What is HR Software? How to choose the right HRMS? A Complete Guide to an HR Software

Zubin Damania
October 15, 2018

Many people are unaware of exactly what is HR software. We are here to solve your doubts about HR software.

There are multiple software offering HR & Payroll that make lives easier for HR teams at your organization. But there are always questions, like

  • What is HR Software?
  • Uses of HR Software.
  • Do you know what features these software provide?
  • Do you know what are the benefits of these software and how they are better than traditional HR processes?

Don’t get overwhelmed by these questions. If you are new to the concept of HR software, you have landed at the right place. This article is your complete guide to these software, their types, benefits, and everything else that you need to know.

What is HR software

HR software is an ideal tool for simple, effortless HR management. It empowers organisations of all sizes and levels with the power to access, manage, and automate various organisational and employee data. This software also takes care of the complete payroll system of an organisation and automates all payroll-related processes. When you opt for a smart software, you can get away with bulky files of documents and salary slips. You can view and address complex taxes, deductions, funds, benefits, loans, and every other financial issue in this user-friendly payroll software.

HR Software

Types of HR Software

Types of HR Software

Once you come to know what is HR software, now you need to know about it’s types. If you see, different organisations use varied types of human resource software. Each of these software has peculiar characteristics that are best-suited for different needs.

Let us understand some of the HR solutions that organisations commonly use.

1. Human Resources Information Systems (HRIS)

An HRIS software helps the hiring managers keep complete track of employees’ data. This platform collects and stores information related to the employees. A hiring manager or the HR of an organisation can access all personal and professional details. These details include past professional experiences and performance appraisal history. Some smarter HRIS software include additional features and modules such as benefits management options, time and attendance tracking, succession planning, payroll management, etc. that make daily HR chorus simpler.

2. Human Capital Management (HCM)

An HCM software offers an array of applications designed for assisting, tracking and development of employees. These types of software are slightly more brilliant when compared to HRIS software. They are capable of establishing performance goals and track progress. Basically, the goal of HCM software is to strengthen the workforce with complete overview access provided to the hiring manager or the HR.

3. Human Resources Management Systems (HRMS)

Although there aren’t many differences between an HRIS software and an HRMS one, HRIS is a type of the latter. This means that HRMS software involves tracking employee histories, skills, abilities, salaries, and performances. These comprehensive software are known for automating even the most complex HR process.

4. Applicant Tracking Systems (ATS)

This recruitment-based software is ideal to source hundreds of candidates. It also makes their recruitment process easier. These software are dynamically designed with algorithms that help in selecting the right fit for every position.

5. Payroll Software

A payroll software looks after the salaries, reimbursements, compensations, incentives, and complete funds-related processes. The software automates the payroll processes and ensures timely cash and paycheck releases. After the determination of gross income, payroll software automatically calculates deductions. These deductions include federal, state, and local taxes, insurance, and retirement savings. It then calculates and generates net salary in the form of direct deposits or paychecks.

These software can be further classified into two subtypes:

A. Offline or On-premise Software

An offline or on-premise software is the one that organisations install on their system. You can only access and use this software on the laptop, computer, or any other device that it is installed on. Compared to the cloud-based software, this software is more secure. However, it is inconvenient for HR managers who travel frequently.

B. Cloud-based Software

Today, most organisations are moving to cloud-based software due to their countless benefits. These software offer complete flexibility. This means that you can access it from any part of the world, any device they are compatible with, and at any time during the day. These software also have higher storage capacities. Lastly, they empower managers with seamlessly functioning HR processes.

Features of HR Software

Features of HR Software

Employee Performance Evaluation

A software helps you track the performance of each employee with the help of timely review cycles, feedback forms, and rating scale results.

Attendance Management

A software helps in managing employee work shifts, absentees, work-from-home, mark-in/out, leaves and leave deductions and complete attendance in an easy-to-use interface.

Leave Management

A software allows access to all types of leave requests from all employees on one screen. The admin can easily approve or decline the requests in just one click.

Biometric Attendance System

A software can be connected to the high-end biometric machines to keep accurate track of attendance, latecomers, and half-days.

Reimbursement System

A software allows handling all reimbursement requests and transactions at one place. The admin can approve or decline reimbursement requests in just one click.

Payroll Management

One of the best modules of a software is that it manages and processes payrolls of every staff member without any errors. It takes care of all the deductions, incentives, tax liabilities, and reimbursement and then releases salaries in the form of paychecks or direct deposits.

MIS Report Availability

From MIS Report creation to evaluating them for salary increments and other functions, an HR software can make everything available and simpler.

Asset Management

An HR software lets you track assets at all levels of the organization without any hassle.

Tax and Deduction Processing

A software automatically updates tax slabs, calculates tax liabilities, calculates TDS, calculates gratuity, files tax returns, and do a lot more related to tax and deductions so that you remain stress-free.

Bonus Calculations

A software also helps in simpler and easier bonus calculations for selected people as per their net salary.

Full and Final Settlements Processing

As soon as a project ends, a software helps in calculating and generating accurate figures of payments and final recoveries. This way, the full and final settlements can take place quickly, and nothing lags.

Benefits of HR Software

Benefits of HR Software

High Efficiency and Productivity

It goes without saying that by automating your HR processes, you free your HR manager/s. This way, they can utilise this time to complete other tasks such as planning team-building activities or workshops. Same way, the major focus of the HR managers shifts from the complex and mundane HR processes. More time and focus on other HR work means that they automatically become more productive and efficient.

Error-free Calculations and Information Storage

We all know that human errors can sometimes result in serious complications both financial and legal. When you use a software to manage all your HR processes, the chances of human errors are eliminated by 99.99%. The software does calculations on itself and provides accurate figures. Right from the payroll information to salary release to tax deduction calculations, the software automates everything. This reduces the chances of mistakes.

Less Stress

Another obvious benefit of using a software is that it frees up your HR managers from stress and hecticness of daily HR jobs. When they no more have to worry about bulky files and folders, and deal with complex numbers, they feel relieved. And as mentioned above, less stress will make the HR managers more efficient and productive.


Bigger organisations need to hire multiple HR managers to form an entire department looking after all complex HR chorus. Salaries and retention costs of all these managers become a monthly liability. When you have one comprehensive software looking after multiple HR processes, you will need just one person to supervise the software. This way, you just have to invest in hiring one professional and the cost of the software. These expenses combined are still less than the cost of hiring and retention of multiple HR managers.

Easily Available Information

When the HR managers or any other professional in the organisation needs a particular information, the traditional way to get it is relying on files, documents, and spreadsheets. But when you have a software with you, you have all the information entered in it. This information is easily accessible, with just a matter of few clicks on your computer mouse.

Time-saving Onboarding Process

We all know that the onboarding process for every new hire consumes a lot of time of the HR manager. By selecting a software for the digital automating process, you can save time there as well. When the software provides all the valuable information about the organisation and gives virtual tours of the office to the new joiners, there is hardly any need of the HR to be physically present. The HR managers can use this time for other HR activities as we already know.

Accurate Evaluation and Appreciation

It is very easy to overlook the performance of our employees. This may lead to appreciating and rewarding them inadequately. This may further lead to employee abandonment. Using a software helps in solving this problem. A dynamic software monitors performances of each employee and evaluates them from time to time. It also provides results that will help you reward the best performing employees rightly.

Secure data

If you have kept all your company and employee details in file cabinets, how secure is your data? Anyone who has the key can access your valuable information. The data entered in a software is as secure and safe as the database of a bank. Only limited and authorised people can access the vital data. Also, you can give access to multiple people. This means that if one person is unavailable because of some reason, someone else can view and use the information needed.

How to Choose The Right HR Software

Decide What You Are Looking For

The first step to choose HR software is to identify your company’s requirements. Decide what you are looking for in a software, and then start with your search. For instance, if you are looking for a software that can help you manage payroll along with HR processes, search for relevant options. Identifying your requirements will help you conduct your search in the right direction.

Don’t Miss Out on Demos

Once your requirements are in place, and once you have shortlisted the best software options, it’s time for testing them. It is time to get a hands-on experience of every software option. Ask for demos of all the software. During these demo sessions, you can ask all your doubts and get total clarity about the software. Accordingly, you can select the software that seems the most comfortable to work with.

Think About Your Budget

Depending on the complexity of the software and the number of employees, the cost of a software can vary. But you don’t have to spend a fortune on all the HR features you are looking for. Several affordable software offer a number of basic and high-end HR features, and they don’t even cost much. Just because they are inexpensive compared to other software doesn’t mean that they will not perform well. This is a common myth.

Understand standard functions and extras

You must understand the difference between the standard features and functions that come within the software and the extra features that you need to buy later. Opt for a software that has most features that you require as the standard features. If most of your required fall under the category of extra functions, you will end up paying a lot more than your set budget.

Keep Customization in Mind

We all know that no software is ideal and perfect for every organisation. Also, no software has all the features built-in right from the moment you buy it. But what matters is that the software you are considering is open for customizations. Opt for the software that you can customise as per your needs. Opt for the one that is easy to upgrade with various additional packages for add-on features.

Timely Upgradation Option

Opt for an HR solution that can upgrade itself and stay in line with the latest technological advancements. Such software will help you manage your HR and payroll processes smartly. This kind of software won’t ever let you lag in your HR functions as it remains updated as per the latest features and technologies.


  • Companies with “best in class” talent management programs are 26% more likely to be using performance management software. Source: Aberdeen
  • 47% of companies have HR software that is over seven years old. Source: Bersin by Deloitte
  • Spending on cloud-based HR software is growing faster than spending on installed or on-premises software, and cloud-based software will be 50% or more of total HR technology spending by 2017. Source: Gartner
  • 48% of HR and talent professionals want to replace their current software with a cloud-based system by 2018. Source: Information Services Group Of those HR professionals who want to replace their software in the next year, 54% say it’s because they need better capabilities and functionality. Source: Brandon Hall
  • Gartner’s 3Q 2017 Magic Quadrant reported that within three years more than 30% of global midmarket and large enterprises will adopt cloud-based human capital management (HCM) software suites to conduct administrative human resources and talent management and administration.
  • According to a recent report released by Grand View Research Inc., the HRMS market size should reach $30 billion by 2025.


Traditional HR Methods

- Traditional onboarding employees is a tediously long and hectic process filled with paperwork, forms, and data entry.

- HR-related information can only be accessed only when the HR managers or other authorities are present in the office.

- The tax season is one of the most hectic ones due to multiple calculations, filings, return filings, and deducting from employees’ salaries.

- Crucial files and folders can be accessed and viewed by every employee that has access to the file cabinets they are kept in.

- Employees have to wait for the manager’s availability to get answers to their queries.

- HR managers are always busy performing HR and payroll-related tasks.

- Very high chances of silly mistakes, human-errors, and non-compliance with rules and laws.

- Traditional HR processes involve a lot of paperwork and documentation.

HR Software

- An HR software makes onboarding easier as the new joiners can put in their information, go through the company policies, and the HR manager can see exactly where new hires are in the process.

- HR-related information can be accessed from any location and on every device that has the software installed on it.

- An HR software automatically calculates the tax liability amount for the organisation. It also calculates the deductions from every employee’s salary and provides an accurate figure of the amount to be paid.

- The HR managers and admin can decide who should be given access to valuable information.

- Most information is available and accessible for all the employees. They can view the information 24*7.

- HR software automates every HR and payroll-related process, providing more free and stress-free time to managers.

- No chance of human-errors and complete compliance with crucial laws.

- As HR software is a completely digital platform, it is considered to be an eco-friendly option.

Written by
Zubin Damania
Zubin is the co-founder of Social Media Bundle. A growth hacking specialist who has helped multiple startups scale by 10x. He was also the "Top 20 Under 20 Young Achievers in India" by Sutra Services".
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