What is HR Software & How Does It Improve Employee Experience

When human resources was founded over a hundred years ago, no one could have expected it would be the significant contributor to running the world's best companies that it is today.

Likewise, it would have been hard to foresee how complex HR work would be and the incredible workload it would bring to all of us.

It's good that we have technology to help us with this!

A‍s we know now, managing people efficiently is essential for organizational success in a world where continuously increasing competition and technological advances like AI in the Workplace make it hard to catch up.

As companies expand, keeping track of HR-related tasks like employee information management, document routing, recruitment, onboarding, payroll, and compliance becomes challenging.

Remote work adds additional complexities as you may be operating in markets where you're not familiar with local labor and tax laws.

This is exactly where modern HR software comes into play.

HR Software gives you a digital solution to streamline and automate key processes, letting your teams focus on strategic initiatives and employee engagement (at least, in theory, but more on that below.)

Understanding HR Software

HR software, including Human Resources Information System (HRIS), Human Resource Management Software (HRMS) or Human Capital Management (HCM) software, is a digital platform that helps organizations streamline and optimize their HR-related processes.

Gone are the days of manual record-keeping and paper-based systems that companies had to deal with for much of the last century.

Instead, HR software leverages technology to digitize and automate HR tasks, freeing up valuable time and resources for HR professionals to focus on strategic initiatives that drive employee satisfaction, productivity, and organizational growth.

It provides a centralized hub for managing employee information, automating workflows, and ensuring compliance with regulations.

HR software enables HR teams to securely store, organize, and access employee data, improving efficiency, accuracy, and data security.

The Evolution of HR Software: From Manual Systems to Cloud-Based Solutions

HR software has come a long way since its inception in the 1970s when computers were first used to manage human capital data.

In the 1980s, HR systems became more widely available to enterprise clients, and the advent of web-based software in the 1990s further revolutionized HR software accessibility.

Today, most HR software solutions are cloud-based, subscription-based, and easily integrated with other data management programs.

These cloud-based systems offer numerous advantages, including lower upfront costs, faster implementation, automatic software updates, and greater accessibility and flexibility.

Cloud HR software allows HR professionals to access and manage employee data from anywhere via the internet, promoting remote work with collaboration and communication across geographies and time zones.

Key Features and Functions of HR Software

There's a broad spectrum of HR software, as most of the technology employees touch helps them be more productive and engaged, which are key measures HR cares about.

Therefore, HR software encompasses a wide range of features and functions that cater to the diverse needs of HR departments. Some of these are available in the core HRIS system, others are delivered through specialized platforms.

Let's explore some of the key functionalities commonly found in HR software:

1. Employee Information Management

One of the primary functions of HR software is to centralize and manage employee information.

HR software, specifically HRIS Software, provides a secure repository for storing and organizing all employee-related data, from basic personal details to job history, performance reviews, and training records.

This centralized database enhances data accuracy and accessibility, from tens of employees in smaller companies to enterprises using HCMs like Workday with hundreds of thousands people.

It additionally makes HR teams more data-driven, giving you insights (see: what is people analytics) into where new HR programs will be most effective.

In today's global and remote world of work, HR teams often tap into contractor management software to accomplish the above for people who are not full-time, local, employees.

Given this rising trend, HRIS software like Rippling and Deel have integrated managing contracts and remote workers into their HRIS.

2. Recruitment and Applicant Tracking

HR software often includes recruitment and applicant tracking functionality, enabling HR professionals to streamline the hiring process.

These features help manage job postings, track applicant information, schedule interviews, and collaborate with hiring managers.

Applicant tracking systems (ATS Software) within HR software simplify and automate candidate screening, making recruitment more efficient and effective.

Complementing this, recruitment CRM helps organizations build a robust passive talent pool and facilitate internal mobility, maximizing their human capital management capabilities.

And because candidates are increasingly using AI to mass-apply for jobs, talent acquisition teams often tap into AI Recruiting platforms to keep up.

In fact, among the Top 30 HR AI tools, ten are AI Recruiting Software.

3. Payroll and Benefits Administration

No company will do well if it doesn't pay its people fairly, accurately, and on time. This is why payroll is often front and central in HRIS software and dedicated payroll solutions. (And yes, there are even free payroll software!)

Similarly, administering employee benefits, such as health insurance, retirement plans, and vacation policies, can be complex and time-consuming.

HR software simplifies payroll and benefits administration by automating enrollment, managing employee eligibility, tracking benefit usage, and generating reports.

This ensures compliance with regulatory requirements and enhances employee satisfaction.

Global Employee of Record (EOR) platforms like Deel, alongside certain HRIS systems like Rippling, give you a single view of all employees and their payroll status, regardless of location or currency.

4. Onboarding and Offboarding

The state of onboarding is terrible, with Gallup reporting that only 29% of new hires "feel fully prepared and supported after being onboarded."

Efficient onboarding (and offboarding) processes ensure a smooth transition for new hires and departing employees.

HR software facilitates the creation and management of onboarding and offboarding workflows, automating tasks such as form completion, document signing, training assignments, and access provisioning.

Many HRIS systems, as well as dedicated platforms for employee experience management, focus heavily on how to create incredible onboarding experiences.

Tapping into technology to embrace onboarding best practices at scale is another reason HR software is critical, especially in remote onboarding.

5. Time and Attendance Management

Tracking employee attendance, managing timesheets, and calculating payroll hours can be time-consuming.

Worse, if you don't do them well, you may risk not being compliant and face heavy fines.

HR software often includes time and attendance management functionality, allowing employees to log their hours, request time off, and managers to review and approve time entries.

Core HRIS systems, payroll software, and specialist platforms like time management tools streamline the payroll process and ensure accurate employee compensation.

(A manual timesheet template may still be required and preferred for specific use cases, such as short-term contracts.)

6. Performance Management

Performance management is a critical aspect of HR.

It involves setting performance goals, providing feedback, and evaluating employee performance.

HR software provides tools for creating performance review cycles, setting objectives, tracking progress, and documenting performance conversations.

These features let you monitor employee performance and identify areas for improvement, helping them enjoy their work more and boosting the company's competitiveness in the market.

Newer generations of Performance Review Software use AI to tailor recommendations to employees and give managers and HR teams deeper insights, sometimes by simply talking to an AI assistant.

7. Compliance and Reporting

HR departments ensure compliance with labor laws, regulations, and reporting requirements.

HR software helps organizations stay compliant by automating compliance tracking, generating reports, and maintaining proper documentation.

These features reduce non-compliance risk and facilitate audits or legal actions, if necessary.

All this is especially important when hiring global employees in countries where you're not familiar with the local labor and tax laws. The rise of remote work has spurred an entire industry of global Employee of Record providers (EOR.)

8. Employee Self-Service

Employee self-service is an essential component of modern HR software.

It empowers employees to access and update their personal information, request time off, view pay stubs, and access relevant HR documents.

Employee self-service functionality reduces administrative burdens on HR professionals and promotes employee engagement and autonomy.

Employee self-service is another area where AI will further transform the digitization of HR.

New platforms like Leena AI and Moveworks help dig from big knowledge bases and answer employees' questions in human language.

Smaller companies can look to Notion IQ for similar applications, and if you're already with legacy players like Workday or SuccessFactors you may (soon) have these integrated into your HRIS system or ERP.

9. Learning & Development

The more competitive the job market gets, the more learning and development becomes an important retention booster.

Employees will stick around longer if they can see and feel they are growing as a person and professional.

It's also paramount for people to have a sense of what they're growing toward. This is why many of the best learning and development platforms focus on career paths and closing skills gaps.

Especially in the newer, AI-driven L&D platforms like Sana, one of our Top 30 HR AI tools, this means getting highly personalized support in your learning journey, including being able to talk to an AI assistant about questions that come up in your daily work.

10. Skill Analysis and Matching

Finally, a new breed of software for HR, including Gloat and Eightfold, focuses on understanding people's individual strengths so that they can be matched to career opportunities within your company.

These can also be a big help in recruitment, as they leverage taxonomies of over 1 million skills to match candidates and open roles more accurately.

HRIS vs HCM vs HRMS

Even without the complexity of specialized employee experience, performance management, and time-tracking platforms, many overlapping and confusing terms are used to describe HR software.

Especially HRIS, HRMS, and HCM are often confusing (not surprisingly with this acronym jungle), so let's start by defining those:

• HRIS, or Human Resources Information Systems, are platforms that manage core HR functions such as payroll, benefits management, time tracking and reporting, and employee self-service. Most companies have HRIS software.
• HRMS, or Human Resources Management Software, has all of the above but adds additional features that impact the employee experience, such as performance management, succession planning, and employee onboarding.
• HCM, or Human Capital Management, is the most complete set of platforms (and therefore often out of reach for startups and SMEs). It additionally includes an Applicant Tracking System (ATS), Training and Development, and Expense Management, for integrated workforce management, usually leveraged by enterprises.

This table explains the differences between these human resources systems well:

Choosing the Right HR Software for Your Business

Selecting the best HR software for your organization requires careful consideration of your unique needs, budget, and future growth plans.

Here are some key factors to consider when choosing HR platforms, according to experts:

1. Scalability

As your organization grows, your HR software should be able to scale with you. Consider whether the software can accommodate increasing employees, provide additional features, and integrate with other systems.

2. Integration Capabilities

Check if the HR software can integrate with other essential systems used in your organization, such as payroll software or performance management tools. Seamless integration ensures data consistency and eliminates the need for manual data entry.

3. User-Friendliness

Ease of use is crucial for successful adoption and utilization of HR software. Look for intuitive interfaces, customizable dashboards, and user-friendly features that enhance user experience and minimize training requirements.

4. Data Security and Compliance

Ensure the HR software provider adheres to industry-standard security protocols and compliance regulations, such as GDPR or HIPAA. Data encryption, access controls, and regular security audits are essential for safeguarding sensitive employee information.

5. Customer Support and Training

Consider the level of customer support and training the HR software provider offers. Adequate support and training resources are essential for a smooth implementation and ongoing software usage.

6. Pricing and Return on Investment (ROI)

Evaluate the pricing structure of the HR software, including licensing fees, implementation costs, and ongoing maintenance expenses.

Consider the potential return on investment regarding time saved, increased productivity, and improved HR processes.

So what is the best HR software?

The annoying question to this question, unfortunately, is: it depends.

When selecting an HR software provider, consider your organization's needs, budget, and long-term goals.

To make an informed decision, it's also helpful to read reviews, request demos, and consult with industry experts. (And yes, I'll count us in that category – make sure you sign up for my weekly newsletter on the future of work!)

One Platform to Rule Them All?

Stitching together several HR management software often results in a disjointed employee experience and inconsistency in data for your HR teams.

A growing number of CHROs are, therefore, deciding to stick with one central platform for all HR administration, sometimes extending to performance management and learning & development.

In an interview with HR data guru David Green, Workweek Chief People Officer Hebba Youssef said about this:

"HR people are using anywhere up to 25 tools.  And if those tools don't all talk to each other somehow, then you're spending a lot of your time trying to do something that could be done for you if you just stayed in one or two systems that talk to each other." – Hebba Youssef, CPO, Workweek

She believes this so much that she is sticking to one system in her own company, even if it doesn't fulfill every need:

"I have one system right now and I'm going to be very cautious before I implement anything else.  There are things I want to do that that system doesn't do, and I've had to make the decision not to do them for the time being. I've weighed the pros and cons quite heavily, because I don't want to introduce mayhem and chaos that will never scale properly for just this tiny little thing I want." – Hebba Youssef, CPO, Workweek

This vision aligns well with Josh Bersin's visions of integrating all HR does into a system in the metaphorical sense of the word. As Josh shares in his blog post on the topic:

"As we talk with HR teams in many large companies, I realized we are ready for a major change. HR departments don’t just need to be more “agile” or add product managers, design thinking, and iterative design to the profession. We need to rethink HR as a “system,” not a set of “services” or “offerings,” and we need to interconnect them together in a solution-oriented, real-time way." – HR Tech Guru Josh Bersin

Popular HR Software Companies

The HR Software market offers a wide range of options to choose from.

Here are some popular HR software companies known for their innovative solutions and customer satisfaction:

HRIS

As mentioned above, most companies have an HRIS. Choosing the right one means offering a better experience for your employees, and your own HR teams, as modern HRIS software better capture what companies need from their core HR system. Some of these include:

1. BambooHR
2. TriNet HR (formerly Zenefits)
3. Rippling

See our in-depth review of the top HRIS Software.

HCM

If core HR isn't enough, you're likely in de mid-market, enterprise, or government sector and you'll likely have your eye on a much larger platform that you can customize to your needs. Some popular choices include:

1. Workday
2. SAP SuccessFactors
3. Oracle HCM Cloud

Recruiting Software

Recruiting software is essential to streamline hiring workflows, enhance efficiency with data-driven insights, and optimize career portal to attract and engage with candidates. Top recruiting software to consider are:

1. Greenhouse (ATS)
2. Workable (ATS + CRM)
3. Gem (CRM)

Explore our best picks for Recruiting Software and Recruiting Software for Small Business.

Given the rise of job application software and the increasing rate at which job boards make it easy to apply, your Talent Acquisition team would likely love to get some AI support. Rising starts here include:

1. Paradox AI (Olivia)
2. Textio Loop
3. Skillate

See our in-depth review of the top AI Recruiting Software.

Payroll Software

If payroll isn't part of your HRIS or HCM, or it doesn't meet your needs, then you'll want a dedicated payroll solution. Because not every company has the need or budget for a full-service payroll solution – so I've included two free options as well.

1. Paylocity
2. Gusto
3. OnPay (budget)
4. Payroll4Free (free)
5. HR.my (free)

Read our detailed review of the top Free Payroll Software.

Contractor Management Software

If you're dealing with contractors, especially globally, then you'll likely want to tap into a contract management solution. Here are some of the best options:

1. Deel
2. Remote
3. Papaya Global

See our in-depth review of the top Contractor Management Software.

Performance Review Software

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If the performance review module in your HRMS doesn't suffice, then you will likely want to embrace a dedicated performance review software. Some of the most popular choices here include:

1. Culture Amp
2. Lattice
3. Leapsome

Read our detailed review of the top Performance Review Software.

For a much more in-depth list of reviews of all HR software, see our guide to HR Software in 2024.

The Future of HR Software: Embracing Technology for a Better Work and Employee Experience

As technology advances, HR software will play an increasingly vital role in optimizing HR processes and enhancing the employee experience.

Here are some emerging trends and technologies shaping the future of HR software that I see today:

1. Artificial Intelligence (AI) and Machine Learning

AI and machine learning algorithms are revolutionizing HR software by automating repetitive tasks, improving data analysis, and enhancing decision-making processes. AI-powered chatbots, for example, can provide instant support to employees, answer frequently asked questions, and streamline HR inquiries.

2. Remote Work and Collaboration Tools

The COVID-19 pandemic has accelerated the adoption of hybrid remote and remote work models, making remote work and collaboration tools a crucial aspect of HR software.

These tools facilitate virtual communication, project management, and remote team collaboration, ensuring seamless workflows and productivity regardless of location.

3. Employee Engagement and Wellness

HR software is increasingly focusing on employee engagement and well-being.

Features such as employee recognition programs, wellness initiatives, and surveys for measuring employee satisfaction are becoming integral parts of HR software solutions.

These features promote a positive work culture and help organizations attract and retain top talent.

4. Analytics and Predictive Insights

Data analytics and predictive insights are transforming HR software into strategic decision-making tools.

HR professionals can leverage analytics to identify trends, predict workforce needs, and make data-driven decisions.

Predictive analytics can help identify high-performing employees, anticipate turnover rates, and determine training requirements.

Wrapping Up

HR software has revolutionized how organizations manage human resources, enabling streamlined processes, increased efficiency, and improved employee experiences.

HR software offers a comprehensive suite of features to support HR professionals in their daily tasks, from employee information management to recruitment, onboarding, performance management, and compliance.

As technology continues to evolve, HR software will continue to adapt, incorporating AI, remote work tools, and advanced analytics to shape the future of HR management.

By embracing HR software, organizations can optimize their HR processes, drive employee engagement, and create a happier future of work.

FAQ: HR Software and Human Resource Management

What is HR software?
HR software, or Human Resource Management Software, is a digital platform designed to help organizations manage and optimize their HR processes, including employee information management, recruitment, payroll, and more.

How does HR software improve HR management?
It streamlines operations by automating routine tasks, centralizing employee data, and enabling more efficient recruitment, onboarding, and performance management processes.

What are the key features of HR software?
Key features include employee information management, recruitment and applicant tracking, payroll and benefits administration, onboarding and offboarding processes, performance management, and compliance tracking.

Can HR software support remote work?
Yes, most modern HR software solutions are cloud-based, allowing HR professionals and employees to access and manage data from anywhere, facilitating remote work.

Is HR software suitable for all company sizes?
Yes, HR software is scalable and can be tailored to meet the needs of businesses of all sizes, from small startups to large enterprises.

How does HR software help with compliance?
HR software helps ensure compliance with labor laws and regulations by automating compliance tracking, generating necessary reports, and maintaining proper documentation.

Can HR software integrate with other systems?
Yes, many HR software solutions offer integration capabilities with other business systems, such as accounting and performance management tools, for seamless data flow and efficiency.

What should I consider when choosing HR software?
Consider factors such as scalability, integration capabilities, user-friendliness, data security, customer support, and pricing to find a solution that meets your organization's needs.