HRMS Software Development: A Step-by-Step Guide

There are many human resource management software available on the market.

However, finding the one that matches your needs can be challenging.

In this case, you can contact specialists to develop your customized human resources management system. This solution will help you monitor your core HR processes, including recruitment, payroll, performance, administrative tasks, and benefits.

In this guide, we tackle key questions like:

• What are the current market conditions for launching a human resource management system startup?
• How can I develop my own HR software from the ground up?
• What does the human resource software development entail?
• Is building an HR software in-house or using an external team more cost-effective?
• How do I find the right development partner?

We’ll also explore the main features of human resource management systems and estimate development costs in different countries.

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Why Now is the Perfect Time to Launch an HRMS Startup

There are two key factors that make launching an HR software in 2025 a good idea.

On the one hand, the trend towards globalization showed that remote is the future of any business, especially in the field of IT and software development.

We can take a look at these processes and HR operations as an example:

• Company’s performance management
• Employee performance tracking and payroll management via payroll software
• Remote hiring process and talent management

On the other hand, the pandemic changed the way people work. The massive shift to the remote work model placed a significant demand on HR software. How do we know?

• Ravish Agrawal, CEO of Able Jobs, revealed that less than 15% of their entry-level interviews with customers were online before the pandemic, but now it’s more than 75%.
• Regarding the digital touchpoint, less than 20% of companies used it before COVID-19, while now it’s more than 60%.
• HR departments started to aim at employee retention, which increased the need for employee engagement.
• The global HR software market is expected to reach $35.68 billion by 2026, growing at a CAGR of 11.7% from 2021, driven by increasing demand for cloud-based HR solutions and AI-enabled platforms.
• According to HR Technologist, in 2023, nearly 80% of companies were using HR technology to improve employee engagement and productivity. This highlights the widespread adoption of advanced HRMS systems across various industries

Now, let’s take a look at the core HR software functions.

Core HRMS Functions

HR systems are designed to handle various aspects of human resource management.

They make processes more efficient and free up HR professionals to focus on strategic tasks.

Let’s dive into the core HR functions that an HRMS supports.

Recruitment And Hiring

HRMS helps organizations manage the entire employee lifecycle.

From recruitment and hiring to benefits and payroll management.

HR software solutions simplify posting job openings, screening candidates, and scheduling interviews.

For example, the hiring team can create dedicated career pages on the company website, post job openings, manage job listings, and organize open positions using worksheets and resume reviews.

The system also tracks candidates during the recruitment process. It extends job offers, conducts background checks, performs pre-employment screenings, and even generates application forms.

By the time a candidate meets with the recruiter, all formalities are completed through the system.

This can help make the hiring process more streamlined and efficient for both candidates and recruiters.

In fact, for companies looking to streamline hiring, choosing the best recruitment CRM can make all the difference in talent acquisition.

Workforce Management

Once you’ve hired your employees, human capital management (HCM) helps you manage all your data.

With such systems, employee records, benefits, and performance tracking are all automated.

HR can access and update personal info, job history, and benefits enrollment in one place.

Employees can use the system to view their benefits and update their info to reduce the administrative tasks loaded on HR specialists. Everyone wins!

Payroll And Benefits

Payroll and benefits can be a minefield of complexity and errors.

Here’s where HRMS software comes in. It automates the payroll process and makes sure employees get paid correctly and on time.

This type of software also helps with benefits administration, from enrolling employees in health insurance plans to managing retirement contributions.

An HRMS can calculate payroll taxes and deductions, generate payslips, and ensure tax compliance.

This reduces errors and keeps you compliant.

Performance Management

The HR department can facilitate goal setting, provide feedback, and evaluate employee performance, all made quick and easy using HRMS.

For example, managers can set performance goals within the system, track their progress, and give regular feedback to the employees

Also, an HRMS can send reminders for performance reviews and store evaluation results.

These regular reminders make it easier to monitor employee performance over time and identify areas for improvement.

Training And Development

As an organization grows, so should the employees grow and develop over time.

HRMS systems can enhance employee training and development.

With HR software, companies are able to manage training programs and career development initiatives.

The system can track employee progress in training courses, schedule training sessions, and provide resources for skill development.

As you can see, an HRMS is a vital tool for managing various HR functions efficiently.

These systems help companies streamline their HR processes, reduce errors, and focus on improving HR initiatives.

They make it easier for HR specialists to handle tasks like recruitment and employee management, payroll, performance management, employee engagement, and training.

How to Build HR Management Software from the Ground Up

The first thing you should remember about human capital management system design and development is that it requires time, effort, and money.

After all, you can consider this software like real estate – your private property. And you are in charge of its construction and arrangements.

But unlike real estate, investment in a startup can pay off a hundredfold in a short time. So it is better to take enough time to create a high-end product that your customers will love.

That’s why it is crucial to think through all the details, starting from the business analysis, design, software development, and testing stages.

The Discovery Phase

Among the various stages of software development for the HR team department, the project discovery process is fundamental.

The team identifies and analyzes requirements and business goals to propose a technical implementation, set project timelines, and estimate development costs.

As a founder, you should start by identifying your target audience and analyzing your competitors.

The goal here is to think through the concept of your own “betterness” instead of existing solutions.

And it is not only about other digital platforms but also about other non-digital ways to solve the same problem.

We have prepared a list of questions to help you in the research phase:

• Who is the primary target audience?
• What is the biggest problem the customer currently has?
• What have they done in the past to resolve this problem, what went well, and what do they want to change?
• What have they paid in the past to solve this problem?
• What is the ideal outcome they want to experience if the problem were perfectly solved?

If you’re looking for strategies to boost your remote team’s performance, check out this guide on high-performance remote teams.

The discovery phase involves several steps. Let’s take a closer look at each one.

1. Define What Type of HR HRMS Platform You Want to Build

Moreover, the vision, of course, determines the complexity of the future human resource management system.

The complexity of the platform directly determines the final cost of the development of your custom HR web or mobile application.

Among other options, evaluate the following software development opportunities:

• Recruiting-focused
• Onboarding-focused
• Performance-focused
• Talent-focused
• Employee training-focused software
• Administrative-focused
• Workforce management-focused
• Employee management-focused
• Benefits administration-focused

As for examples of the recruiting-focused software, we can mention such companies as:

• Yello, which provides employee referrals, schedule automation, video interviewing features;
• Beamery, a British startup that is among the ten fastest-growing companies in the UK and specializes in self-styled recruitment marketing software for fast-growing companies; For companies looking to streamline hiring, choosing the best recruitment CRM can make all the difference in talent acquisition.
• Avature, a platform for Global Talent Acquisition with more than 650 customers.
• FactoHR, an automated hire to retire solution, helps to find the most skillful talent by incorporating the use of all the types of hiring approaches, resume parsing, smart duplication detection, and applicant tracking functionalities. In fact, for companies scaling quickly, implementing an applicant tracking system can make all the difference.

2. Prepare Requirements Documentation

Creating documentation is an essential step because the textual description of the project determines how it will work.

The purpose of the documentation phase is to prepare quality business and technical requirements. The technical ones include the design and the code requirements.

Based on the requirements file, the team will define what and how they have to build. And this will be a base for future estimations.

There are several ways to work with documentation. On the one hand, you can try to create the requirements yourself.

On the other hand, what happens much more often is that the team, in cooperation with you, will make the requirements.

The second option will be more development-friendly and streamline the creation of software solutions.

3. Define Tech Stack

The technology stack is a set of development tools, languages, and frameworks. It directly affects the user experience and overall performance of your future SaaS platform.

If you’re deciding between software models, this comparison of the ASP model vs SaaS model can help you choose.

The choice of development technologies depends on the requirements documentation. There are a few things to understand.

There is the server-side, the backend, invisible to the end-user, where data processing occurs. And the client-side, the frontend, where the user interacts with the application interface in real-time.

The choice of development language depends entirely on the business goals. For startups, for example, rapid growth and scaling are critical.

But other companies have other goals. Some even work with legacy languages, so-called legacy code.

Struggling to pick technologies for your project? Discover how to choose a tech stack with our expert advice.

4. UX Design of a custom HRMS

The UX design visualizes the first workflow of how your future application will work. It is based on the mix of your vision, user research, and documentation.

The more detailed preparatory work you and your team do, the more valuable the business logic of the future product will be in the output.

The UX designer’s tasks in this stage include:

• User journey. This step is about planning the screens that the users will need to achieve their goal.
• Layout and arrangement of information. This step is about building a flowchart or mindmap (site map or application).
• Low-fidelity wireframes. Creating very rough drafts of the interface
• High-fidelity prototypes. Elaboration of more detailed, with a grid and typography, but still black-and-white drafts of interface functionality and making it clickable.

In this way, users get an application where everything is laid out while customers receive a product that can be rapidly developed.

After the discovery phase, the development phase begins.

Great HR tools start with great design — learn how to design an HR app.

The Development and Testing Stage

The development of your custom HR system begins with the Minimum Viable Product. MVP in software development is a common approach in startup development.

In a nutshell, it is the development of the core HR features of your project to test the viability of your idea or business model. An MVP consists of a minimal set of hypotheses to test.

Meanwhile, the product could contain a few MVPs or a few core features that deliver complex value to the final user.

We would like to share an actual case study on the proper use of MVP in product development.

A few years back, we developed HR software for Blue Academy. It’s a Germany-based HR startup.

Then we faced the classic task of MVP development service: to test the idea’s viability quickly in the real market.

Together with the founders, we went all the way from creating documentation and development of the MVP to the fundraising of investment round A.

If you’re interested in finding out more details, feel free to check the human resource application development case study

Meanwhile, let’s get back to the core features you need to include in the MVP development phase of the HR application.

Features for an HR Software MVP

The point is that the complexity and riskiness of the vital business hypothesis determine the set and complexity of the MVP features.

And this affects the timing and speed of development.

In this case, we’ll take the functions from our experience as a basis.

Among the features that are primary key for successful HR system development are:

Features	Description
Implementation of a role system	It is creating a system of roles for HR platform management. It is important to lay this down at the documentation design stage. For example, there could be roles of HR manager, employee, recruiter, and applicant.
Sign up and sign in	The usual login and the moment when the user creates a profile.
Creation and editing of a profile	Creating, storing, and editing employee data or manager profiles.
User onboarding	It introduces prompts and highlights the following steps to make employee self-service as easy as possible for the user to enter the app.
Employee’s performance review and improvements tracking	Key functionality to be developed in HR web or mobile application. The complexity and nuances of execution depend on your idea. Typically, this feature means setting metrics and development plans and the ability to track progress.
Payment gateway	This integration is about connecting a payment system like PayPal or Stripe so that users regularly pay for the use of your product accordingly to your pricing plans.
Notifications	Customizable notifications about new events. A handy feature for user retention.
Legal compliance	In addition to standard encryption, you may need to implement additional data protection protocols, such as GDPR, to develop your HR platform. Also, it helps to make sure about the security of employee information.

But sometimes, founders lay down more advanced functionality for MVPs or focus on scaling shortly.

Consider this option as well.

Get a strategic MVP to mitigate risks

Check out how we approach MVP development

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Features for Scaling an MVP

There are also features that you can add for the extended functions of your workforce management software development to increase user’s engagement and deliver more value, such as:

Features	Description
Social sign in	Logging in through social networks allows for a smoother user experience and makes it easier to create a profile.
Additional 3rd party integrations	The more integration – the more sophisticated, valuable, and high-quality experiences your users will have. Naturally, the set of tools depends on the business objectives, which is why this point is so fuzzy. But as an example, integration with DocuSign, Slack, or Dropbox.
Integration with LMS	Allows you to maintain remote learning, online training, and workshops.
Benefits management	This feature provides full information on employment benefits and incentives available to employees.
Implementing ML or AI algorithms	AI software can automate the workload and boost the efficiency of HR software solutions. For example, it can perform a preliminary analysis of a candidate’s resume to check their skills and eliminate human bias.

The design and development of your human resource management platform are limited only by budget, not by technical obstacles.

You can implement anything you want.

But the quality of implementation is the next important issue we would like to discuss. And the answer to this question lies in the choice of the dedicated development team.

How To Find A Reliable Technical Partner

Only the right choice of an app development partner will help you achieve your goals, ensure the development of a professional HR platform, and contribute to its effectiveness.

At this stage, the client needs to consider the information obtained from prior analysis carefully.

Then, create a list of several partners who meet the preliminary requirements: good price segment, expertise needed to solve the task, etc.

The ready HR platform should not only have an eye-catching design but must provide a return on investment.

So, for choosing a development partner, we suggest you consider the following:

• Development of rapid time-to-market products;
• Sufficient number of quality use cases/scenarios in the portfolio;
• Positive feedback (recommendations) from previous clients;
• A decent level of documentation (commercial proposal, terms of reference, contract);
• Prompt response to the clients’ requests.

How Much Does the HR Software Development Cost?

Based on the features we talked about earlier, we made a rough estimate of human resource software development for different teams.

For the estimation, we use an hourly rate.

It would take around 1500 hours to develop an MVP and over 2000 hours for a large-scale MVP.

Country	Rate (hourly)	Cost of an MVP
The USA	$150	$225,000 – $375,000+
Great Britain	$100	$150,000 – $250,000+
Ukraine	$40	$60,000 – $100,000+
India	$25	$40500 – $63,000+

Each case is unique, and several factors could influence the average cost of HR software development:

• Project’s complexity and technology stack
• The team size required for the project
• Average hourly rate
• The time frame for the project

In this article, we break down the cost to build your own HR software, from essential features to advanced integrations.

Looking for inspiration for your HR software? Feel free to explore the best HR software solutions on the market.

The Checklist to Get a Proven Estimation

Usually, you can determine the estimated costs involved after the following:

• The customer contacts the software development partners
• The partners collect the data needed for further analysis.
• The specialists determine the requirements for the product.
• The team makes a document for an estimation, which the client must approve.
• The team begins to develop a solution and make changes if necessary.
• The customer receives the ready MVP.
• The team begins to evaluate the cost of the HR software.
• When the HR software valuation is ready and every stakeholder has agreed on it, it’s time to proceed to the development stage with an accurate assessment, technology, and team.

If you are given an estimate for project development without specifying requirements, you are most likely dealing with an incompetent team.

Even the most experienced human resource software development specialists will always specify requirements before estimating the development cost.

HR Challenges

The PwC HR Tech Survey 2021 identifies the top 10 HR challenges organizations face today.

These challenges highlight the complex and evolving nature of managing human resources in a digital and dynamic business environment.

Let’s explore them in more detail.

Managing Remote And Hybrid Work

Since hybrid work is a new trend that is going to stay with us for a long time, there are challenges to maintaining worker trust and managing employee performance.

Organizations need to balance flexibility with effective management to keep their business activities running smoothly and ensure employee engagement.

Want to build a productive remote team? This guide on high-performance remote teams shows you how.

Talent Acquisition And Retention

Finding, attracting, and retaining a talented candidate has always been a challenge.

Employee expectations constantly change, and HR departments must offer compelling value propositions catering to diverse needs. These include work-life balance and career development opportunities.

HR Insights And Data Analytics

Data analytics gives you insight into workforce trends and helps you make informed decisions.

Many organisations struggle to get the most out of their HR data which is key to driving strategic decisions and future HR needs.

Benefits

There are many things to consider when optimizing employee benefits. It’s a big challenge to make sure employee benefits are competitive, meet employee needs, and stay within budget.

Benefits management improves employee satisfaction and retention.

Cloud Transformation

Businesses aiming to stay competitive are investing in cloud-based app development for enhanced scalability.

Moving HR to the cloud gives you flexibility and scalability but data migration and integration and ensuring business continuity during the transition is a challenge.

Cloud-based HR systems make HR more accessible and streamlined.

Employee Upskilling

According to Harvard Business Review, skills development is key for younger employees.

They recommend mentoring programs that share expertise. Gen Z and Millennial workers also want regular feedback on their experiences.

An HRMS can match senior employees with those who need mentoring and can also manage employee satisfaction and engagement surveys.

These development activities are tracked in the HRMS so you can recognize milestones, keep employees on track and build loyalty to the company.

Manager And Employee Self-Service

Managers and employees need self-service tools for tasks like updating personal details or submitting leave requests.

These tools make employees more efficient and reduce the administrative burden on HR.

But making these tools user-friendly and getting everyone to use them is a big challenge.

Compensation

To attract and retain talent, you need to develop fair compensation strategies.

These need to be competitive and transparent so employees are satisfied and motivated.

Another critical aspect of employee satisfaction is recognition. Learn more about employee recognition programs and how they work.

DEI (Diversity, Equity, And Inclusion)

DEI is both a moral and business imperative. An inclusive culture that values diversity of thought drives better decision-making and innovation.

But many organisations are still not making enough progress on DEI.

Start Building Custom HR Management Software Today

Implementing a custom HRMS takes careful planning, stakeholder collaboration, and technical expertise.

Does your organization need an HRMS overhaul or custom solution? Our software engineers have decades of experience building HR platforms that streamline operations and provide analytics around pay, time-tracking, onboarding, and more.

Our journey to becoming a Clutch Leader in Ukraine shows how we put client success at the heart of our software development services.

We use the latest technologies to create HR software solutions aligned with your specific organizational processes and objectives across web and mobile apps.

Contact us today for a free consultation on developing a high-performance human resource information system uniquely tailored to your needs, budget, and timeline.

If you need more insight on HR app development, our guide on app development costs gives you the insights you need to plan your project smartly.