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What is HR Software? How to choose the right HRMS? A Complete Guide to an HR Software for SME in 2021 (Revised)

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Zubin Damania
October 15, 2018

Have you ever heard of HR software?

Today many companies are offering HR & Payroll tools that make lives easier for HR teams at your organization. Although it is one of the most niche tools, it can be very beneficial for small and medium scale businesses. (SME's)

So, let us dive deeper into some core HR tools, their functions and responsibilities.

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

What is HR software

HR software or HRMS is an ideal tool for simple, effortless HR management. It empowers a company with access, management, and automation of various organisational and employee records.

This HRM software also takes care of the complete payroll system of an organization and automates all payroll-related processes. When you opt for smart software solutions, you can do 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.

The best part of an HR Platform is that it helps in reducing the number of manual tasks that the human resources department has to perform. This, in return, reduces the possibility of human errors.

HR Software

Types / Features of HR Software

Different businesses use different types of human resource software. Each of these software has unique characteristics that are best suited for their needs. Let us understand some of the HR solutions that organizations commonly use.

Types of HR Software

Different businesses use different types of human resource software. Each of these software has unique characteristics that are best suited for their needs. Let us understand some of the HR solutions that organizations commonly use.

1. Human Resources Information Systems (HRIS)

An HRIS software helps the hiring managers control data to easily manage employees. This platform collects and stores information related to the employees.

It consists of details related to the entire employee life which includes past professional experiences and performance reviews and appraisals. Some smarter HRIS software includes additional features and modules such as benefits management options, time tracking, succession planning, payroll management, etc. that make daily HR chores simpler.

2. Human Capital Management (HCM)

An HCM software offers several applications designed for assisting, tracking and development of employees. This software is slightly more profound when compared to HRIS software.

It is capable of establishing performance goals and tracking 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)

HRIS software and HRMS software are not too different. HRMS software involves tracking employee records, skills, abilities, salaries, and reviews. This comprehensive software is 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 the recruitment process easier.

This software is dynamically designed with algorithms that help in selecting the right fit for every position and talent management.

5. Payroll Software

Payroll software looks after the salaries, reimbursements, compensations, incentives, and complete funds-related processes. The software automates the payroll and benefits the employer in terms of time.  

After calculating gross income, the software automatically calculates deductions. These deductions include federal, state, and local taxes, insurance, and retirement savings. The software also needs to be integrated into the Indian payroll module.

After calculating gross income, the software automatically calculates deductions. These deductions include federal, state, and local taxes, insurance, and retirement savings. The software also needs to be integrated into the Indian payroll module.

It then calculates and generates a net salary in the form of direct deposits or paychecks. This software can be classified into two subtypes:

A. Offline or On-premise Software

Offline or on-premise software is the one that organizations 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 cloud-based software, this software is more secure. However, it is inconvenient for HR managers who travel frequently.

B. Cloud-based Software

Today, most organizations are moving to cloud-based software due to their benefits. You can access it from any part of the world, on any device they are compatible with, and at any time during the day.

This software also has higher storage capacities. Lastly, they empower managers with seamlessly functioning HR processes.

sumHR is one such cloud-based HR Software for SME's across the globe.

Features of HR Software

Features of HR Software

6. Employee Performance Evaluation

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

Performance management tools can help in sending out performance appraisals and change employee experiences into a positive one.

7. Attendance Management

The 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.

In addition to this, there are mobile apps that have all the key features for real-time tracking of attendance.

8. Leave Management

The software allows access to all types of leave requests and time off requests from all employees on one screen. The admin can easily approve or decline the requests in just one click through E-signing.

9. Biometric Attendance System

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

HR software such as sumHR is usually compatible with most of the biometric devices available.

10. 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.

11. 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.

12. Asset Management

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

13. Tax and Deduction Processing

The 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.

14. Bonus Calculations

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

15. 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

1. High Efficiency and Productivity

HR managers can take a huge breather due to human resource software tools. This way, they can utilise this time to complete other tasks such as planning team-building activities or workshops.

The major focus of HR managers shifts from the complex and mundane HR processes. More time and focus on other core HR work means that they automatically become more productive and efficient.

2. 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 software to manage all your HR processes, the chances of human errors are eliminated by 99.99%.

The software does calculations which are automated and provide accurate figures*. Right from the payroll information to salary release to tax deduction calculations, the software automates everything. This reduces the chances of errors.

3. Less Stress

Another obvious benefit of using software is that it frees up your HR managers from stress and mundane activities of daily HR workflow. And as mentioned above, less stress will make the HR managers more efficient and productive.

4. Cost-saving

Bigger businesses need to hire multiple HR managers to form an entire department looking after all complex HR chores. Salaries and retention costs of all these managers become a monthly liability.

Single comprehensive management software can handle the role of all these employees. It also needs just one individual to oversee it. This way, you 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.

5. Easily Available Information

When HR managers or any other professional in the company need particular information, the traditional way to get it is relying on files, documents, and spreadsheets.

Accessible software is loaded with employee databases and employee info. This cuts the wild goose chase needed to extract information.

6. Time-saving Onboarding Process

We all know that the employee onboarding process consumes a lot of time of the HR manager. By selecting the software for the digital automating process, you can save time there as well.

7. Accurate Evaluation and Appreciation

It is difficult to overlook the performance of our employees. This may lead to appreciating and rewarding them inadequately. This may further lead to a reduction in employee engagement.

Using software helps in solving this problem. A dynamic software monitors the 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.

8. 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 software is as secure and safe as the database of a bank. Only limited and authorised people can access vital data.

How to Choose The Right HR Software?

Companies of all sizes need to find the right human resource management software to suit their needs. However, there are several HR software vendors in the market, that seem to offer the same services.

In reality, there might be a specific HR software provider who is perfect for you. Here is how you can find them.  

Decide What You Are Looking For

The first step to choose human resources software is to identify your company's requirements. Decide what you are looking for in software, and then start with your search.

For instance, if you are looking for software that can help you manage payroll along with HR processes, search for relevant options. Highlighting your requirements will help you conduct your search in the right direction.

Don't Miss Out on Demos.

After highlighting and shortlisting your options, you need to test them. Ask for demos of all the software service providers.

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

The cost of software can vary according to your needs and your numbers. But you don't have to spend a fortune on all the HR features you are looking for.

Several affordable software offers several basic and high-end HR features. 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 the features you need in the package. If most of your requirements 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 company. 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 customize 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 software 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 and efficiently


  • Companies with “best in class” talent management or HR 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 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.

Frequently Asked Questions (F.A.Q.)

1. Why do I as an HR need an 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 organization. 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.

2. What are the 7 major HR activities?

There are some core HR processes that can be divided into 7 major activities. These activities form the various modules provided by HR software.

3. How much does HR software cost?

HR software is usually priced on a "per employee per month" basis. In this model, you will be paying a fixed monthly cost for each employee.

Another pricing scheme is the "per user per month" basis. As all employees may not use the software, this model is limited to people who will use it.

Finally, some software vendors use a one-time payment scheme.

Pricing is purely dependent on the modules of HR software you purchase and its features. For more clarity on how this process works, check out the pricing model for sumHR which starts at low price of ₹49/- per employee per month or $2 per employee per month & you can customize it based on your requirement as well.

4. Why is HR software so important?

HR software is essential for any organization. It saves time and effort by automating complex HR processes. It allows the HR department and employees to focus on company objectives and implement strategies to reach them.

The business can also focus on expansion and development rather than hiring and training HR professionals to go through cumbersome paperwork. By making HR activities more efficient, there is more scope for holistic development in the company.

5. What key features should I look for in an HR software?

Apart from the processes that you are looking to automate, there are a few features that you need to look out for in HR software:

  • A self-service option for employees where they can access information and submit requests
  • A system that easily integrates with the software already present in your organization
  • An easy-to-use interface that requires less training
  • High-level data encryption and data security
  • A cloud-based software system that makes HR management easier and more centralized.

I hope this answers your questions regarding HR Software/HRMS.

If you're looking for a 360 HR Suite, sumHR offers all possible options mentioned above.

The best part is you have fixed plans and variable plans (pay for the product you want).

Still not convinced, book your free demo now at sumHR.

If you have any doubts feel free to drop it in the comment section and I'll be sure to answer it.

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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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