For companies exploring HR technology, acronyms like HRIS, HCM, and HRMS can prove confusing at first. What are the differences between these terms? How does each technology impact the way companies do business? Sometimes these terms are used interchangeably, which only adds to the confusion. Also, there are at times an overlap of critical HR functions among the three systems.
Here’s a closer look at the key differences between these HR technologies and how business leaders can evaluate these systems to determine what’s best for their human resources needs.
Human Capital Management (HCM)
Human capital management refers to the overall approach a company takes to managing its most important asset: people. HCM is a people-centered approach to making the most of a company’s human resources and refers to both the strategic and technological elements needed to address a wide range of HR-related activities.
Examples of key HCM topical areas include:
- Administrative functions, such as management of institutional and employee data, as well as benefits and payroll administration
- Recruitment and performance management functions, encompassing onboarding, career planning, and learning and development
- Service delivery, such as access to company policies and procedures, managing documentation, and organization-wide knowledge base
- Managing the workforce, including time and attendance, budgeting, forecasting and scheduling, and self-service options
HCM technology solutions can offer businesses the ability to report and analyze human resource data to make better strategic organizational decisions. HCM solutions often encompass activities such as recruiting, compensation and benefits, talent management, time and attendance, and other employee-related processes.
Integration plays an important role in HCM systems, as integrated data can provide deeper insights and can enhance an employer’s ability to make holistic decisions affecting overall human capital management strategies. Proper integration requires technology that reflects the wide range of functions companies need to optimize their human resources.
Human Resource Information System (HRIS)
Human resource information system software enables companies (and their HR teams) to track, manage, and automate basic HR capabilities. In most cases, the system works off a comprehensive employee database. HRIS software may also encompass HR analytics and reporting.
Common software applications cover the following HR functions:
- Entering and tracking HR data
- Managing an employee database
- Tracking applicants
- Benefits administration
- Payroll processes
- Work scheduling
HRIS software may also facilitate tracking employee work hours, supervision of absences relating to sickness, vacation, or other factors, as well as benefits administration and new employee recruitment.
As a software solution for these and other related HR functions, human resource information system software can help HR teams maximize success in employee hiring, retention, and performance.
Human Resource Management System (HRMS)
HRMS software can facilitate the seamless integration of core HR capabilities into a single suite, where HR teams can conduct tasks, perform data analysis, and put together essential reports.
With an HRMS, employees can complete self-service tasks linked to their personal information, thus allowing HR professionals more time for other duties. Data security is often a key feature of an HRMS, which may employ authentication steps to limit access to those defined as “authorized users.”
Additionally, many HRMS platforms can be customized to meet specific organizational and user needs, thereby streamlining workflows and other processes. Processes favorably impacted by HRMS platforms may include:
- Payroll management
- New employee recruitment and onboarding
- Maintaining employee attendance records
- Performance reviews
- Benefits administration
- Learning and development
- Employee scheduling and self-service
An HRMS can be a central location to store critical business data and provide employees with access to information specific to their compensation, performance, benefits, or paid time off. It can also provide organizations with the analytics and insights they need to make critical HR and other data-driven business decisions.
HRIS vs. HCM vs. HRMS
At the highest levels of human resource management, the terms HRIS and HRMS are often used interchangeably to represent the technological systems used in HR functions. Some overlapping examples might include organizational and employee data management, payroll administration, and benefits administration.
Often, systems that fall into this category are limited-function systems that provide one or two core services. Companies may link them together by creating workarounds to help them communicate or by using provider partnerships to expand their service offerings. The two terms are best used to describe technological solutions, but don’t specifically tie into broader strategic planning or management philosophies.
For companies that want to leverage their human capital assets for maximum impact, an HCM strategy is essential. Choosing an integrated HCM system over a single function HRIS software platform can give companies access to high-quality information, while potentially reducing workloads and the risk of propagating inaccurate data.
As more data is transferred and stored digitally, businesses need tools to ensure that personal, sensitive employee information remains secure at all times. Key elements of effective HRMS security include:
- Segmentation: Ensure that specific information is available only to specified individuals or job requirements.
- Two-factor authentication: The system should employ advanced two-factor authentication technology for an additional layer of data security.
- Password and reset policies: It’s imperative that user passwords (revolving around recommended complexity and strength) be altered and reset regularly. This helps maintain a defense against unauthorized users attempting to acquire sensitive employee or business information.
With security in mind, an HRMS can empower HR teams to transition cumbersome, paper-based processes into the cloud — significantly reducing the potential threat of unauthorized users gaining access to files.
Whatever form of business you lead, there can be significant benefits to be gained from HCM, HRMS, and HRIS software. The key is determining which platform best suits your company’s specific human resource needs.
To be assured you’re purchasing the most effective system for your business, it’s necessary to conduct research, which requires time and resources. The point of this research is to help you understand what software vendors are describing as they present potential solutions.
Just remember that, like other business-related software, all HRMS options are not alike. Keep these tips in mind when making your selection:
- Determine if a system’s fundamental functions offer solutions that maintain compliance in an organization as it changes and evolves.
- Compare and contrast software solution vendors to evaluate their track records in this field.
- Narrow your choices to which software technologies address your company’s specific needs and provide the most effective employee user experience.