Human resource management software: A buyer's guide
A collection of articles that takes you from defining technology needs to purchasing options
When it comes to human resource management tools and software, no two companies have the same requirements. Because companies vary in size, location and industry, their requirements for HR tools also vary.
For example, some larger companies are in highly regulated industries where compliance is a major HR issue. Other companies are engaged in fierce competition for talent and have backlogs of positions they can't fill. Still other companies are entrepreneurial startups faced with managing an employee payroll but lack the knowledge or time to handle it internally.
Despite these differences, there's one common consideration: It's vital to understand a company's specific needs before choosing human resource management tools.
Which human resource management tools fit best?
Most HR and human capital management (HCM) software comes as a suite, although many vendors now offer a more pick-and-choose approach. This gives companies a greater range of choice and also the ability to avoid paying for unnecessary features.
Core HR functions, including payroll, benefits and employee records, are the required foundation. After this, organizations can expand HCM software into other modules that address areas like talent management and social engagement.
Let's take a look at various use cases for specific HR software features.
Processing payroll for U.S.-based employees and expatriates
Payroll can be complex for U.S.-based companies that have expatriates working overseas or locations across the globe. These companies must stay abreast of U.S. payroll and tax requirements, comply with the wage and labor laws of other countries and compute currency exchange rates. As such, they require human resource management tools that support U.S. payroll and that can localize payroll currencies and even languages to the appropriate foreign countries.
Meeting ever-changing compliance requirements
Certain industries, such as insurance, financial services, healthcare and public sector agencies, operate under extensive regulatory compliance. HR systems and reporting must also meet these compliance requirements. The problem is that compliance requirements, such as the federal Health Insurance Portability and Accountability Act and the Affordable Care Act or employee background checks in finance, are constantly changing.
Fortunately, vendors offer compliance-ready HR software features that automatically update when regulations change, helping companies stay on top of regulatory reporting and compliance.
Attracting and developing talent
Companies of all sizes are affected by worldwide talent shortages for critical positions. HR departments competing for the talent want software to help not just recruitment efforts, but also the retention of top performers.
While some third-party vendors specialize in talent management, traditional HR software vendors have recently added talent management to the list of HR software features. This is good news for companies wary of integrating a separate third-party talent management system with their existing core HR software.
Integration with existing systems
Many companies don't want to completely replace their HR systems in the name of an upgrade or new features. Maybe the systems work well, or employees are familiar with them. Or maybe the company has years invested in customized code and interfaces, which they don't want to lose.
In this case, the first step should be to ask the legacy vendor if it offers talent management or any other desired capability. If the vendor can't meet the specific need, it's time to look at third-party human resource management tools that will work with the existing systems.
Software with a set of standard APIs, which enable data to easily pass between them and the existing systems, is a potential answer. Be aware: An API doesn't mean the software integration is plug and play. With different vendors involved, things can get hairy. Often, this integration necessitates consultants, particularly if the vendors involved don't have a platform integration agreement.
Another approach is to add the new software by connecting into a cloud-based version. This works for circumstances with minimal integration requirements with existing software. With cloud, users can simply access the new software through a secure internet portal. Many vendors that offer SaaS provide HR expertise and consulting on how to best use the new software.
Unlike larger companies, smaller companies don't always have the staffing or desire to handle core HR functions, such as payroll, direct deposit and taxes. For these companies, outsourcing payroll to an HR software vendor makes sense, because the vendor can take care of these necessary tasks, while the company talent focuses on growing and managing the business.
Many outsourcing vendors also offer HR consulting services on an as-needed basis. This can be helpful for small companies that also need help hiring and firing employees, as well as doing performance reviews.
These HR tasks are often left to line managers who have no HR experience and don't know the legal aspects of HR. Here, the outsourcing company can provide on-demand consulting. Since most outsourcing vendors are cloud-based and offer payroll access 24/7, small companies also gain flexibility for employees who work nontraditional hours.
Using social media for collaboration
Many companies that already have core HR and talent management tools want to take HR to the next level by using social media and collaboration tools to help employees exchange ideas and information with one another. These companies often have project-based work or need to facilitate employees working together toward a common goal. For example, healthcare uses collaborative technology to bring doctors, pharmacists and medical practitioners together in patient management.
Companies are also using social media tools to conduct employee surveys, gauging attitudes and office atmosphere.
Still, in other cases, HR turns to popular social media channels to build awareness of the company brand, share company culture and even recruit potential candidates for job openings. Nearly all HR software vendors offer social media tools for these purposes.
As part of their talent management and development strategies, many companies want to help employees advance their own careers and increase their value to the enterprise.
They do this by offering online training that employees can take anywhere, anytime on either their desktop computers or mobile devices.
HR goals like these are especially prevalent in technology-driven companies where new breakthroughs (and the need for new skills) are constantly emerging.
Once again, many vendors offer human resource management features that support the development and administration of corporate training programs.
Paying employees for performance
More companies want the ability to reward top-performing employees with bonuses and larger salary increases based on the value they deliver to the company. The problem is that older HR systems and practices often provide pay increases based on time on the job or seniority.
A pay-for-performance model that awards employees based on their contributions could require additions to existing HR software, often in the form of a compensation management module. Of course, the long-term integration picture for any additional software should be a major consideration, and it's best to find a vendor that can provide the compensation management tool and also scale into other HR systems as needs require.
Visibility through HR analytics
HR managers and key corporate executives want to know how well the HR initiatives described above are working. They want to use HR analytics to analyze turnover trends, salary levels and recruitment activities, and they want predictive analytics to help determine why employees leave, how to improve retention and what motivates employees to join the company. Ultimately, they want to compete for and retain the best talent.
Companies of all sizes can glean insight from HR analytics. For example, managing the cost of benefits is important for public as well as private sector organizations, while SMBs might just need help quantifying performance reviews.
Regardless of company size or industry, most companies have little experience with HR analytics, which is also called people analytics or talent analytics. Consequently, it's best to consider vendors with a strong track record in helping organizations adopt HR analytics, with easy-to-configure analytics reports that HR can immediately put into practice. IT infrastructure is also a major issue in selecting an analytics vendor, because the analytics reporting the vendor offers must be able to easily interact with the employee-related data already stored in other systems.
HR software features custom-made for your industry
Retail grocery stores have paper-thin profit margins, where the volume of goods sold is great and most employees are on hourly wages at thousands of different retail locations. These companies want workforce analytics and other human resource management tools to optimize employee schedules, streamline work processes and reduce costs and waste from operations.
Oil and gas drillers operate on a per-project basis and rely on both highly skilled employees and contractors who augment staff. These companies might need workforce management tools that can address the needs of a hybrid employee-and-contractor workforce.
Still other companies must run payroll for both union and nonunion employees, and they need a payroll system that can handle different pay rates, deductions and reporting regulations.
For companies best served by industry vertical-specific human resource management tools, there are HR software vendors with optimized products designed to fit the HR needs of specific industries.
Before shopping for human resource management tools
Today's HR software suites are capable of so many functions, and to avoid becoming overwhelmed with choices, it's vital for an organization to have well-defined goals and uses.
Companies should take stock of existing HR operational and system processes that are already working well. In most cases, it's best and easiest to simply keep these processes in place and just add products that easily integrate with the existing HR software base.
However, some companies have reached a point where the cost of maintenance, operational and system pain points, and software limitations are just too great. Here, a major system conversion might be the most feasible means of retooling systems and improving business processes.
With a clear understanding of company needs and objectives, the next step is to identify must-have features that will factor into a request for proposal.
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