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A key function of any human resource department is the management of employee data. This can encompass everything from payroll information, performance data, and health records. This data is becoming more and more complicated, and the scrutiny of how this data is stored is only going to become more stringent. That’s why so many HR departments now utilize some form of human resource information system (HRIS). So, what is HRIS, and how does it work?
What is HRIS?
HRIS stands for human resource information system. Simply put, a human resource information system is a software application that is used to store, track, and manage employee data, enhancing the overall employee experience. An HRIS is often used by HR departments to streamline many of the tasks that they would otherwise have to do manually. This can free up time for HR professionals so they can focus on more strategic tasks like recruiting and training employees.
HRIS vs HRMS vs HCM: Understanding the difference
It can be easy to mix up the terms HRIS, HRMS (human resource management system), and HCM (human capital management).
Here’s a quick breakdown of each term so you can better understand the difference:
HRIS stands for human resource information system. An HRIS is a software application that includes time tracking, data security, user-friendly apps, overall HR systems management, and more. It stores and tracks employee data efficiently, ensuring a seamless experience for HR professionals.
HRMS stands for human resource management system. An HRMS is a more comprehensive system that not only tracks employee data but also incorporates features for payroll, time and attendance tracking, and performance management.
HCM stands for human capital management. HCM is a holistic approach to managing all aspects of an employee’s lifecycle, from recruitment to retirement. HCM systems often include features for payroll, benefits administration, talent management, and more.
Functions of an HRIS
HRIS software can vary in terms of the features and functionality it offers. However, some core functions are typically included:
Time and attendance management
For many organizations, tracking employee time and attendance is no longer a manual, physical process. Most HRIS include a digital way to track employee time (working time), leveraging advanced HR technology, and automating workforce management.
Payroll and compensation management
Some HRIS offers payroll management features, which can be used to process employee paychecks and generate reports on payroll costs. Payroll can be complicated when you begin to account for different taxes, vacation time, sick pay, and more. With the integration of effective software solutions, payroll management becomes streamlined, enhancing benefits management and ensuring accurate employee records.
Benefits administration
Benefits work differently than payroll, so your HRIS must allow you to deal with them separately. You’ll need to worry about bonuses and retirement without allowing them to get in each other’s way. This streamlines record-keeping and supports HR strategy and workforce planning.
Performance management
Your human resource information system should be able to give you a bird’s eye view of how your staff is performing, including performance reviews and employee benefits. This level of insight enables you to make strategic decisions and work with your employees to improve their performance, thereby enhancing retention.
Organizational management
Organizing the various aspects of your workforce can be tough. A good human resources information system can bring order to the chaos, whether it’s managing meetings, paperwork, or even logistics between different locations.
To effectively handle new hires, resumes, and user experience, HR teams can rely on a software solution. Additionally, effective HR teams use advanced applicant tracking systems to streamline talent acquisition processes, ensuring seamless integration with the HRIS.
Employee self-service
Many HRIS offer an employee self-service portal that allows employees to view and update their employee information. This includes contact information, emergency contacts, and other core HR information.
Reporting and analytics
HRIS can generate various reports, such as employee turnover rates and the average time it takes to fill a position. Having an HRIS analyst is beneficial because these reports can be used to make data-driven decisions about HR policies, HRIS solutions, different data management metrics, and potentially even inform future strategy decisions for management.
Workflows and approvals
HRIS can be used to create and manage workflows, such as the approval process for vacation requests. Without a clear workflow in place, it’s very easy for one person to become a bottleneck, which may cause you to run into employee morale and compliance issues.
Types of HRIS
The best HRIS comes down to what your business needs. While most HRIS do have some core functions in common, there’s a lot of variation in the types of HRIS systems on the market. Here are some of the most common types of HRIS:
Operational HRIS
Operational HRIS is designed to streamline the day-to-day tasks of HR professionals. These systems typically include features for time and attendance tracking, benefits administration, and employee self-service.
Strategic HRIS
A strategic human resources information system is designed to help HR professionals align their activities with the overall strategy of the organization. These systems typically include features for performance management, talent management, and succession planning.
Tactical HRIS
Tactical HRIS is designed to help HR professionals make data-driven decisions about HR policies and procedures. These systems typically include reporting and analytics features, as well as a knowledge base of HR best practices.
Comprehensive HRIS
Comprehensive HRIS is designed to provide a complete solution for HR management. These systems typically include all of the features of an operational, strategic, and tactical HRIS. It also includes additional features for payroll processing, time and attendance tracking, and benefits administration. These are typically the top-class HRIS and are generally the most expensive, too.
Limited function HRIS
Limited function HRIS is designed for businesses that don’t require a full-featured HRIS. These systems typically include only the most essential HR functions, such as employee self-service and benefits administration. For some HR departments, most HRIS functions have either been built in or outsourced. In this situation, you may only need a singular function.
Choosing the right HRIS for your business
One challenge businesses may find when they wish to implement a new HRIS is how to choose the right one. Consider these guidelines.
The size of your organization
If you have a large organization with hundreds or even thousands of employees, you will need an HRIS that is scalable and can handle all of your employee data. On the other hand, if you have a small organization with only a few dozen employees, you may not need a fully-featured HRIS and can get by with a simpler HRIS system.
The needs of your HR department
You should choose an HRIS that includes the features and functionality your HR department needs to carry out its tasks effectively. For example, if your HR department is responsible for managing payroll, you will need an HRIS with payroll processing capabilities. If they need assistance with the onboarding process, an HRIS will be very helpful as well.
It’s important not to get caught up in the bells and whistles of an exciting new tool. Only incorporate what’s needed or what will support your business.
Your budget
HRIS can vary widely in price from a few hundred dollars to several thousand dollars per year. You should choose an HRIS that fits within your budget and offers the features and functionality you need. Remember, the broader the scope of your HRIS, the more expensive it’s likely to be.
Benefits of an HRIS
Human resource information systems can transform your HR department overnight and lead to huge growth and savings for your business. Here are some of the potential benefits you can expect from HRIS software:
Improved efficiency
HRIS can automate many of the tasks that HR professionals have to do manually, such as tracking employee data, processing payroll, and managing benefits. This can lead to increased efficiency and productivity within the HR department.
Better decision making
HRIS can provide managers with access to real-time data on employee performance, time and attendance, and other factors. This data can be used to make informed decisions about things like staffing levels, training needs, and employee development.
Reduced costs
HRIS can help businesses save money by automating tasks that would otherwise have to be done manually. For example, an HRIS can be used to process payroll electronically, which can save the business money on paper and postage costs. It can even help bring outsourced functions back in-house without adding to your current staff’s workload.
Improved compliance
HRIS can help businesses stay compliant with laws and regulations related to HR, such as the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA). Data breaches are a common issue with manual systems, as dealing with large swathes of data by hand is a near-impossible task. An HRIS can provide a secure HR system by knowing that data is being handled securely and compliantly.
Increased employee satisfaction
By providing employees with self-service capabilities and easy access to their HR data, HRIS can improve employee satisfaction and engagement.
Challenges of an HRIS
While HRIS can offer several benefits for businesses, there are some challenges you should be aware of. These challenges include:
Implementation and integration
Implementing an HRIS can be a complex and time-consuming process. The system must be properly configured and integrated with other business systems, such as payroll and accounting. Training will also be needed to ensure all relevant stakeholders are comfortable with the system and can use it without causing compliance breaches.
Cost
HRIS can be expensive, both to purchase and to maintain. If not managed properly, the costs associated with an HRIS can outweigh the benefits. It’s important to consider just how broad of a human resource information system you need. Are you hoping to replace the majority of your HR functions or just replace something narrow like payroll? A more focused product may be a lot more cost-effective.
Employee privacy
Some employees may be concerned about the amount of personal information stored in an HRIS. Businesses must take steps to ensure employee data is used appropriately and only accessed by authorized personnel and that it’s safe and secure from breaches.
System downtime
If an HRIS goes down, it can have a significant impact on the business. Businesses must have contingency plans in place to deal with system outages.
Compliance
Businesses must ensure that their HRIS is compliant with all relevant laws and regulations. Storage of personal data with data security is often core to these systems, so compliance is of the utmost importance.
Getting an HRIS certification will help surmount the challenges you might face and it will give you the expertise needed to handle an HRIS.
HRIS and the cloud
Cloud technology has transformed the way most businesses store and manage data. Cloud-based HRIS offers several advantages over traditional on-premise HRIS. These advantages include lower costs, increased flexibility, and better scalability. However, there are also some challenges that businesses need to be aware of when considering a cloud-based HRIS. These challenges include:
Security
One of the main concerns with cloud-based HRIS is security. HR data deals explicitly with people and will include things like social security numbers, addresses, and even possible health-related data. Not only is it extremely important to keep this data safe to protect the individuals, but it’s also a serious compliance issue that could potentially cost your company a lot of money.
Implementation
Another challenge with cloud-based HRIS is implementation. Because these systems are usually hosted by a third-party provider, businesses need to make sure they have the resources and expertise in place to properly implement and use the system.
Vendor lock-in
Another potential challenge with cloud-based HRIS is vendor lock-in. When businesses choose a cloud-based HRIS, they’re usually relying on a single vendor for their HR software needs. This can make it difficult to switch to a different vendor if the business isn’t happy with the service or the costs.
The future of HRIS
Some of the trends that are likely to shape the future of HRIS include:
The rise of artificial intelligence
Artificial intelligence (AI) is being increasingly used to automate tasks. This trend is likely to continue as AI technology becomes more sophisticated. HRIS will likely look to implement this technology to allow for even more automation.
The increasing importance of data
As HRIS become more sophisticated, they will be able to generate increasingly large amounts of data. This data will be used to inform decisions about things like staffing levels, training needs, and employee development. It will also be important to have a highly developed HR staff that can understand the data and make decisions with it, too.
Compliance
With the ever-changing landscape of HR regulations, compliance is becoming an increasingly important concern for businesses. This heightened scrutiny from regulators underscores the necessity for HR teams to invest in advanced software solutions for efficient record-keeping and compliance management.
Employee engagement
As the war for talent intensifies, businesses are increasingly looking for ways to improve employee engagement. HRIS will need to be able to help businesses identify and address issues that impact employee engagement.
FAQ
What is HRIS in simple terms?
HRIS stands for human resource information system. It's a software tool that helps organizations manage employee data more efficiently.
What are the four major components of HRIS?
The four major components of HRIS are:
1. Employee information management: This component involves storing and managing employee data such as personal details, job history, and performance records.
2. Recruitment and applicant tracking: HRIS helps in managing the recruitment process, including job postings, applicant tracking, and candidate evaluation.
3. Payroll and benefits administration: HRIS facilitates payroll processing, including salary calculations, tax deductions, and benefits administration, such as health insurance and retirement plans.
4. Training and development: This component helps in organizing training programs, tracking employee development, and assessing training effectiveness.
What are the three types of HRIS?
HRIS comes in three types:
1. Operational HRIS manages daily tasks like employee data, attendance, and benefits.
2. Strategic HRIS aligns HR with organizational goals, focusing on performance and talent.
3. Tactical HRIS supports data-driven HR decisions through reporting and analytics tools.
What are the benefits of using an HRIS in an organization?
Using an HRIS in an organization offers streamlined data management, improved efficiency, better decision-making, enhanced compliance, and cost savings. It's a smart solution to keep your workforce on track, which is way more effortless than manual management.
Summary
We hope that this article helped you learn what an HRIS is, what HRIS stands for, and why HRIS plays a vital role in the modern workplace. They help businesses manage their HR data, automate HR processes, and improve employee engagement. As the workforce continues to evolve, so too will the role of HRIS. The trends that are likely to shape the future of HRIS include the rise of AI, the growth of the gig economy, the rise of remote work, the increasing importance of data, the importance of compliance, and the increasing need for better employee engagement.
To learn more about how an HRIS can work for your business, schedule some time to chat with us about Workstream's HR, Hiring, and Payroll platform.
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