HRIS, HRMS, HCM...What is the Difference?
Deciphering the differences between these software solutions

Human resources (HR) software is vital to the success of any growing company. This software can help you manage all the functions of human resources at your company. If you are a small business, you may not need an HR solution now, but you may need one as your business grows. There are a variety of HR technologies in the space, and it’s important to know the key differences between each so you can make the best decision for your growing business. In this article, we'll look at the most popular HR technology solutions – HRIS, HCM and HRMS. We’ll talk about what each of these solutions means and then recap their differences. But first, let’s briefly touch on the benefits of HR software.

What are the benefits of using HR software?

If you’re new to HR software, there are many benefits that an HR software solution can provide to you and your business. Let’s look at a few of the benefits HR software can provide:

Improves efficiency and productivity – many HR software systems help automate many common HR tasks, helping you or your HR department streamline processes and focus less on the administrative side of HR. That can increase productivity, as you or your HR professionals can focus on more complex tasks.

Boosts the employee experience – HR software can make it easy for employees to request PTO or submit expense reports. These functions can be even easier with HR software integrations. HR software can also help employees with their performance and reviews, as some software can even come with educational modules to help employees sharpen their skills. This can boost employee engagement at your business, allowing them to gain valuable skills in the process.

Saves your business money – HR software can help your bottom line, as payroll and benefits costs are two of the largest expenses you’ll face as a business owner. By automating some of these processes, you can reduce staffing or redirect your employees’ focus to lower labor costs.

Streamlines the hiring process – HR software can help you recruit and hire, so you can keep your thumb on the pulse of potential candidates. You’ll also be able to track applicants throughout the entire hiring process. Some HR software even lets you automate your candidate communications, keeping frequent touchpoints between your business and prospective employees.

Helps you maintain compliance – Compliance in HR is important, and small business owners like you may not have time to stay on top of all the latest rules and regulations. Not following these regulations can cost you money. Luckily, many HR software solutions can help you maintain compliance with updates containing all the latest developments.

Monitors time tracking, personal time off, and sick leave – If your business records employee hours, whether to bill clients or  pay employees who receive hourly compensation, HR software can help ensure accurate time tracking. HR software can also give your employees access to their vacation, personal time off and sick leave, all in one place. 

Improves security and risk management – HR software can also help you protect your business with a customizable record management system of employee training, workers’ compensation claims, and disciplinary actions and notices. Some HR software also has security features built in, with some providers offering role-based access to certain data, which further protects employee data.

Aids in decision making – With HR software, you and your HR staff can access a variety of metrics on your workforce, allowing you to pull reports to make informed decisions. This could mean hiring more experts in one area or shifting the focus of one or more employees. The more data you have, the more sound decisions you can make for your business.

As you can see, there are plenty of benefits for your business to utilize HR software. But not all HR software is the same, so let’s take a look at each type of HR software. First up, HRIS.

What is HRIS?

An HRIS is a human resource information system. This type of software uses a comprehensive database of employees to track, manage and automate many basic HR functions. Because this system works off a lot of data, it can help provide digestible information and insights to HR leaders and organizations. The HRIS helps to track people, procedures and policies. Here are some of the biggest HRIS functions:

• Data management (from work permit information to tax data)

• Absence management and employee workflows

• Benefits administration

• Self-service portals where employees can update their personal information

• Talent acquisition and applicant tracking

• Training and development implementation

• Automating HR actions like PTO requests, performance review scheduling, employee feedback, etc.)

As you can see,  HRIS software helps streamline a lot of the simpler processes in HR and provides an opportunity for HR professionals to focus on more strategic and complex work. Now, let’s look at HCM.

What is HCM?

HCM stands for human capital management. This type of system focuses on the most valuable asset of a company – the people. The term HCM reflects both the strategic focus of a company on its people and the technology that enables this focus. Essentially, if it involves employees or workforce management, an HCM system can do it. Usually, HCM software has tools for talent acquisition and talent management and organization, enabling your HR team to make better HR decisions including onboarding, performance tracking, compensation and even offboarding. Here are some of the main tools available in an HCM system:

• Recruiting and workforce acquisition – Covers the whole recruitment process with an applicant tracking system (ATS)

• Employee management – Includes time and attendance tracking, management of employee information and the employee life cycle, benefits and payroll administration, as well as performance management

• Documentation delivery – Provides access to company policies and procedures, managing documents and company knowledge base

HCM is more than just the software to manage HR processes. It’s a strategic approach to managing your people and software is just one of the pieces that can help. Many HCM systems can even be tailored to fit your company’s needs. Now, let’s look at HRMS.

What is HRMS?

The last type of software is HRMS, or human resource management system software. The broadest of software systems, HRMS software typically offers all of the features you’d expect to find from an HRIS and HCM system. HRMS systems can also incorporate payroll systems and other labor management tools. One of the biggest advantages of an HRMS is that it seamlessly integrates all of the core HR functions into a single suite. Another advantage is that HRMS takes data security and authentication to another level, implementing steps or safeguards to limit access only to authorized users. Here are some of the key features of an HRMS:

• Payroll management

• New employee recruitment and onboarding

• Maintaining employee attendance records

• Performance reviews and employee retention

• Benefits administration

• Learning and development

• Employee scheduling and self-service

Now that you’ve seen what each software can do, let’s contrast them to find the most significant differences between software types and which HR managment software may be right for your business.

HRIS vs HCM vs HRMS

When it comes to choosing the right software for your organization, it’ll depend on your business needs. Let’s look at which solution may be right for you.

At the base level is an HRIS. It comprises all the basic HR functions and is a great start with HR software. It gives you access to recruitment tools, benefits administration, self-service portals, personnel tracking, training and development. For many small businesses, these tools may be all that you need.

However, if you need more capabilities from your HR software, the next step would be an HCM solution. In addition to all the HRIS features, an HCM provides even more support. HCM programs add capabilities for employee performance, onboarding, more robust analytics, and even HR services and support.

Finally, the most robust HR software solution is typically an HRMS. It provides you with all of the capabilities of HCM and HRIS systems and can incorporate time and labor management programs and payroll processing functions for the most complete HR software solution. As the most robust solution, this may be the best option for larger corporations or businesses that need to manage many employees. 

As you can see, there are HR software solutions that can fit your business needs. However, these are not one-size-fits-all solutions, and finding the right solution for your business will take some consideration. You’ll need to define your business’s HR needs and then compare the options to see which solutions best fit your business. 

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