Introduction
As critical as Human Resources is to your business, much of the day to day work involves repetitive tasks like updating employee information and filling out forms. A human resources information system (HRIS) can help make your HR department more efficient, allowing you to focus on long-term strategic HR work instead of basic administration.
HRIS software spans a huge range of systems, from off-the-shelf $500 packages to customized enterprise systems that can cost upwards of $100,000. You can choose from modules that handle basic demographic information, payroll, recruiting, performance assessment, benefits, and more.
Note that these systems go by multiple aliases. HRIS is probably the best-established term, but HRMS (human resources management system) and HCM (human capital management) are also used to refer to the same types of systems. In general use, the terms are interchangeable, although you may find some vendors who draw minor distinctions between them. Finally, the phrase "HRIS systems" is technically redundant, but like "ATM machine" is common in day-to-day usage.
Because there is so much variety and such a wide range of features to choose from, it's important to carefully consider your HR needs before you start shopping. This BuyerZone HRIS Buyer's Guide will help you:
- Assess your HRIS needs
- Understand which features to look for
- Determine how to choose among multiple providers
- Know how much can expect to pay
Once you have the information, BuyerZone can connect you with leading HRIS vendors in your area — free.
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Understanding the basics
HRIS systems can cover almost any human resources activity you can name, from recruiting and hiring, to benefits and payroll, to training and development. One of the challenges in choosing an HRIS is deciding what areas to address.
Knowing what pain points you want to solve is a good place to start. Is your HR team swamped with paperwork every open enrollment period? Can your employees easily find their benefits status, such as how many vacation days they have left? Are you able to hire the highly-qualified employees you need? Take some time to review your current HR practices and answer these types of questions before you start talking to HRIS vendors.
Scope
Think about how you want to enhance your HR activities, as well. You may want an HRIS that simply makes your current process faster and easier: one that allows employee self-service to benefits, automates applicant tracking, and handles payroll processing, for example. While these benefits are significant, they're mostly improvements to your existing business processes.
The alternative is to integrate an HRIS that can help make HR a more strategic part of organization. For example, you can incorporate new HR activities, such as talent management, succession planning, and online applications.
Make sure that you're basing this decision on what's best for your business, not what some software vendor tells you. Almost all HRISes are expandable over time, so the best approach may be to tackle administrative issues first, then add more strategic modules later.
Compliance issues
Preparing for an HRIS purchase should also involve a thorough investigation of the record-keeping and reporting regulations that apply to your industry. HR departments face a maze of compliance issues, from basics like EEO and ADA that apply to every U.S. business, to more specific laws and regulations from OSHA to HIPAA to SAS 70 to ISO 9000. International standards, such as European Safe Harbor requirements, add to the confusion.
No HRIS can suddenly bring you into compliance with all of these regulations, as many of them focus on processes, not just technology. Instead, a robust HRIS provides the central data repository and reporting capabilities to allow you to get there.
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What modules do you need?
Most HRISes are sold in modules: you can use just a payroll module, or a core HR module, or a recruiting and tracking module. The main benefit is that you can start with the areas that are most important to your business, then add more later as you become familiar with the system. Here's a quick look at some of the most popular areas and key features to look for.
Core HR management
Tracking employee data is one of the central features of an HRIS. By centralizing information that may currently exist in multiple locations, an HRIS can give you a more complete overview of your HR picture and reduce administrative overhead.
Features to look for:
- Comprehensive demographics: tracks all employee data: previous employment, education, emergency contacts, employment eligibility (I-9) forms, job history, and more
- Time and attendance reporting: either integrates with your existing time tracking system, or provides all the attendance tracking features you need
- Performance reviews: formalizes and automates your review process, including self, peer, and manager reviews and all approvals
Payroll
Payroll is often the first aspect of HR to be automated, usually when a company outsources the job to a payroll service provider. Computerized payroll systems can drastically reduce the time your staff spends on payroll work and cut down on errors.
If you're happy with your current payroll service, you may want to just stick with them — but find out if the HRIS software transmits data directly to that provider, or if it requires data exports and imports.
As an alternative, you may want to use your HRIS vendor instead of a third party provider for your payroll processing. This can save some steps: if all your data is in one system, you can cut down on data exports and re-keying. Be sure that the HRIS provider offers all the payroll processing features you expect before leaving an existing payroll service, though.
Features to look for:
- Special paycheck handling: covers wage garnishment, commission-driven paychecks, changing taxes, and other less common payroll activities
- Effective security: encryption and multiple layers of protection against unauthorized access
Benefits management
Employees place enormous value on benefits like health insurance, vacation time, and retirement plans. The right HRIS will help reduce the amount of staff time spent on enrollment forms, changes, and even simple requests like "how much vacation time do I have left?"
Features to look for:
- Covers all your benefits: parenting leaves, flexible schedules, community service time, 401k or other retirement plans, health, dental, and vision insurance, and flexible spending or dependent care accounts
- Connects to external systems: can establish direct connections with your health insurance, 401k plans, and other benefit providers
Recruiting
Hiring the best talent is one of the most essential roles of HR, and a good HRIS can help. Presenting the right appearance to prospective applicants helps portray your business as technology-savvy and well-organized.
Features to look for:
- Online applications: allows job seekers to view your open positions, submit their resumes, and check their status through your web site
- Job application workflow: routes resumes to the appropriate people, schedules interviews, tracks follow-up activities
Talent management
It may be a buzzword, but talent management encompasses some legitimate and valuable tools. This is an area where HRIS can bring new strategic processes to your business.
Features to look for:
- Career development: tracks skills and training
- Performance management: handles employee reviews, including peer input and upward feedback
- Succession planning: lets you plan for key staff departures and earmark likely candidates for promotion – required in some industries
- Retention planning: identifies your best employees and gives them reasons to stay
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Aspects of HRIS software
Take the time to evaluate more general characteristics of the HRIS you're considering, in addition to specific features. Among the most important are ease of use, reporting, employee self-service, security, and integration.
Ease of use
When evaluating HRISes, don't concentrate solely on features. Getting your staff to adopt a new system can be difficult, so it's essential to choose software that's easy to use. Of course, every salesperson will tell you their software is easy to use. You need to decide for yourself what "easy to use" means, but here are some examples:
Features to look for:
- Are basic menus and screens easy to grasp?
- Is entering information easy and understandable?
- Can you include non-standard information?
- How much is automated for you?
- Can you customize labels and options to match your HR policies?
- Can you easily find specific information on individual employees?
- Does the flow from section to section match your workflow?
- How many steps does it take to perform basic actions?
No matter how easy the basic functions are, users will always have questions, so investigate the built-in help features as well. How much contextual help is included? Are there pop-up "tool tips" to explain various buttons? Is the help system useful? Make sure your employees will be able to get the help they need.
Judging ease of use is much more effective when you get hands-on access to the software: when the sales rep just shows you how things work, everything can seem easy. Ask for some time to try the software out for yourself.
Reporting
An HRIS may include dozens of standard reports, from top-level HR overviews to detailed payroll and benefits analyses. Get sample reports from each vendor so you can compare the level of information included in each one.
The sheer number of reports can be overwhelming, so don't try to investigate them all. Instead, look carefully at the top level reports and "dashboards." These reports should give you the essential information you need at a glance.
The ability to customize reports to your liking is a big benefit. Most HRIS software supports customization, either through built-in report editing features or by supporting external reporting software. Look for a system that lets you export data in a format you can use, whether that's Crystal Reports, Excel, or some other format.
Employee self-service
Employee self-service provides a huge reduction in administrative work for your HR staff. With self-service, employees can get information and make changes to their HR information and benefit elections themselves, instead of calling an HR rep or completing a paper form.
Self-service applications work through secure web sites, either over the Internet or on an intranet. Subject to the policies you set up, they can allow employees to handle many types of HR transactions:
- View paychecks and make changes to direct deposit or withholding
- Check vacation and sick day balances, make time off requests
- Change health and other benefit elections during open enrollment or upon qualifying life events
- Monitor retirement plan accounts
- Update personal demographic information
Look for applications that handle all of your employees' common requests and are easy to set up and manage. Also, make sure that the user interface is easy for novice computer users to understand.
Security
Any computer system that contains confidential information needs to be reliably protected against unauthorized access and malicious attacks, and HR information is some of your most sensitive. Legitimate HRISes incorporate password protection and other precautions as a standard layer of security. Many offer audit trails that track all changes made to employee and payroll data and who was responsible for each.
Also, look for the ability to assign users to groups that have varying rights. That way, individual employees can only see their own information, managers can see data for their staff, and HR employees can view and change any employee's information.
Integration
Chances are you'll need your HRIS software to work with some other software you're already using. This may include your existing accounting system, payroll service, or time tracking software. Make sure you let potential vendors know what types of integration you'll need so you can get a sense of the complexity involved.
However, don't just ask the vendor if their software can be integrated with your existing systems – ask how they'd do it. Some companies provide built-in APIs or plug-ins to connect to popular software, but charge steep hourly or project fees for more complex or customized integration. In other cases, the integration may be limited to an export feature that creates a text file to be imported in the other program. This can get the job done but isn't as efficient as an automated process.
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Locally-hosted software vs. ASP
Another important decision to make when choosing HRIS software is whether you want to run the software locally or use a hosted version that you access via the Internet.
Locally-hosted software
Traditional software is locally hosted — the program runs on your computers and stores data on your hard drive or a network server in your office. Sometimes called a client-server configuration, this setup keeps all your data in-house but requires technical expertise. Your IT staff will have to maintain the servers, as well as create daily backups and secure the system against hackers and viruses.
If you choose a client-server system, the majority of your costs will be tied to the upfront purchase and installation fee, and new hardware if needed. You may also pay smaller ongoing fees for support and access to upgrades.
ASP-based solutions
In contrast to locally-hosted systems, application service providers (ASPs) host both the application and your data on their servers. Your staff accesses the service via the Internet using a web browser.
The main advantage is that an ASP system is maintained by IT professionals at the vendor's office. They provide airtight security, backup power, and regular backups to ensure that your data is always there when you need it.
The provider can't guarantee that your Internet connection always works, though. The biggest drawback of ASP solutions is that a network problem can prevent you from accessing your HR information. It's not common, but it's possible.
Payment for ASP solutions is based on a smaller setup fee and ongoing monthly payments.
Which is right for you?
Locally-hosted software is more familiar to many users. However, the ASP model is gaining popularity, particularly among smaller firms. Here are some areas you should consider when deciding between ASP and client-server HRIS software solutions:
- IT staff — If your IT staff has the time and expertise, an in-house solution might be right for you. Smaller companies with little to no IT expertise are probably better off with an ASP solution.
- Budget — While ASP systems require a much smaller up-front investment, the ongoing costs will usually surpass locally hosted versions in the long run.
- Remote access — ASP solutions make it easy for off-site employees to access the software. Accomplishing this with locally-hosted solutions may be expensive and require significant extra setup work.
You can also start off with a hosted service then move to an in-house solution: ASPs should offer a seamless migration path that allows you to easily export your data. Some vendors offer both hosted and in-house systems, making the transition smooth. This approach can be an easy way to get started without committing fully to either option.
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How to run your evaluation
Once you understand what type of software you need, it's time to start comparing different packages. Submit a BuyerZone request for HRIS software quotes and you'll be matched with several qualified providers based on your requirements.
Start by visiting vendors' web sites calling vendors to get a general idea of what each company has to offer. Prepare a standard list of questions so you can gauge the general fit of each company to your needs.
Many companies use a formal request for proposal (RFP) process when shopping for HRIS software. A good RFP provides enough detail that vendors can craft replies with more substance than their basic marketing material, without getting so granular that responding is a burden. Try to send RFPs to at least three but no more than ten vendors, then pick a few from that set to investigate further.
A guided demonstration by the vendor is the next step. Most often, the vendor will connect you to some sort of trial account and use web conferencing to walk you through the ins and outs of the software. Make sure you involve representatives from different areas in your company that will be impacted by it, like HR, accounting, and IT.
Avoid "canned" demos if you can — pre-recorded videos of the software in action provide little value. The real benefit of a live demo is having the vendor demonstrate the features you want to see. Be prepared with questions about specific scenarios or processes that are important to you, especially those that are unique to your business or industry.
Some vendors will provide a limited version of the software you can try for yourself, while some ASPs will even let you access the full application. Investigating the capabilities on your own is useful, but because these systems cover such a huge range of functionality, a vendor-led tour is the best way to get a strong understanding of the software as a whole.
Avoid drawn-out decision making
Due to the number of departments impacted and the scope of the decision, HRIS evaluations can drag on for months or even years. With several people spending a few hours a week on demos and evaluations, that can quickly add up to hundreds of hours of lost time.
Do your best to keep the process moving. Having a project leader who is both skilled at compromise and empowered to make final decisions is one key way to avoid getting bogged down in an endless decision-making cycle.
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What to look for in an HRIS vendor
When you buy HRIS software, you're also selecting a new partner for your business. Choosing the right vendor is just as important as choosing software that's easy to use and includes the right features.
First, remember that HRIS software packages can vary tremendously in scope and functionality. Look for a vendor who takes the time to understand your needs and works with you to recommend an appropriate solution — not one who just pushes their product as a one-size-fits-all answer.
The way a vendor approaches the sales process can also give you some valuable insight. Good salespeople are willing to tell you when something you request is hard or impossible, while less reputable vendors might just gloss over potential problems.
HRIS resellers and HRIS software developers
The HRIS market consists of both software publishers that sell their systems directly, and resellers who provide consulting and installation services to go with third-party software. Neither approach is inherently better than the other, but you should be aware of which you're dealing with.
When working with a reseller, you'll have to do a little extra investigation into the software publisher. Look at their history of software updates: recent updates and new releases indicate a commitment to the software. Ask how the publisher handles bug reports and feature requests, and how often they release new versions. Also, find out how upgrades impact any customization work you've done: you don't want an upgrade to wipe out your custom fields or labels.
Customer service and training
As with any complex software, you should expect occasional problems or outages. While "guaranteed 99.5% uptime" and other vendor assurances are fine, more important is how they react when something does go wrong. Inquire about their support policies: when do they have live support staff available by phone? Do they guarantee a specific response time? What kind of training do their reps have? Are there fees for support?
The vendor should offer training for everyone who will use the system. Many businesses prefer having a trainer come to their office, but that's not always possible. Web-based training can also be effective, if done properly. Regardless of how it's conducted, training should take users through the basics of entering data, running reports, and troubleshooting typical problems.
Finally, the vendor should be able to connect you with references who use their software. Ask for references to customers similar to your business in size and specialty, if possible. Call the references and ask questions such as:
- Has the system improved your HR operations? How?
- What modules do you use?
- Does it do everything you expected? What is missing?
- Are your employees satisfied with it? What do they like or not like?
- Have you expanded your system since your originally purchased it? How was that process?
- How does the vendor react when you have problems?
- What do you like least about the software?
- Overall, was it a good investment? Why or why not?
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HRIS pricing
Understandably, prices for HRIS systems can vary tremendously: a basic HR information package for a 20-person business is not in the same ballpark as a customized enterprise-level HRIS for a 2,000-employee corporation. Even two fairly similar businesses can wind up with very different prices for HRIS software — and both be getting a fair deal.
As discussed in Understanding HRIS Basics, the scope of your HRIS implementation will have a big impact on the price. A basic transactional system can provide significant benefits to your business — but won't cost nearly as much as a system that includes talent management and other strategic functionality.
Don't buy on price alone
Choosing the right HRIS software should involve careful consideration of your needs, evaluation of features and capabilities, and comparisons of dealers. Specifically, it's about more than just price.
If you're comparing three solutions with fairly similar price tags and a fourth that's half the price of the others, you can bet there’s something lacking from the discount package. Placing undue emphasis on price can lead to a purchase that ultimately fails to deliver the benefits you should expect.
Moreover, skimping on price early on can cost you more in the future. Even if you only have 50 employees now, if you plan on expanding to 100 in the next couple of years, it makes sense to buy a system that can accommodate that growth.
Basic HRIS pricing
The main cost for client-server HRIS software comes from the per-user licenses you'll have to buy for the software. A 50-person company can expect to pay between $2,000 and $5,000 to purchase software licenses.
Note that some vendors target firms with 100 employees or more, so smaller buyers may encounter minimum prices that make client-server systems a much more expensive proposition. Larger companies may see even higher per-user costs as the systems grow in complexity and scale: $80,000 for a 300-user system, for example.
Very small companies may be able to buy packaged software for $500 to $1,000, but those types of systems offer very little in the way of customization and may not be able to grow with your business. If you do choose to start with a small HRIS, make sure you'll be able to export your data so you can upgrade to a more comprehensive system in the future.
ASP-based HRISes are usually priced per employee per month. Depending on the modules you choose, you can expect monthly fees of $4 to $10 per user. While that may seem stunningly inexpensive compared to the client-server license fees, remember that you'll be paying that cost every month as long as you use the software. For example, 100 users at $6 per month adds up to almost $15,000 by the end of the second year — and you could use an HRIS for 10 or 20 years.
Whichever type of hosting you choose, you'll have to pay installation or consulting costs for customization and setup. These fees can range from $2,000 to $40,000 and up, depending on the amount of work required and the size of the installation.
Make sure that consulting and installation fees and responsibilities are spelled out in the project estimates, as well as the contracts. Hidden charges for upgrades, annual maintenance, customization, or training can drastically skew your price comparisons, as can different prices for administrator licenses, user licenses, and server licenses. Make sure the vendors present a complete cost picture up front.
Support and training costs
Make sure the pricing information you get from each vendor details what training and customer support is included — and how much additional help costs. Some vendors provide unlimited telephone and online support; others charge by the minute or per incident after a set amount of free support.
Training is usually priced separately. You may be able to choose from on-site, off-site, web-based, or video training, all at different price points. It's usually worth having at least some training to get your staffers up and running. Once you see how the system is working, you can then decide if you need more advanced training.
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