature is using information from the HRMS to create a vision for the future workforce. It is also the least-used feature of a standard HRMS. The true significance of this job is frequently shown during a merger or acquisition, during significant economic swings in either direction, or when executives leave. Companies that take a proactive approach to workforce optimization are more resilient to change, retain more top talent, and have higher employee engagement.

5. Payroll

Calculating earnings from gross to net or net to gross, withholding specific deductions, and sending payments are all routine functions of the HRMS. Payroll functions include benefit selections as well as employee and employer expenditures. Tax filing and deposits are also automated with full-service payroll systems. Employees can use self-service tools to make changes to their elective deductions, direct deposit accounts, and tax withholdings, as well as retrieve copies of their earnings statements, without requiring HR support.

6.Workforce management

HR teams use this to track employee growth, management evaluations, and disciplinary actions, as well as to record time and attendance and ensure the organisation provides a healthy and safe work environment. This is also where the functions of compensation planning, performance management, learning, and incident recording are located. Human resources can design timesheet systems, overtime rules, time-off policies, and approval processes to maximise automation, control, and efficiency. This job also includes a method for reviewing staff performance and setting goals.

7.Contingent workforce management

Related to main workforce management and essential for businesses where not all employees work full-time. Contractors, consultants, interns, and temporary workers supply specific expertise, assist with local community initiatives or university programmes, and deal with labour shortages. Because these employees are not always on the payroll and are usually ineligible for benefits, the HRMS does not fully manage these relationships; however, the work they do contributes to company success, and it is important to track how many contingent employees are on board at any given time as well as the total costs.

Once you’ve determined which functions are most important, it’s time to go into specific features.

HRMS Advantages

HRMS feature sets, like broad functionality, can vary greatly from provider to provider, and combining various systems may limit the total system. HR, IT, finance, and other stakeholders should carefully consider which of these HRMS functions are essential for the organisation.

1. Benefits administration

Assists human resource professionals in developing programmes, configuring eligibility rules, and making payments or deposits to benefits suppliers. Additionally, self-service open enrollment is available, and benefit expenses are integrated with accounting.

2. Centralized employee records

Employee records are centralised when they are stored, updated, and maintained in a single location. Allows for better reporting and reduces the expenses of compliance and audit preparation.

3.Learning management

Learning management elements are intended to assist employees in acquiring or developing skills through course administration, course and curriculum development, testing, and certifications. It also allows businesses to roll out and track mandatory compliance training.

4. Reporting and analytics

Allows you to generate operational reports to track HR data, complete compliance reporting, create key performance indicators (KPIs) to measure HR process performance, and incorporate HR metrics into financial dashboards for company-wide analysis, planning, and decision-making. Look for the option to create ad hoc reports as well.

5. Rewards

Calculate salaries, hourly wages, variable payments for bonuses, overtime, sales commissions, shift differentials, and merit increments while deducting regulatory and elective deductions to produce accurate net payments to employees at regular intervals. This feature set may offer benefits such as matched retirement fund contributions or mobile phone reimbursements.

6. Talent acquisition

Before handing new hires off to a generalist or the hiring manager to begin onboarding, recruiters can build career pages on the company website and intranet, create job requisitions and descriptions, manage positions, integrate open positions with job boards, manage resumes, track applicants through the recruiting process, extend job offers, perform background checks, administer pre-employment screenings, and create job application forms.

7. Management of talent

Allows HR professionals to develop and evaluate personnel through performance evaluations, goal management, and the delivery of competency and skills tests.

8. Attendance and timing

Allows for the processing of time-off requests and the management of time-off balances, employee scheduling and absence management, and the integration of timecards with payroll and projects.

9. The user interface

A user-friendly interface is essential since an HRMS can be made available to the entire workforce. Employee and manager self-service, mobile apps, localization, personalised dashboards, workflow automation, role-based access controls, and notifications are all available in today’s systems to keep employees engaged and questions to the HR or IT departments to a minimum.

10. Workforce planning

Allows you to plan and budget for workforce costs and compare them to actual expenditures for both current and future scenarios. Also useful for identifying talent gaps, developing succession plans, and prioritising recruitment efforts.

Specialized HRMSs may have additional functionality, and not every organisation requires a fully loaded system. If you opt to employ various providers to create the HRMS, make sure that all of the products have an open architecture that allows for bi-directional data interchange, required integrations, and file uploads across the system. Using a single HRMS provider eliminates the need for one-time integrations, which can be costly, complex, and difficult to protect and upgrade.

We’ve talked about features and functioning so far. Those who need to persuade management that an HRMS is a good investment, on the other hand, should prepare for a higher-level business ROI talk.