HRIS vs HRMS vs HCM – Differences Explained For 2024

The development of ERP solutions like HRIS and HRMS has become of growing importance for the modern-day needs of businesses. In the age of data and technology, handling the day-to-day aspects of human resource management without dedicated HRMS software can have a lot of negative results. These include:

Inability to track and monitor the progress of day-to-day activities of employees.

Inability to enforce HR policies and regulations in an organization.

Inability to execute important HR functions like processing payrolls, handling leave applications, formulating HR policies, and all others. 

In this context, understanding the differences between HRIS, HRMS, and HCM becomes important to help your business stay upbeat with HRMS development needs. 

Human Resource Information System (HRIS)

HRIS is referred to as the Human Resource Information System. It is basically responsible for keeping track of data and information produced in the daily routine of a business. 

HRIS is an application that is created for the purpose of human resource management. Basically, this application will help to manage the details of the employees. Anything that revolves around employees is stored in the HRIS application. This application is mainly used to manage the payroll information of employees.

Along with payroll, the application has the capability to manage the details of the employees like performance management, leave management, and payroll management. This application will be mostly desktop-based. It has existed for many years, and every company will have its own HRIS application.

The basic difference between the HRIS application and HRMS application is that the HCM and HRMS application is hosted mainly on the cloud, whereas the HCM application is on-premise and does not have cloud hosting and will be available on-premise and installed in the local systems of an organization.

Why is HRIS Application important for your business?

HRIS application focuses on features like managing the payroll for an employee. The payroll management typically helps the employee to get into their payslip every month. The application will help the employee to check out the list of holidays that have been planned by the organization. The HRIS application helps the organization to customize payroll management according to their requirements.

The application will help the employee to initiate their income tax declaration. The income tax declaration is an important task as the salary that they earn every month is accountable to tax, and they should be able to provide the declaration well in advance in some portal.

HRIS application helps the HR team to manage the activities of the employee in an effective way. The initial process with any employee is to complete the paperwork. HRIS application will help the HR team to complete the paperwork and the process of collecting the documents in an effective way. The paperwork will also require certain e-signatures, and this application will enable such signature procedures to be completed properly.

Small Organisations to Bigger Organisations will have a greater dependency on HRIS applications. They use this application to monitor and track employee-related information. Beyond the information related to employees, these organizations use the application exclusively meant for Executives of the organization and business owners.

These Organisations can manage the hiring process of the employees via the HRIS tool. The HRIS tool will help a company organize the activities related to training, the onboarding process of new employees, and any documentation process for employees that can be handled with the tool.

Human Resource Management System (HRMS)

HRMS is software for managing employees. It aids in full employee management and tax compliance. Additionally, it simplifies understanding the workforce and managing employee life cycles.

HRMS application has the entire steps related to the recruitment and onboarding process. The recruitment process is the first step of the organization to attract employees, and it would help to deliver the best of people’s work.

The recruitment process can be well managed with the HRMS application. The resume of the employee and the candidate’s information will be stored within the HRMS application. The application will help to keep track of the employees who appeared for the interview in the past. This tracking will help the organization assess the employee and evaluate him for recruitment.

The onboarding process will also run smoothly with the help of the HRMS application. This application will also have the process automated for the employees. The candidates can get the offer letters sent from the application directly, and they can even sign off on the offer letters. The employees perform e-signature on the offer letters and can get that saved as part of the onboarding process.

HRMS applications will mostly be cloud-based applications. The application will have an end-to-end centralized HR solution and can help to automate the HR processes for any scale of organization.

The HR team nowadays need not worry about managing the employees. The application is designed in such a way that the organization does not need to have a great learning curve in using the application. They are very easy to adapt, and it is very effective in handling HR-related activities.

The other important aspect of the application is the leave tracking of the employees. The employees can apply for leave in the application, and they can track the leaves of the employees on the same screen.

The advantage is that the application can be used as an employee-friendly tool and at the same time as an organisation-friendly tool. The tool will help the employees to track their performance documents. The entire performance process of a user and the documents related to performance is managed via these kinds of applications.

The HRMS application goes beyond HRIS. It is cloud-based and manages HR work effectively. HRIS manages employee data, including payroll, recruitment, and benefits. It also covers training, talent, engagement, and attendance. HRMS is for smart workforce management. It helps HR pros track a company’s top assets.

Human Capital Management (HCM)

HCM software, or Human Capital Management, does what HRMS does. However, it is now more popular. It manages human resources activities in the cloud.

HCM application is mandatorily deployed in the cloud-based environment, unlike HRIS or HRMS. HCM adapts to the latest techniques, and it will also have an inbuilt AI capability. HCM solutions have inbuilt digital systems that help streamline the onboarding process effectively. The HCM tools will change the old tasks into new, performance-driven activities. They will add more business value for the organization.

Differences between HRMS (Human Resource Management System), HCM (Human Capital Management), and HRIS (Human Resource Information System)

Choosing the Right System between HRMS, HRIS, and HCM

Selecting the right HR system, like HRMS, HCM, or HRIS, is crucial for any organization. It boosts HR efficiency and business success. Here’s a guide to choosing the best system.

Assessing Business Needs

• Identify Your HR Objectives: Determine whether your priority is operational efficiency, strategic talent management, or data management and analytics. This will help you decide whether an HRMS, HCM, or HRIS is more aligned with your needs.
• Understand Your Workforce: Consider the size, distribution, and complexity of your workforce. A larger, more diverse workforce may benefit more from a comprehensive HCM system, while a smaller organization might need a straightforward HRMS or HRIS.
• Evaluate Current Pain Points: Identify gaps in your current HR processes. Are you struggling with manual payroll processes, lacking strategic talent development, or facing challenges in data management? The system you choose should directly address these issues.

Integration and Scalability

• Integration Capabilities: The right HR system should seamlessly integrate with your existing software (such as accounting, productivity tools, or ERP systems) to ensure smooth data flow and avoid information silos.
• Future-Proofing: Choose a system that can scale with your business. As your organization grows, your HR system should be able to accommodate new users, functionalities, and more complex processes without significant overhauls.
• Cloud-Based vs. On-Premise: Consider whether a cloud-based solution (with its flexibility and scalability) or an on-premise system (offering more control over data) suits your business needs better.

Cost-Benefit Analysis

• Upfront Costs vs. Long-Term Value: Weigh the initial investment against the potential ROI. This includes not just the cost of the software but also implementation, training, and ongoing maintenance costs.
• Efficiency Gains: Consider the time and cost savings from automating HR processes. For example, an HRMS can significantly reduce the time spent on payroll and benefits administration.
• Strategic Advantages: Evaluate how the system can contribute to your organization’s strategic goals. An HCM could offer long-term benefits by improving talent management and workforce planning, potentially leading to better performance and competitiveness.

User Experience and Support

• Ease of Use: The system should be intuitive and user-friendly. A steep learning curve can lead to resistance from your HR team and employees, reducing the effectiveness of the new system.
• Vendor Support and Training: Ensure that the vendor offers comprehensive support and training resources to facilitate a smooth transition and ongoing usage.

Compliance and Security

• Data Security: With HR systems handling sensitive employee data, robust security measures are essential. Ensure the system complies with data protection regulations relevant to your region or industry.
• Compliance Features: Look for features that help you comply with labor laws, tax regulations, and other legal requirements. This is key for global organizations. They need to navigate varying, complex rules in different places.

Vendor Reputation and Reliability

• Research Vendors: Look into the vendor’s track record, customer reviews, and case studies. A reputable vendor should have a proven history of reliability, innovation, and customer satisfaction.
• Ask for Demos and Trials: Before making a final decision, request demonstrations and, if possible, a trial period to test the system’s functionality and ensure it meets your needs.

Conclusion

The HCM platform’s main benefit is that it is in the cloud. So, it will have no issues with scaling or downtime.

The cloud-based solution easily integrates with innovative HR task managers. It also includes document management tools, aiding in onboarding and performance management.

The application quickly adapts for remote or hybrid work. It’s accessible from any environment and location. It’s cloud-based, so it works smoothly. However, good network bandwidth is crucial. Both HR and employees can access it from anywhere. Plus, they get information instantly.

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Our team of expert writers is committed to bringing insights on topics ranging in the fields of technology, marketing, and business. With a wide-reaching range of services on our platform, we help businesses achieve digital transformation end-to-end.