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RESOURCES


HCM VS. HRIS VS. HRMS: WHAT ARE THE DIFFERENCES?

DECEMBER 21, 2022

--------------------------------------------------------------------------------

Knowing the differences between technology solutions will help HR software
buyers make the right choice for their company.

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Human Resources



Trying to pin down the definitions of HCM vs. HRIS vs. HRMS can feel like
playing three-card monte. The truth is sometimes obscured by a little
razzle-dazzle.

When selecting HR technology, it’s important to understand the similarities and
differences between these three types of solutions: Human Capital Management
(HCM), Human Resources Information System (HRIS), and Human Resource Management
System (HRMS). While the terms may seem interchangeable, technology vendors
sometimes use them to refer to a specific set of functions or features.

Every HR software solution comes with at least a few bells and whistles. Key to
finding the best fit for your company is knowing not only what the technology
does but also what it doesn’t do. If you’re leading the selection process, make
sure your planning committee, stakeholders, and vendors are all using the
terminology consistently — before you get to the evaluation stage.

Because, as you begin comparing HR technology, you’ll probably come across all
these terms. And while they can overlap, there are nuances to look for
throughout the selection process.


KEY TAKEAWAYS

 * Human Capital Management (HCM), Human Resources Information System (HRIS),
   and Human Resource Management System (HRMS) are three types of HR technology
   solutions.
 * Originally, an HRIS addressed core administrative HR tasks, whereas an HRMS
   included talent management functionality. However, modern day HRIS and HRMS
   have the same features.
 * HCM software is the most comprehensive. It includes the same features as an
   HRIS or HRMS, but also offers strategic support for each stage of the
   employee lifecycle.


WHAT IS THE DIFFERENCE BETWEEN HRIS, HRMS, AND HCM?

One way to think about these terms is chronologically. As workforce needs have
evolved, especially over the last few years, technology has advanced to meet
those needs. Where an HRIS was once cutting edge, now an HCM solution refers to
a more modern suite of software. HRMS is somewhere in between.

The other way to tell the difference between HRIS, HRMS, and HCM is by looking
at functionality.

A Human Resource Information System (HRIS) is generally the starting point. This
core administrative system leverages technology to make storing and retrieving
employee information easier. Typically, HRIS covers the bases like benefits and
compliance data, but payroll may be handled through a separate system that is
integrated with your HR software.

A Human Resources Management System (HRMS) was originally intended to address
talent management gaps in existing HRIS packages, like onboarding, career
development, and learning management. Over time, HRIS platforms expanded to
include many of these functions, so the line between an HRIS and an HRMS has
blurred. Today, there’s not much difference between the two systems, but there’s
a good chance your IT stakeholder is more familiar with the term HRIS, even
though that’s the older acronym.

Human Capital Management (HCM) is a more comprehensive approach that brings
together best HR practices and the technology to facilitate them. In addition to
providing the same functionality as an HRIS or HRMS, an HCM solution also offers
strategic support across the entire employee lifecycle.


THE BENEFITS OF HCM COMPARED TO HRMS OR HRIS

There are several features of an HCM solution that set it apart from HRIS and
HRMS. That doesn’t necessarily make HCM the right solution for your company. It
really depends on the business outcomes you need to achieve.

The differentiating components of an HCM solution are:

 * A flexible, end-to-end platform. Delivered on the cloud through a
   software-as-a-service (SaaS) license agreement, a modern HCM solution is more
   comprehensive, easier to scale, and more cost-effective than legacy systems.
 * A single employee system of record. This is the foundation of an integrated
   solution. It powers the complete employee lifecycle, from hire to retire.
 * Broad functionality. Not only does an HCM automate and streamline core
   processes like payroll, personnel management, and benefits administration, it
   also supports talent and workforce management strategies with recruiting,
   onboarding, learning, time and expense management, and compensation.
 * Tools to create meaningful employee experiences. These tools are designed to
   help employees feel connected through video, chat, peer recognition, surveys,
   and self-service options.
 * Reporting and analytics. A complete HCM solution connects data to business
   goals, like time and cost savings, turnover trends, and diversity and
   inclusion initiatives. Advanced analytics like Paylocity’s Modern Workforce
   Index use peer benchmarks and artificial intelligence (AI) to offer
   prescriptive recommendations.

According to TechTarget, companies today are looking for a technology solution
that not only serves the HR department but also the needs of all employees.
Because workforce dynamics continue to shift, HR practitioners and executives
alike want to invest in a system that can adjust and grow with the company.


HOW TO CHOOSE AN HCM, HRMS, OR HRIS SOLUTION

How you go about choosing the right HR technology solution for your company
starts with knowing what you want to do. Or perhaps more to the point, what are
you unable to do with your current system?

Because your process will be unique, we won’t outline every step here in detail.
(You might check out SHRM’s in-depth framework for additional guidance.) But
we’re happy to offer a few insider tips from our perspective, which — not to
brag — comes from working with more than 33,000 clients.


STEP 1: DEFINE CHALLENGES, NEEDS, AND GOALS

Define your goals from three points of view: your HR department, your
stakeholders, and your employees. Ultimately, you will need buy-in from all of
them to be successful when transitioning to a new or upgraded system.

The more specific and measurable your goals are, the better. Look at vendor case
studies for inspiration. We recommend:

 * Mountainside Fitness saved 900 hours per year by streamlining their
   onboarding process, which gives the HR team more time to connect with new
   hires.
 * Using data insights, Listerhill Credit Union saved $210K per year by
   adjusting branch schedules and was subsequently able to hire one new
   full-time HR team member.
 * Revere Plastics decreased turnover by 70% by leveraging Paylocity’s social
   communication tools to improve the employee experience.

These are just a few examples of goals that an HR technology solution can help
you achieve.


STEP 2: GET BUY-IN FOR HR TECHNOLOGY

Before you ask the executive team to sign off on a major purchase, you’ll need
to do your research and get buy-in from several stakeholders along the way.

Here are four ways to build a rock-solid case for new HR technology:

 1. Stay focused on business outcomes. How are those outcomes tied to your
    workforce and where are the pain points? For example, do you need to recruit
    top talent faster or are you struggling to keep the in-house expertise you
    already have? Where could you save costs by automating workflows and
    documents? How do diversity and inclusion spark the innovation your company
    needs to be competitive?
 2. Get input from others. If you have an HR team, ask them to help you narrow
    your initial search for options. Even if you’re a team of one, talk to
    colleagues at other companies, read client reviews on websites
    like G2 and Capterra, check out social media, and talk to vendors at
    conferences. You might even consider hiring an HR consultant, who can also
    help you define requirements and write a request for proposal (RFP).
 3. Form the ultimate cross-functional planning committee. This group of experts
    will ensure that your evaluation of HR solutions and vendors aligns with
    your company’s requirements and goals. It will likely be a combination of
    stakeholders in finance, IT, core HR, talent acquisition, talent management,
    workforce management, benefits administration, DEIA (diversity, equity,
    inclusion, and accessibility), and any other areas that will utilize the
    solution to achieve desired outcomes.
 4. Calculate return on investment (ROI.) Although not anyone’s favorite thing
    to do, estimating ROI is essential for getting final buy-in. Online
    calculators can help you with a rough estimate, but you probably want to
    enlist your finance team as well. They can help you assign dollar amounts
    that demonstrate how an investment in HR technology will pay off in the long
    run.


STEP 3: SEE THE SOLUTIONS IN ACTION

With your executive team on board and your planning committee by your side, it’s
time to compare your shortlist of potential solutions with live demonstrations.
Whether your organization uses a formal RFP process or not, share your
requirements with the vendors beforehand so they can tailor their presentations
and show you the most relevant features. Ask questions and ask for client
references.


STEP 4: EVALUATE AND SELECT A VENDOR

Prior to the demos, create a scorecard for your evaluation committee so that
everyone is working from the same criteria. The rating system you use should
reflect your priorities, but be sure to consider these factors:

 * Functionality
 * Security
 * Reliability
 * Ease of implementation
 * Service
 * Cost


IS PAYLOCITY AN HRIS, HRMS, OR HCM SOLUTION?

Yes! Because Paylocity is an HCM solution, it encompasses the functionalities of
HRIS and HRMS as well.

HR TECHNOLOGY CATEGORIES



PAYLOCITY’S MODERN ALL-IN-ONE PLATFORM





WHAT CAN YOU EXPECT FROM HR TECHNOLOGY IN THE FUTURE?

It’s really the “C” that makes HCM different — a more holistic approach of
investing in human capital to galvanize innovation, improve productivity, and
increase profitability.

As workforce dynamics continue to evolve, HCM will expand on emerging
technologies like artificial intelligence (AI), machine learning, and natural
language processing (NLP). Chatbots to connect with potential candidates in real
time, analyzing resumes and video interviews for transferable skills, and
predicting employee burnout are just a few ways companies are tapping into these
technologies.

And while these bells and whistles are pretty awesome, make sure they serve your
purpose: To spend more time with people and a lot less time with paperwork.

Now, could we show you a demo of the most complete platform for the modern
workforce?


MODERN HR TOOLS

Recruit and retain talent by shaping an environment that makes employees feel
valued and engaged. Let our HR tools help.

Explore HR Solutions


WORRY-FREE PAYROLL

Payroll doesn’t have to be complicated. Ensure compliance and accurate employee
data with automated payroll software.

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