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The Future of HR: Human Resource Management Systems

Vira Kostohlad

Vira Kostohlad

Head of Recruting

9 min

There are many HRMS solutions 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 system will help you monitor your core HR functions, such as recruitment, payroll, performance, and benefits.

In this post, we’ll share some insights on developing the best HRMS solution based on our experience as HR software development experts.

We’ll help you decide on the features set and explore the pitfalls to avoid along the way.

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What is Human Resource Management?

Human resource management (HRM) is a system of tools that help HR teams streamline their core HR processes.

This includes things like hiring, training, paying salaries, and ensuring the company follows labor laws.

The main users of HR solutions are HR leaders and staff because they handle daily tasks related to workforce planning and ensuring the company complies with laws and regulations.

However, it’s not just HR professionals that benefit from an HRMS.

Managers and employees can also use it for tasks like updating personal information or checking benefits. This is especially appealing to younger employees who prefer self-service options.

Executives can use the HRMS to analyze workforce trends and understand how they impact the business.

Since managing employees can be a significant cost for a company, integrating the HRMS software with the accounting system helps the finance team manage these expenses better and gain more insights from HR data.

Overall, HRM is crucial for organizations to manage their workforce effectively, improve productivity, and reduce costs.

Now, let’s dive into the history of human resource management systems and how they evolved.

History of HRMS

The history of Human Resources Management Systems began in the 1970s and 1980s when companies started using computers to manage basic HR tasks like payroll and attendance. Before that, these tasks were handled manually with paper records.

In the 1990s, HR software became more advanced, incorporating more functions such as employee records, recruitment, and benefits administration.

The widespread use of personal computers made these systems accessible to more businesses.

The 2000s saw the rise of the internet, which transformed HRMS by enabling web-based systems. This allowed HR tasks to be managed online, making them more efficient and accessible from anywhere.

Today, HRMS continues to evolve, integrating advanced technologies like cloud computing and artificial intelligence to provide even more capabilities and insights for managing human resources effectively.

Core HRMS Functions

These systems are designed to handle various aspects of human resource management, making processes more efficient and freeing 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. Starting with recruitment and hiring.

It simplifies the process of posting job openings, screening candidates, and scheduling interviews.

The company’s 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 throughout the recruitment process, extends job offers, conducts background checks, performs pre-employment screenings, and generates application forms.

By the time a candidate meets with the recruiter, all preliminary formalities are completed through the system, ensuring a streamlined and efficient hiring process.

Workforce Management

Once employees are hired, an HRMS enables organizations to manage all their data efficiently.

This includes maintaining up-to-date employee records, managing benefits, and tracking performance.

For instance, an HRMS can store personal information, job history, and benefits enrollment details in one place, making it easy for HR to access and update records as needed.

Additionally, employees can use the system to view their benefits and update their information, reducing the administrative burden on HR staff.

Payroll and Benefits

Managing payroll and benefits can be complex and prone to errors.

An HRMS automates payroll processes, ensuring employees are paid accurately and on time.

It also handles benefits administration, from enrolling employees in health insurance plans to managing retirement contributions.

An HRMS can automatically calculate payroll taxes and deductions, generate pay slips, and ensure compliance with tax laws. This automation reduces errors and helps maintain compliance with regulations.

Performance Management

Using an HRMS, an HR department can facilitate goal setting, provide feedback, and evaluate employee performance.

Managers can set performance goals within the system, track progress, and give regular feedback.

For example, an HRMS can send reminders for performance reviews and store evaluation results, making it easy to monitor employee performance over time and identify areas for improvement.

Core HRMS Functions

Training and Development

Continuous employee development is crucial for organizational growth.

An HRMS enables organizations to manage training programs and career development initiatives. It 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.

From recruitment and employee management to payroll, performance management, employee engagement, and training, these systems help organizations streamline their processes, reduce errors, and focus on strategic human resource initiatives.

Must-Have HRMS Features

An HRMS not only simplifies administrative tasks but also enhances strategic decision-making.

Here are seven crucial HRMS features that can significantly benefit any organization:

  • Time and attendance, including clock-in/clock-out systems and leave management
  • Leave management, sick leaves, parental leaves, and more
  • Reporting and analytics reporting and analytics capabilities enable organizations to make data-driven decisions
  • Payroll management payroll processing ensures accurate and timely payment of wages, tax calculations, and compliance with financial regulations
  • Performance management performance evaluations, goal setting, and feedback processes helping organizations track and improve employee performance
  • Recruitment and onboarding streamlines the recruitment process by managing job postings, applicant tracking, and new employee onboarding, ensuring a smooth transition for new hires
  • Employee self-service portal empowers employees to access and manage their personal information, benefits, and leave requests, reducing the administrative burden on HR staff
  • Benefits administration  manages employee benefits programs, including health insurance, retirement plans, and other perks, ensuring employees receive their entitled benefits
  • Compliance management helps organizations stay compliant with labor laws and regulations by keeping accurate records and providing necessary documentation and reports
  • Learning and development allows for employee training and development programs, offering tools for tracking progress, managing certifications, and fostering continuous learning

While these features significantly enhance HR operations, implementing an HRMS is not without its challenges. For a smooth implementation and maximum benefit from the system, it is vital to understand these challenges.

Must-Have HRMS Features

HR Challenges

The PwC HR Tech Survey 2021 identifies the top 10 HR challenges that 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

The shift to remote and hybrid work models has brought productivity gains but also created challenges in maintaining worker trust and managing performance.

Organizations need to balance flexibility with effective oversight to sustain productivity and engagement.

Talent Acquisition and Retention

Finding, attracting, and retaining talent remains a significant challenge.

With changing employee expectations and the competition for top talent, HR departments must offer compelling value propositions that cater to diverse needs, including work-life balance and career development opportunities.

Top HR Challenges 

HR Insights and Data Analytics

Data analytics provide insights into workforce trends, and support informed decision-making.

Many organizations struggle to analyze HR data effectively, which is vital for driving strategic decisions and identifying future HR needs.

Benefits

There are many factors to consider when optimizing employee benefits. It is a significant challenge to ensure employee benefits are competitive, meet employee needs, and remain within budget.

Effective benefits management improves employee satisfaction and retention.

Cloud Transformation

Moving HR processes to the cloud offers flexibility and scalability but poses challenges in data migration and integration, as well as ensuring smooth operation during the transition.

Cloud-based HR systems enhance accessibility and streamline HR functions.

Employee Upskilling

According to Harvard Business Review, skills development is crucial 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 pair senior employees with those who would benefit from mentoring and can also manage employee satisfaction and engagement surveys.

These development activities are tracked in the HRMS, helping recognize milestones, keeping employees on track, and fostering loyalty to the company.

Manager and Employee Self-Service Capabilities

Managers and employees need self-service tools for tasks such as updating personal information or handling leave requests.

These tools enhance efficiency by empowering employees and reducing the administrative burden on HR. However, making these tools intuitive and ensuring their widespread adoption remains a significant challenge.

Compensation

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

These strategies must be competitive and transparent to ensure employee satisfaction and motivation.

Diversity, Equity, and Inclusion (DEI)

Promoting Diversity, Equity, and Inclusion (DEI) is both a moral and business imperative. An inclusive culture that values diverse perspectives enhances decision-making and drives innovation.

Despite its importance, many organizations still struggle to make significant progress in DEI initiatives.

Benefits of Human Resource Management Systems

The main benefit of an HRMS is having all your workforce information in one place.

This reduces compliance risks, provides valuable data for decision-making, keeps employees engaged, and makes HR professionals more productive and efficient.

Here are the top five business benefits of an HRMS.

Increased Efficiency

HRMS automates HR processes, reducing manual errors and improving efficiency.

Handling questions and managing big programs like benefits enrollment or performance reviews can take up to 40% of HR professionals’ time weekly.

Many employees would rather do these tasks themselves.

An HRMS helps by creating a place where employees can find answers to common questions and access their own records. This allows HR to focus on more important tasks.

Processes that need multiple approvals, like timecards, job requests, and time-off requests, can be very time-consuming.

An HRMS automates these approvals, notifying the right people when it’s their turn to approve or reject something. This can reduce the time needed by more than half and improve accuracy.

Employee self-service portals allow employees to access and update their personal information, view pay stubs, and manage benefits without needing HR intervention.

This feature not only saves time for HR staff but also empowers employees to take control of their own data. According to SHRM, self-service tools can reduce HR’s administrative workload by up to 40%.

Payroll Management

Accurate and timely payroll processing is a critical feature of any HRMS.

By automating payroll calculations, tax deductions, and compliance reporting, an HRMS reduces errors and ensures employees are paid correctly.

In fact, the American Payroll Association found that automation can reduce payroll processing costs by as much as 80%.

Performance Management

An effective HRMS includes tools for setting performance goals, tracking progress, and conducting evaluations.

This continuous feedback loop helps employees stay aligned with organizational objectives and supports their professional development.

A study by Deloitte indicates that companies with effective performance management systems are 1.5 times more likely to outperform their peers financially.

Benefits of Human Resource Management Systems

Learning and Development

Research by the Association for Talent Development shows that companies investing in comprehensive training programs see 218% higher income per employee than those without formalized training.

HRMS platforms often include features for managing training programs and employee development.

This includes tracking course completions, scheduling training sessions, and providing e-learning resources for talent management.

Analytics and Reporting

Organizations with strong HR analytics capabilities are twice as likely to improve their recruiting efforts.

Advanced analytics and reporting capabilities allow HR professionals to gain insights into employee data, identify areas for improvement, and make data-driven decisions.

An HRMS can generate reports on metrics like turnover rates, employee engagement, and productivity.

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Developing Advanced Solutions for HR Professionals and Employees

HRMS is essential for modern human resource management, helping organizations streamline processes, improve efficiency, and reduce costs.

With technology, especially cloud solutions, playing a central role in HR today, it’s crucial to invest wisely.

You want to select cost-effective systems and tools that address your challenges, work with trusted vendors, and implement skills and processes that promote technology adoption and enhance the employee experience.

These investments not only benefit HR but also support the entire organization in overcoming technology challenges.

If you are looking for a vendor to help you build and maintain a custom HRMS solution, we are here to help.

Our specialists have a strong track record of developing successful HR solutions. Feel free to check out our case studies for more insights.

We’ll carefully analyze your business needs and help you develop a system that fits you best.

Let’s discuss your needs.

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Have a question? Look here

What is an HRMS?
An HRMS (Human Resource Management System) is a software solution that integrates various HR functions, such as recruitment, payroll, benefits administration, performance management, and employee data management, into a single system.
What are the key features of an HRMS?
Key features typically include employee database management, payroll processing, time and attendance tracking, benefits administration, performance evaluation, recruitment, and onboarding.
How does an HRMS improve efficiency in HR processes?
An HRMS streamlines HR processes, saves time, and minimizes errors by automating routine tasks, reducing paperwork, and providing real-time access to employee data.
Can an HRMS be customized to fit our organization’s specific needs?
Yes, many HRMS solutions offer customization options to tailor the system to your organization's unique requirements, including custom workflows, reporting, and integrations with other software. Another way to tailor the HRMS to your business goals is to develop one from scratch. You can reach out to us and discuss your needs and we will create the custom HRMS that has all the core HR functions you need.
How does an HRMS help with compliance?
An HRMS helps ensure compliance by keeping accurate records, providing audit trails, and updating automatically to reflect changes in labor laws and regulations.
What are the benefits of using a cloud-based HRMS?
Cloud-based HRMS solutions offer benefits such as remote access, scalability, automatic updates, reduced IT costs, and enhanced data security.
How can an HRMS enhance employee engagement?
An HRMS can enhance employee engagement by providing self-service portals for employees to access their information, request time off, enroll in benefits, and receive feedback and performance reviews.
How does an HRMS support data-driven decision-making?
An HRMS provides comprehensive analytics and reporting tools that help HR professionals and management make informed decisions based on real-time data and insights.

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