Manually managing human resources (HR) functions can be a challenge, especially as your business grows. If you want to streamline these processes and reduce the burden on your HR staff, top HR software is the way to go. This buying guide will help you learn more about what HR software is and the businesses that can benefit from it the most.
What is HR software?
HR software is a digital platform designed to streamline your HR functions. It often includes a cloud-based platform with self-service features to help you recruit and onboard employees, track employee hours, administer employee benefits, process payroll, manage employee performance, maintain legal compliance and access a variety of HR-related reports. Some HR software also includes support representatives to help you get the most out of your HR solution and offer guidance on how to handle some employee-related issues.
Who needs HR software?
Essentially all businesses with employees will find value in HR software. While this isn’t an exhaustive list, here are some types of businesses that need HR software:
- Small businesses: HR software benefits small businesses, even those with just a few employees. Managing tasks like payroll, benefits administration, time-off requests and performance reviews can be time-consuming for small business owners. HR software can automate these tasks and free up valuable time for you to focus on other business functions.
- Startups: Startups are often in a high-growth mindset, which means their needs are frequently changing. As your startup expands, flexible HR software can scale with it, allowing your business to consistently manage HR processes with ease.
- Large enterprises: If you have a large enterprise, chances are you have an internal HR department. Having HR software for your staff to use can streamline bulk processes and maintain consistency throughout various departments.
- Remote-based companies: Since HR software is often cloud-based, you and your workers can access it from any location. Many HR software vendors can also help with legal compliance, which can be tough to maintain manually if your employees are located across various cities or states.
- Companies in high-compliance industries: Some industries, such as healthcare and finance, have a high compliance burden. HR software helps these companies stay compliant with complex regulations and reporting obligations.
- Companies with high employee turnover: High employee turnover can be costly and disruptive. HR software helps businesses with high turnover rates by streamlining the recruitment process, onboarding new hires and tracking employee engagement. HR software also includes reporting capabilities, which can be beneficial for identifying ways to reduce turnover.
How much does HR software cost?
The cost of HR software varies significantly depending on several factors, like how many employees you have and the services and features you want included in the software. Typically, pricing is structured on a per-employee basis, ranging from $5 to $20 per employee per month. Some providers also include a monthly base fee, which can be anywhere from $40 to $100 per month. It’s common to pay extra for services such as payroll management, employee benefits administration and performance tracking.
Some HR software solutions offer flexible payment options, allowing you to choose between monthly subscriptions and annual contracts. While free trials and plans are rare, most providers offer online demos or personalized walkthroughs to showcase their software’s capabilities.
It’s essential to evaluate your business needs and budget carefully to find an HR software solution that aligns with your specific requirements and goals.
What are the benefits of HR software?
HR software offers a variety of benefits that can improve efficiency, compliance and employee satisfaction for businesses of all sizes. Here are some of the key advantages:
Increases efficiency and time savings: HR software automates repetitive tasks like payroll processing, benefits administration and time-off tracking. This reduces the potential for human error and frees up HR staff for more strategic initiatives.
Improves HR compliance: Manual data entry can be error-prone, leading to compliance issues. HR software streamlines data entry and automates calculations, ensuring accuracy in payroll, benefits and other key HR functions. Additionally, the software can track deadlines and regulations, helping businesses stay compliant with labor laws.
Streamlines employee recruitment and retention: HR software facilitates the recruitment process by managing applicant information, tracking candidates through the hiring pipeline and scheduling interviews. This allows businesses to attract and retain top talent more effectively by quickly moving candidates through the recruitment process.
Enhances the employee onboarding experience: HR software automates the onboarding process, ensuring new hires receive all necessary information and complete required tasks efficiently. This leads to a smoother transition into their role and fosters a more positive employee experience from the start.
Reduces the administrative burden: HR software empowers employees by providing self-service portals for tasks like requesting time off, accessing pay stubs and updating personal information. This reduces the administrative burden on HR staff and allows employees to take control of their HR needs.
Allows for data-driven decision-making: HR software generates HR reports and provides real-time data on your workforce. This data can be used to identify trends in areas like recruitment, retention and employee performance. With this information, businesses can make data-driven decisions about HR strategies, resource allocation and talent management.
What are the types of HR software?
HR software encompasses a wide range of solutions that address various aspects of workforce management. While some HR solutions offer a wide range of services and features, others focus on one specific area of HR. Here is a breakdown of some key categories.
Human resource information system (HRIS)
HRIS software is the foundation for many HR software solutions. HRIS acts as a central database for employee information, storing information like contact details, payroll records and benefits enrollment. It simplifies recordkeeping and allows for basic reporting.
Human capital management (HCM) system
Building upon HRIS, HCM software offers a more comprehensive suite of tools. It integrates core HR functions like payroll processing, talent management and performance management into a single platform. HCM systems often provide advanced analytics and reporting capabilities.
Applicant tracking system (ATS)
Focused on the recruitment process, applicant tracking software streamlines tasks like creating and posting open jobs, screening applicants, scheduling interviews, and communicating with candidates. An effective ATS helps attract qualified candidates and improve efficiency in hiring workflows. Many applicant tracking systems integrate with other HR software so your new hire’s data is accessible throughout their employment lifecycle.
Benefits administration software
Benefits administration software helps automate and streamline the employee benefits administration process. It has features to help with eligibility verification, open enrollment and claims processing. It often has self-service capabilities and enrollment support for employees to manage their own benefits.
Payroll software
Payroll software automates payroll calculations, deductions and tax filings. It reduces the risk of errors and ensures accurate and timely payments to employees. It typically includes time off management tools as well so that you can accurately track employee time off.
Learning management system (LMS)
Learning management systems are designed for employee training and development. It allows companies to create, deliver and track employee training programs. It offers online courses and typically includes features like certification tracking and employee progress monitoring.
Performance management software (PMS)
This software helps streamline employee goal setting, feedback collection, performance reviews and performance improvement plans. It tracks employee progress and facilitates effective communication between managers and employees regarding performance expectations.
What are the key features to look for in HR software?
While the specific features you should look for depend on your specific HR needs, there are a few common ones that many businesses find useful.
Recruiting and onboarding
Most HR software includes tools and features to help with recruiting and onboarding. Useful tools include job board integrations, applicant tracking, interview calendar integrations, offer letter templates, new-hire packets, e-signature capabilities, document storage and onboarding workflow automations. Most HR software can also integrate with background check service providers.
Benefits administration
HR software can help you administer and manage employee benefits like medical, dental and vision insurance; short- and long-term disability insurance; retirement savings accounts; health savings and flexible spending accounts; life insurance; workers’ compensation; and commuter benefits. While HR software does not typically administer these benefits themselves, they conveniently integrate with popular benefit carriers that allow you to manage your benefits with ease. They also include benefits enrollment assistance and ongoing participant education to help your employees choose the right benefits.
Payroll
HR software can help you track employee hours and pay employees accordingly. It offers useful features like shift scheduling, time tracking, geolocation tracking, time off management, payroll processing, contractor payments, payroll tax administration and overtime compliance assistance. Some HR software providers include these features in their base plans, while others offer them as optional add-ons.
Performance management
Most HR software offers some level of performance management services, although some may offer these as optional add-ons. Common performance management features include goal setting, feedback collection and performance tracking. Having a digital log of employee performance history can be a great way to track and reward progress.
Compliance support
HR software has many tools to help you maintain compliance with federal, state and local employment laws. For example, it allows you to store necessary documents and records for HR compliance. Since it automates many processes, it reduces the potential for human errors. Workflow automation can also help ensure no steps are missed in the workforce management process. If an error does arise, HR software can promptly notify you before it becomes an issue.
HR reporting
HR reports are some of the most useful tools for businesses that want to improve efficiency. HR software includes basic reporting and analytics features for you to track data on HR processes like payroll and taxes. Many HR solutions also offer advanced reports on things like employee engagement, headcount and turnover. If you sign up for software that offers benchmarks, you can easily assess how your processes compare and make improvements as needed.
What factors should you consider when choosing HR software?
Although many popular HR software solutions seem similar, each has its own specialties, making them better for certain types of businesses. Here are a few key factors to consider when choosing your HR software.
Pricing and contracts
Pricing and contracts are obvious callouts, but they should be a top priority when looking for HR software. You want to find a solution within your current budget and potential future budget as your business scales. Pay attention to monthly pricing, setup fees, the cost of add-on features, contract lengths and cancellation terms.
HR features
Identify the key HR features you need and then look for HR software that has those. Note which features are automatically included in each plan and which are optional add-ons that will incur additional fees. Consider what features you may need in the future as well.
Platform usability
HR software is typically cloud-based, allowing you and your employees to access it from any location. However, some user interfaces are easier to navigate than others and, as a result, have shallower learning curves. Assess how tech-savvy your employees are and find software to match. You will also want to consider what features can be automated, as this can help streamline HR functions even further.
Scalability
You want an HR solution that can scale with you as your business grows. Look at what services are offered, as well as platform integrations. You want a solution that can work with your other current business platforms and meet your changing needs.
Customer support
All HR software vendors offer some level of support, but how much you get will vary. Assess what support communication methods are offered (e.g., phone, email, webchat) and whether the vendor offers a dedicated support representative. Reading customer reviews can help you get an idea of how effective their support teams are.
Professional employer organization
A professional employer organization (PEO) is a type of HR solution that simplifies the HR management process for small and midsize businesses. This type of HR vendor acts as a co-employer for your employees and helps take on some of the legal and administrative burdens of managing HR. They typically offer their services as a bundled package (e.g., onboarding, benefits administration, payroll, performance management, compliance assistance, etc.), so they are a great choice for SMBs that need additional expert support with HR. Some HR vendors even offer their services as a PEO or a standalone HR platform, allowing you to transition between the two as needed.
What are the top HR software vendors?
There are many excellent HR software options on the market. However, after extensive research and testing, I’ve identified the following providers as some of the best HR solutions available:
- BambooHR: This platform has two distinct plans, with add-ons for time tracking, payroll and benefits administration. It’s especially ideal for growing businesses that want a user-friendly platform with core HR and onboarding features.
- Bambee: Bambee is an HR outsourcing solution that offers transparent online pricing, HR audits and policy creation, and hands-on guidance and support. It caters specifically to companies with fewer than 500 employees.
- Gusto: This software has essential HR services, but it excels at payroll. Gusto offers automatic full-service payroll in every plan and can support both employee and contractor payments.
- Rippling: This automated solution can act as an HR software provider or a PEO service. It also offers IT and finance management features, making it a scalable solution with integrated options.
- Paycor: This platform has four plans with optional add-on features. Its numerous reporting and analytics features can help companies streamline their business functions.
- Insperity: Insperity offers PEO and non-PEO HR service options, making it a scalable HR solution for SMBs. It also has numerous training and development resources for employees.
- ADP: As one of the largest HR providers in the industry, ADP is a powerhouse HR solution. It offers PEO, HRO and payroll plans, as well as comprehensive benefits administration.
- Paychex: This solution offers HR services in addition to other business services like business insurance. It’s cloud-based and has many self-service features, making it a great option for companies with remote or dispersed teams.
- TriNet: TriNet offers PEO and non-PEO options. Its non-PEO HR solution, HR Platform, includes a user-friendly interface with transparent pricing. It’s especially great for startups that want easy-to-use software with standard HR features.
- Papaya Global: International employers should consider Papaya Global. This global HR solution can support companies in multiple countries and features a centralized HR platform and local currencies.