Human resources technology

When it comes to an organization’s people, few choices are as crucial as selecting the right HR technology. This decision can be complicated, however, because of the different solutions available on the market. Individual software providers aside, there are three primary options – human resource information systems (HRIS), human resource management systems (HRMS) and human capital management (HCM) systems. Each of them can process employee information and connect different parts of an organization, but there are nuances in their capabilities. Ultimately, employers must determine the breadth of technology required to meet their HR management needs.

How do employers choose between HRIS, HRMS and HCM solutions?

What is an HRIS?

Constructing an HCM tech stack often begins with HRIS, or core HR. It is the central hub for employee data, encompassing personal information, work history, organizational structure and payroll details. HRIS also handles essential functions, such as tracking time and attendance, managing employee leave, administering benefits, and supporting compliance.

HRIS benefits

An HRIS automates processes, alleviating manual workloads and streamlining operations. Solutions with self-service features have the added benefit of empowering employees to manage their data, request time off and access payroll information.

What is an HRMS?

As organizations mature in their HR strategy, their tech stack often expands to HRMS, which offers more capabilities to employees and leadership teams than an HRIS. Features commonly include payroll, time and attendance tracking, talent management and reporting.

Payroll

Accurately paying workers on time is one of an employer’s most essential obligations. An HRMS supports this responsibility in the following ways:

• Precisely calculating and processing payroll
• Generating payroll reports and tax filings
• Integrating with time and attendance systems to keep track of employee hours
• Allowing employees to access their pay statements and tax documents through self-service
• Mitigating legal risks by supporting compliance with tax laws and labor regulations

Time and attendance

An HRMS automates time tracking and keeps accurate employee attendance records to help support compliance with employment laws and internal policies. It may have self-service features and mobile capabilities so employees can view schedules, request time off and easily update their information from personal devices.

Talent

Talent software consists of talent acquisition and talent management. Together, they play a crucial role in an HRMS tech stack by helping attract, engage, develop and retain employees. Talent solutions also automate tasks, streamline fair hiring and management practices, and foster positive employee experiences.

Reporting

HRMS reporting provides valuable insights into employee performance, attendance, compensation and benefits. This data enables organizations to identify successes and areas that need improvement. They can then make more informed decisions and adjust their strategy to impact the business positively.

HRMS benefits

An HRMS is like an efficient coordinator, streamlining routine HR tasks for employers and employees alike. The result is seamless data flow, increased efficiency, consistent practices, enhanced reporting and simplified IT management.

What is HCM?

HCM solutions go beyond the essential tools included with HRIS or HRMS. They manage employee data, payroll, time tracking, benefits, talent, performance development, and more. By combining these functions into one cohesive unit, HCM solutions provide employers with a comprehensive view of their workforce.

HCM benefits

If HCM strategy is the blueprint for how employers manage and support their employees, then an HCM system is the toolbox that helps them build that strategy. Employers can expect the following benefits from such a solution:

• Smoother processes – Simplifying workflows and reducing manual tasks
• Employee support – Enabling employees to manage their own information and engage with the organization
• Insightful metrics – Providing data for tracking performance and making informed decisions
• Compliance ease – Helping HR departments stay on the right side of regulations while minimizing paperwork

When is it time to upgrade to an HCM solution?

Organizations often consider adopting an HCM system during growth, strategic planning or cost-cutting phases. Here’s why:

• As operations expand, existing systems struggle with increased workloads, so new solutions are sought.
• Operational efficiency gains importance when manual tasks hinder productivity and cost-effectiveness, driving the search for streamlined processes.
• Focusing on employee satisfaction leads to pursuing user-friendly interfaces and self-service options.
• Amid evolving compliance complexities, automated systems help ease regulatory burdens and mitigate errors.
• Data-driven insights further motivate the search for HCM systems because robust analytics consolidate scattered information and simplify decision-making.

What is the difference between HCM and HRMS and HRIS?

Compared to HRIS or HRMS, HCM software expands the HR tech stack in the following ways:

• Adding to core HR functions: HR service management, employee self-service, organization charts
• Going beyond payroll processing: Compensation, pay equity, continuous pay, financial well-being, benefits administration, rewards and recognition
• Advancing time and attendance: Scheduling, labor forecasting, time clock and location management
• Furthering talent strategy: Recruiting software, performance management, learning systems, succession planning, internal mobility, employee surveys, employee engagement, employee communications
• Moving from reporting to forecasting: People analytics, workforce intelligence

HRMS vs. HCM vs. HRIS: Are there any similarities?

Deciphering between HRIS, HRMS and HCM solutions may seem overwhelming, but employers don’t

necessarily need to opt for the priciest or most advanced options. The following four elements are common with most HR systems:

• Strategy-informed HR – Aligns HR practices with organizational goals and strategies to enable leaders to develop and implement initiatives that support the overall business strategy
• Focus on employee experience – Prioritizes the employee experience through self-service portals, mobile access and intuitive interfaces to empower employees and improve engagement, satisfaction and productivity
• Consistent compliance – Supports compliance with employment laws, regulations and internal policies to help organizations stay up to date with ever-changing requirements
• Data-driven approach – Leverages data analytics to provide insights into workforce trends, performance, and engagement, allowing organizations to make informed decisions and align HR strategies with business objectives

How do employers choose between HRIS, HRMS and HCM solutions?

Purchasing HR technology – whether it’s HRIS, HRMS or an HCM solution – comes down to finding the best fit for an organization’s needs and workplace culture. A structured approach, such as the following, can lead to a successful software evaluation and selection:

1. Identify business needs – Clearly outline the organization’s priorities to evaluate solutions based on how well they meet HR and payroll requirements.
2. Define success – Establish the criteria and metrics that will determine whether an HR software solution is effective and aligns with the organization’s goals.
3. Conduct thorough research — Gather information on different HRIS, HRMS, and HCM systems, including their strengths, weaknesses, and reputations in the market.
4. Evaluate product fit — Look for features, functionalities and customization options important to the organization’s HR processes.
5. Understand integrations — Assess the compatibility and connectivity of the HR solution with other existing systems and applications in the organization’s technology ecosystem.
6. Build a shortlist — Narrow the list of potential solutions based on their reputation and how well they align with organizational requirements.
7. Request proposals – Communicate the expectations, evaluation criteria and desired implementation timing to the solution providers on the shortlist.

Frequently asked questions about HRIS vs. HCM vs. HRMS

Are HCM solutions and HRIS the same?

An HRIS is the core of an HCM tech stack, but they are not the same. An HRIS is limited to employee data management and basic HR functions, such as time tracking and benefits administration. HCM software, in contrast, is a robust solution that covers workforce management from hire to retire and has advanced features, like labor forecasting and pay equity analysis.

How should a business choose between HCM, HRIS and HRMS?

When acquiring HR technology, employers should consider their organization’s size, budget, and

desired functionality. It also helps to identify problems, explore different features, and evaluate products through demos. Devoting time and effort to these endeavors enhances the probability that the technology selected – HCM, HRIS or HRMS – syncs with the organization’s strategies and objectives and fosters lasting success.

This guide is intended to be used as a starting point in analyzing the difference between HRIS and HCM and HRMS and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax guidance or other professional services. Please consult with your legal counsel.