A Guide To Understanding HR Software

Your small business guide to HR management software. We break down the different types of HR software on the market so that you can decide what best fits your team and your business.

What is HR software?

HR software helps businesses more easily manage their people.

As a digital tool, application, or platform, HR management software securely stores employee data and documentation, and streamlines necessary HR tasks and admin like onboarding and time off. 

But within the umbrella term of HR software, there are many different types:

Human resources management system (HRMS). HRMS software is for managing core HR functions and storing information about people.

Human resources information system (HRIS). An HRIS stores all HR data (personal details, pay, attendance, leave allowance etc.) and helps to manage essential HR services. HRIS and HRMS are often used interchangeably.

Human capital management (HCM) system. HCM software includes more in depth reporting and analytics. 

Onboarding software. Onboarding software helps companies more efficiently and consistently welcome people to the team.  

People management software. Includes recruitment, onboarding, performance management, and people analytics. 

Payroll software. This software is for managing and automating payroll, and adhering to tax regulations.

ATS (Applicant Tracking System). An ATS makes recruitment and hiring easier, and is especially helpful for sorting through a large number of applications.

Employee database software. Acts as a central store for a company’s people data.

Staff management software. Everything managers need for overseeing their team.

Employee management software. Like staff management software, employee management software makes it easier to manage people.

Employee recognition software. For rewarding people and acknowledging milestones.

Employee experience software. Helps businesses collect feedback and create a positive work environment. 

PMS (Performance Management System). For assessing employee performance.  

SaaS HR software. SaaS stands for ‘Software as a Service’ and is a catch-all term that includes most types of HR software. 

It’s quite an overwhelming list isn’t it? Well don’t worry, because this guide will help you sift through all the information and the acronyms and choose the HR management systems software that’s right for you.

What benefits should HR software offer?

HR software is hugely beneficial for small businesses. This is because the right HR software will:

Save time and hours of your day

By automating and streamlining all essential HR tasks and admin, HR management software will give you back a big chunk of time.

Consolidate your HR processes

HR software will bring together all of your HR processes, making them more efficient and consistent.

Help you delegate to other people

You can assign tasks and responsibilities directly to managers and employees within HR management software.

Give you confidence that your data is safe

HR software will store all people-related data securely so that you’re GDPR-compliant. 

Make you look professional 

Using spreadsheets and emails to store and request important information looks old-fashioned. With HR management software, your communications and data uploads will be slick and automated. 

Enhance your team’s performance

With a better employee experience and more information at your fingertips, Good HR software can help to improve performance. 

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“Having Charlie in place as early as possible is going to save you so much time and energy. If you don't, then you're just giving yourself things to worry about. And that's pretty pointless.” - James Gill, CEO at Go Squared

What should you look for in HR software to get these benefits?

As you can see from the list above, HR software is not one single thing — different types of HR management software offer different functions and solutions. So how do you pick the one that’s right for your small business?

To help, we’re going to break it down into what you absolutely need versus what you can add as you grow.

Essentials for beginners (aka what you absolutely need)

When you’re just starting out with HR software, these are your non-negotiables:

Employee data

One central place to store and access all your employee data is game changing for a small business. No more searching through emails or spreadsheets to find information — with HR software, everything is literally at your fingertips.

Self service

One of the great things about HR management software is that you can delegate essential HR tasks directly to your employees through ‘self service’. They’re responsible for entering and updating their own personal data, uploading onboarding documents, and requesting leave, for example — taking multiple jobs away from you.

Security

Using HR management systems software to store employee data and documentation is much safer than spreadsheets and desktop folders. In fact, many are guaranteed 100% GDPR-compliant. You can also limit access, so that only certain members of your team can see all of the information held in the software. 

Time off management

In a small business setting, managing time off can quickly become a job in itself. As soon as your team starts to grow, so too do the tasks of coordinating, communicating and tracking leave. HR software automates pretty much everything to do with time off — from alerting you to leave clashes, updating team calendars, and calculating leave allowances.

Onboarding

If you’re going to use HR management software, you want it to make a difference to you and your employees right from the beginning, so onboarding functionality is key. New starters are introduced and welcomed to the company, and then prompted to complete their own employee profile. You can create checklists for their first day, week and month, and delegate onboarding tasks to other members of your team — all from within the HR software. 

Integrates with tools you already use 

And finally on our essentials list, you want HR software that integrates with any software you’re already using, whether that’s ATS or payroll. Because you want to avoid copy/pasting between platforms wherever you can.

What you can add on as you grow

Performance management

Some HR software comes with performance management built in, but this is something you can add in as your business grows.

Employee engagement surveys 

When your team is very small, engagement surveys might not reveal a great deal. But as your business expands, you’ll want to collect feedback to ensure that engagement levels keep up with the pace of growth. 

Benefits and perks

Perks and benefits are a great way of attracting and retaining top talent, so this is definitely something you’ll want to offer via your HR management software.

ATS (Applicant Tracking System)

Another HR functionality that makes more sense when your team is larger or rapidly expanding — choose HR software that allows you to add on ATS at a later date. 

HR advisor 

Even with the best HR software, there will come a point where you need someone to manage HR internally — whether that’s an advisor or a full time employee. But HR software means that they’ll have really solid foundations to build on. 

Payroll

If you have HR management software that integrates with your payroll system then you can look to include this as a built-in feature further down the line,

Training 

Some HR software comes with integrated employee training and development, and it’s another great way of attracting and holding onto good employees.

Pros and cons of HR management software

How do you decide what kind of HR software you need?

We’ve thrown a lot of information at you, but the checklist below will help you distill everything you’ve read into clear, actionable thoughts. 

1. What’s your company size? Some HR software is built specifically for small business and some scale up as you grow — where you are right now will help you nail down your options. 
2. What’s taking up most of your time? If you’re already spending time on HR admin then this will only increase as you grow. Note down all the tasks you want your HR management software to solve. 
3. How do you want to grow? Think about your ambitions for your business and how you want it to grow. Thinking about the future will also help you to identify the HR management software that’s right for you.
4. What’s your budget? Make sure you have budget set aside to cover the cost of HR software (which is typically a monthly subscription).
5. What other software do you use and rely on? Ideally, you want your HR management software to integrate with anything you already use (e.g. payroll etc.).

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How much does HR software cost?

We’ve mentioned budget in the checklist above, but let’s look at the financial side of things in a bit more detail…

• It depends on the HR software 

Pricing models vary across human resources software management companies. For some, you pay:

• per employee, per month
• per company size.

And for others, you’ll get a quote depending on the package you choose.

Each HR software payment model has pros and cons

• per employee, per month makes it easy to track, but as soon as you start hiring more people your monthly outgoings can increase significantly
• per company size can be a good way to budget forecast, as it gives you scope to grow (i.e. you only move to the next size bracket when your business has increased in size, and you can see what that is in advance)
• quotes can feel more personalised, and potentially give you more room for negotiation, but it’s difficult to forecast any costs in advance.
  

It’s hard to say how much HR management software should be

It’s important to consider how much money you’re spending when you’re doing the work yourself. The cost of HR software could actually work out as a big saving.

And the research time will also cost you money

You can lose a lot of hours researching all the HR management options and requesting quotes, which is why we’ve done the work for you. Our Compare Guide sets out the best HR software options for small businesses side by side:

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At what point in your growth do you need HR software?

You know your business best, so ultimately only you can decide when is the best time to start using HR software. But as a fellow small business, we know that it’s tough making decisions when you’ve not got the experience to back them up.

So to help you out, here’s a final tip from those who have been there and done it:

• Charlie customers say that our HR software is built to fit any small business size — whether you’re two or 50 people — and that starting as you mean to go on is much easier than everything breaking and you having to fix it.

“Charlie is a great platform that makes HR playful, communicative and not at all redundant – everything is done seamlessly, and that’s really what you need in your day-to-day small business life.” - Sophie Hanman, Customer Happiness Manager at London Nootropics 

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And if you’re still on the fence, have a read of our free guide to HR automation for small business:‍

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