HRMS vs HRIS vs HCM: What is the difference between HR software? [A Comprehensive Guide]

For a growing company, it is vital to have a strong HR department. This ensures well-coordinated management of the workforce. The role of HR processes becomes even more crucial as remote work gains momentum - about 50% of businesses surveyed are fully-remote and are planning to stay that way.

Industry-specific HR software can be a great way to streamline human capital management (HCM) processes in the current circumstances. Besides, the HCM software market shows steady growth to $33.04 billion in 2024 (in 2019 it was $30.8 billion).

If you are considering investing in HR management software, we would recommend you take a closer look at HRMS, HRIS, and HCM as the most sought-after industry-specific software solutions.

Types of Human Resource (HR) software

When it comes to HR software, there is hardly a catch-all tool. The field of HR solutions is so vibrant that it has already spawned numerous platforms of the same type. This leads to some confusion in terms.

For example, you may come across terms such as Enterprise Resource Planning (ERP), Employee Management System (EMS), Applicant Tracking System (ATS), and many others.

Among the most commonly used terms are HRMS (Human Resource Management System), HRIS (Human Resource Information System), and HCM (Human Capital Management) application.

Let's go over these three systems in terms of their differences to choose the HR management software that best suits your business needs.

What is a Human Resource Management System (HRMS)?

HRMS is a holistic HR solution with an advanced set of features. Typically, HRMS covers most of the functionality provided by HRIS and HCM. With HRMS, routine HR duties become more automated and efficient.

Human resource management systems contain basic information about employees and serve as a centralized data hub. They provide employee self-service for payroll, benefits enrollment, reporting, scheduling, and more.

HRMS is much more than just a system with employee records. There is great emphasis on managing the employee lifecycle and any workplace-related changes and trends.

Implementing an HRMS boosts an organization's efficiency as managers can track and better understand their employees, as well as see the business implications of any employee-related changes.

HRMS is utilized to:

• Manage employee data;
• Monitor employee attendance and other changes in employee performance;
• Choose and train staff more thoroughly;
• Calculate salaries and benefits, etc.

What is a Human Resource Information System (HRIS)?

A Human Resource Information System (HRIS) is a centralized platform for storing and managing employee data required for core HR processes.

HRIS is leveraged to automate work processes as well as to protect the personal data of your employees. HRIS software is data-driven and compliant with industry regulations and standards.

HRIS allows the HR department to focus on managing new employees, in particular on selection and recruitment. With no HR management app in place, HR staff are forced to rely on spreadsheets and paper registers. This can lead to potential errors, loss of documents, and lack of standardization in data management.

An HRIS system offers self-service for employees, which means that processes are simplified, take less time and become more streamlined.

HRIS is utilized to:

• Organize and administer employee-related data digitally. These data include personal contact information, position, and salary information, benefits, social security numbers, paid leave requests, etc.
• Manage HR-related policies;
• Standardize HR tasks and challenges;
• Maintain structured records and generate detailed reports.

What is a Human Capital Management system (HCM)?

Human Capital Management (HCM) is a web-based tool designed to deal directly with the workforce. It covers the issues of attracting, managing, and developing manpower. It is probably the most requested HR tool by far.

HCM assists you in tracking the entire employee lifecycle step by step - from recruiting and hiring (for example, when you need to hire developers from an IT outsourcing team) to onboarding, career growth, and termination.

Every detail counts. It sheds light on who your most valuable employees are, how to encourage them to train and how an employee's path in the company affects the success of your business.

Simply put, HCM systems are all about how valuable human capital is to a business. By applying HCM, you can initiate practices aimed at optimizing employee development plans, creating attractive compensation packages, promoting overall employee well-being, and increasing the return on investment in human capital.

If you do not invest in those who build your brand brick by brick, employees are likely to be reluctant to invest in the business as well. We suppose that human capital is worth being the largest item of expenditure in the corporate budget.

HCM system is utilized to:

• Encourage teamwork;
• Manage professional development plans and training effectiveness of employees;
• Resolve employee compensation issues;
• Carry out business planning, including strategic workforce planning and much more.

As you can already see, the services offered by each of the above HR systems overlap in one way or another. No wonder you may have a hard time choosing just one system.

However, having a lot in common, these HR software solutions do differ from each other. For a deeper insight into how they differ, let's dive into their ins and outs by referring to the features outlined below.

HRMS vs HRIS vs HCM: features, scope, differences

There is still no single view on the scope of HRMS, HRIS and HCM. The only way to determine this is to get acquainted with what these software solutions are and what issues they cover.

However, the truth is the following:

• HRIS is an outdated software solution with limited functionality and low business value.
• HCM and HRMS are the most widely used today.

Now let's get down to business.

HRMS

HRMS is primarily about automating repetitive actions or tasks performed by the HR department.

What HRMS can offer:

• All data about employees and candidates are consolidated;
• Advanced insights about employees by connecting additional systems (analytics, resume search, assessment equipment, calendars, etc;)
• A better picture of the needs and portrait of employees through a self-service portal.

HRMS features

Below is a comprehensive set of HRMS features that have proven to be the most effective.

Job applicant path tracking

This option optimizes the process of searching job boards, posting vacancies, reviewing applications, screening the most suitable candidates according to criteria, and even making offers to those who are shortlisted.

Staff onboarding

HRMS contributes to an easy and smooth onboarding process. Due to its features, new employees receive welcome kits, get acquainted with the company's policies, are accompanied by HR services during their first working day, and can access any necessary information to get started.

Employee data management

All employee-related documents are stored and administered in one place. This provides easy access to data and also contributes to a more transparent management structure.

Vacations and days-off management

HRMS allows you to implement leave policy and leave management in an organized manner. HRMS gives a transparent picture of used and planned time off, as well as a notification system for new requests, their confirmation or rejection. All processes are streamlined and automated.

Secure access on the go

HRMS provides your team with secure access to private information anywhere in the world and literally on the go.

Reasons to choose HRMS

It is worth investing in HRMS because this system helps to digitize huge amounts of employee data and automate the process of their processing. This greatly streamlines the operations of your HR staff.

Who can benefit from HRMS implementation and why:

1. HR departments can make their daily work much easier by delegating routine tasks to HRMS. This will allow them to concentrate on more crucial things for the business's success.

2. Both large enterprises and small companies looking to scale can benefit from HRMS, as this platform takes over a huge part of the complex work with many small details.

It is of paramount importance to have your in-house experts involved in the planning of the future HRMS. By outsourcing this project, you will certainly get the qualified services of business analysts, designers, and engineers with the required expertise. However, it also does not hurt to do your homework on defining HRMS tasks and goals.

It is up to you to decide whether it will be the recruiting software development, employee management system, or something else. In any case, turning to the staff augmentation cooperation model, you can hire software developers who can cope with any of your tasks.

HRIS

HRIS is the basic tool for managing all employee-related information, namely:

• Personal information
• Work-related information
• Expenses, salaries and benefits
• Time off, leave, and leave requests
• Work results and achievements

HRIS features

A typical HRIS provides a predictable set of features that, however, allow you to manage and use employee data to benefit your business.

Recruitment and hiring

Combined with an Applicant Tracking System (ATS) and often a CRM, HRIS helps streamline and automate the hiring process. Recruiters get free access to various job boards, a list of candidates can be automatically generated according to predefined criteria, and even interviews can be scheduled and conducted according to the most efficient scheme suggested by HRIS.

Staff onboarding

With HRIS, onboarding processes are digitized and paperwork is eliminated. Your attention is now on the main thing - the expertise of new hires. All this can be done by automating the onboarding process with an HRIS tool in place.

Time off tracking

With this feature you can automate the process of submitting time off requests, approving and rejecting them, tracking time off, and generating reports.

Tax compliance and payroll

This includes managing tax and benefits deductions, administering correctly calculated salaries, etc.

Employee self-service option

HRIS can be enhanced with self-service portals so that employees can take control of their data and spend less time and effort searching, navigating, and updating that data. This feature gives employees a sense of control and responsibility as it allows them to set goals, request time off, and monitor any information that is relevant to them. This approach as a whole promotes a transparent relationship between the company and its employees.

Payroll data management

HRIS stores information about the amount of salary, payment schedule, and the progress of salary accrual. It also includes bank details, the employee's position in the company, and the dynamics of changes in salary and vacation pay. With such accurate data, payment mistakes are excluded.

Reporting and analytics

Numbers matter. A data-driven HRIS generates reports, performs calculations, and provides critical information for strategic decision-making. Accuracy and relevance of data are a must for HRIS.

Reasons to choose HRIS

If you consider building your own HRIS but are not sure if it is really what you need, we can help you.

Check out the following list of organizations that would benefit from implementing an HRIS:

• Companies that are scaling up, have several (many) open positions at the same time and hire new employees every month;
• Entities with a large number of employees (50+), where there is a need to quickly and accurately juggle many scattered items;
• Companies that offer hourly wages and for which it is vital to scrupulously estimate software development time;
• Companies adopting the latest team management approaches, such as the Agile project management approach;
• Organizations with well-thought-out but complex onboarding processes in place.

HCM

The HCM system is used by the HR department to facilitate the career growth of employees. It can be web-based or cloud-based. HCM-system automates most of the daily work (training, analysis, verification, planning, signing documents, etc.), i.e. reduces the administrative burden on the HR department, giving employees more freedom to solve more strategic issues.

The purpose of HCM is to strengthen the company's interaction with employees, manage employee expectations, and generate reports for further data-based decision-making both within the HR department and among executives.

The system is used as a technique to improve employee performance, which, again, aims to achieve greater business results. These results can be achieved by hiring the right people, helping them to upskill, motivating them, mentoring them, and otherwise encouraging them. The right set of features helps a lot in this.

HCM features

It is up to either the software solution provider or the customer to decide what features should be available in HCM. Traditionally, HCM is equipped with the features listed below.

Talent management

This option is the backbone of the human capital management system. Typically, the software includes features for candidate screening and new employee onboarding, career planning and performance evaluation, compensation, and benefits planning, etc. For HCM, people come first.

Workforce management

HCM systems can be of help when you need to track employee attendance, manage tasks, plan work schedules, forecast budgets, and generate comprehensive data-driven reports.

Enterprise data and employee data management

This includes an employee self-service portal, administration of employee personal data, administration of payroll and benefits data, and encryption and protection of personal information.

Cloud-based options

Each stakeholder has instant access to any regulatory document, policy, or employee information from any device at any time.

The principles on which the classic HCM system is based:

• HR management goals should be defined, i.e. what employees should learn and grow professionally for and how the company can benefit from it.
• The ways to achieve the goals are listed. For example, how to properly onboard a development team, how to establish an effective mentoring program, etc.
• The budget, time, and human resources that need to be invested in achieving the set goals are determined.
• Duties are assigned, areas of responsibility are defined, and metrics (e.g. software development metrics) and other criteria for tracking the effectiveness of human capital management are established.
• There is an option to receive feedback from stakeholders to improve human capital development plans and make timely changes.

Reasons to choose HCM software

The truth is that the more HR-related work issues that need to be solved daily, the more powerful a software product you need. It is believed that HCM is a more advanced version of HRMS. At the same time, an HCM system is more than just a tool. It also serves as a certain approach and methodology to manage staff more competently.

HRMS vs HRIS vs HCM: The differences summed up

Well, so far we have learned a lot about the differences between HRMS, HRIS and HCM. Let's try to sum it up.

All three systems have one thing in common: they deal with human resource management. All operations from candidate screening, hiring, and professional development to taxation, payroll, and employee retirement can be handled by a software solution such as HRIS, HRMS or HCM.

In terms of their features, all three systems overlap in one way or another. While HRMS and HRIS can be interchangeable, HCM is a more functionally diverse software solution, often with unique options.

Hopefully, now the difference between HRIS, HRMS, and HCM systems is clear. The only thing left to do is to decide which HR management tool to build.

HRMS vs HRIS vs HCM: Which one to choose

Before you finally decide what kind of software to create - HRMS, HRIS, or HCM - it is reasonable to get acquainted with the features of a particular system, as well as learn about the software development process in general. This will help you, firstly, to choose the right IT outsourcing company and decide whether you need a ready-to-use system or MVP would be enough. Secondly, you will know for sure that the chosen HR management software meets what your business wants to get from its implementation.

You can even start your choice based on the number of employees in your company. For example, if you have less than 10 employees, you may not need HR management software. Conversely, a business with around 1,000 or more employees will likely need full-fledged software. This could be HRIS or HRSM.

Bottom line

The issue of human capital management in business is key. Employees are the driving force that generates profits and ensures the endless development of the company in the right direction. Investing in the management and professional growth of your employees means investing in the growth of your business.

The best way to tackle this task can be the implementation of HRMS, HRIS or HCM. You have already learned how they differ and how they can be useful for you.

If you still have any questions, do not hesitate to contact us. Our subject matter experts will guide you through the process of selecting and developing each of these types of human resource management software.