Streamlining to save hours every day. Simplifying the headaches away. Automating repetitive tasks so you can finally find more time to help grow the business. In short, every human resources manager’s dream.
While the software already exists, it can be a struggle to figure out the differences between the top solutions: human resource information system (HRIS), human capital management (HCM), and human resource management system (HRMS).
You need a bird’s-eye view of the entire HR automation landscape to know what’s best for your company. You also need to know what features help you manage a growing multinational team with remote workers in different countries.
So where do you start your research?
This article outlines the differences between HRIS, HCM, and HRMS in plain language and guides you to the best software solutions for globally compliant hiring and payroll.
Understanding HRIS
The journey to a great HR tech solution begins with understanding what HRIS is and how it compares to other systems, such as HRMS and HCM.
A word of caution: though we’ll describe three different HR technologies, there’s considerable overlap between them. Software vendors and HR staff often use the terms HRIS, HRMS, and HCM interchangeably.
Nevertheless, understanding the basic differences helps you decide which technology best suits your business needs.
So let’s talk about HRIS first since that’s where it all starts.
As a reminder, HRIS stands for human resource information system.
As the name implies, an HRIS is a technology-driven solution designed to streamline the execution of administrative HR tasks.
HRIS includes an automated personnel-tracking function to keep the HR department well-organized, efficient, and effective. It consolidates employee data, automates routine tasks, and offers analytical capabilities.
At the end of the day, this HR software helps minimize manual effort and optimize HR processes. Also, it usually includes an employee self-service (ESS) portal.
Popular examples of HRIS systems include Zenefits and Workday.
Core administrative functions you’ll typically find in an HRIS include the following:
Streamlined processes
An HRIS simplifies your workflow and saves users time, energy, and money.
HRIS systems consolidate everything in one place so that you’re not switching between systems. Automating everyday processes cuts down on time-intensive labor costs, saving your business even more time in the long run.
You’ll also notice increased efficiency if you integrate your HRIS platform with your preferred HR tools . Data syncs automatically, processes become more efficient, and productivity soars.
Employee database
The employee database is an HRIS’s central feature.
It is a digital repository of all essential employee data points, including employment histories, job roles, salaries, contact details, performance records, and personal information.
Time tracking and attendance
Employee attendance and time-tracking modules within an HRIS streamline the recording and monitoring employee work hours and absences.
The system automates these tasks, minimizing manual errors that could otherwise lead to compliance breaches or employee dissatisfaction.
Payroll
An HRIS’s payroll feature simplifies the often complex task of processing salaries, bonuses, deductions, and taxes.
The automated system makes payroll smoother and significantly reduces the chances of costly errors.
International dimension
Many HRIS systems offer features for international HR needs, such as multi-currency support and tools to help the company comply with local labor laws.
However, successful international expansion requires access to more HR software functions.
Here are some of the features you’ll need if you have a geographically diverse team:
Rapid, compliant onboarding and offboarding
Accurate and compliant payroll for domestic and international employees and contractors
Global benefits plans
Management of equity incentives and employee stock ownership plans (ESOPs) for global teams
Some off-the-shelf HRIS systems don’t provide tools for international HR functionality simply because they’re not designed with these needs in mind.
That’s where solutions like Remote’s global payroll, tax, and compliance save the day. Our Global Employment services simplify international employee and contractor hiring. Remote also helps you stay compliant with international employment practices.
Understanding HCM
Now, let’s explore HCM or human capital management.
HCM emphasizes employee development, talent management, and strategic HR initiatives.
An HCM system includes the essential HR features in an HRIS, but its additional functionality facilitates a more holistic approach to managing your workforce (think of it as spanning the entire employee life cycle).
Platforms that provide comprehensive HCM solutions include Oracle HCM Cloud, Infor HCM, and Ultimate Software’s UltiPro.
An HCM solution is designed to foster employee growth and productivity. It emphasizes the value of employees as vital assets or “capital” within the organization.
This approach of valuing employees to boost performance is long overdue. Globally, 86% of employees say that people at their organization are not fairly heard. People who aren’t heard are less likely to exercise their talents.
Typical HCM features include the following:
Recruitment
In an HCM system, the recruitment module is a comprehensive hub for all hiring activities. It helps HR staff efficiently manage job postings across various platforms, stay on top of applicant tracking through the hiring pipeline, and schedule interviews.
This centralized approach streamlines recruitment, saving time and improving talent acquisition quality.
When going global, HCM can help to implement remote-first recruiting practices , ensuring that you have access to the best talent out there.
Onboarding
HCM systems streamline and automate the more tedious aspects of onboarding, such as the completion of benefits forms and the reviewing of company policies and procedures.
HCMs also ensure a consistent and high-quality onboarding experience, leaving new hires excited and ready to roll. HR isn’t recreating the wheel each time a new employee is hired, which frees up their time and resources to focus more on welcoming them into the fold.
Onboarding employees quickly and efficiently is especially critical with a global, remote workforce.
Talent management
The talent management component of an HCM system empowers companies to support their employees’ career growth better.
Its performance management tools track and enhance employees’ productivity, allow succession planning capabilities for leadership continuity, and develop career development resources to nurture employees’ skills and potential.
Training and development
An HCM system’s learning and development feature makes managing employee training programs easy, helping build a competent and up-to-date workforce.
The ongoing process of skill enhancement and knowledge expansion helps companies stay competitive and enables employees to fulfill their potential.
Time tracking and attendance
HCM systems automate time tracking and attendance so that employees can manage their time off with ease, and employers can refer to and monitor individual working hours with little effort.
Employees can quickly request last-minute absences or time off for vacations and other types of planned leave. The system also supports quick review and approval of all requests from HR so that neither employees nor managers are left in limbo.
Payroll
HCM’s automated payroll features reduce time and labor costs, as well as the propensity for human error associated with tedious data entry.
HCM runs payroll efficiently while maintaining compliance with tax reporting and local rules, policies, and regulations.
Benefits
HCM administers employee benefits, including PTO, health insurance, retirement plans, and incentive programs. Employees can access, review, and manage their benefits through their HCM platform.
Ideally, HCM allows you to adapt benefits plans to suit your business model and remain compliant in every country where you hire employees.
Employee engagement
Positive employee engagement remains challenging for employers, with only 33% of employees feeling actively connected to their workplace.
An HCM platform is designed to provide an enhanced employee experience, from initial recruitment to ongoing training and retention. HR and employees appreciate efficient processes, especially those that reduce the time and energy spent on repetitive tasks.
Performance management
HCM’s performance management feature streamlines the processes required to review employee performance, identify strengths, and address areas for improvement.
HCM positions businesses to retain top talent by allowing employers to provide professional development, specialized training, or other support to employees interested in advancing their knowledge and careers.
International dimension
Internationally focused HCM systems support global talent management and cross-border recruitment and development, which are essential for businesses that operate in multiple countries.
However, managing international employment can be complex due to varying labor laws. Even an advanced software system may not be designed to handle it all.
Human capital management is not synonymous with HR.
HR is the administrative hub that handles recruitment, employee development, payroll, benefits, and performance management.
HCM takes those pieces and applies them to the entire employee lifecycle. It smoothes a business’s core functions into efficient, automated processes for managers to provide an elevated, positive experience at each employment stage.
For some companies, investing in HCM could be the distinction between providing an average employee experience and an exceptional one.
HRIS vs HCM: key differences
Now that you understand HRIS and HCM, let’s highlight their differences.
Functionality
You’ve seen how the range of functionalities in HRIS and HCM systems differ considerably.
An HRIS focuses on the administrative tasks of employee data management, including time tracking, payroll, and benefits administration. Its main goal is to streamline processes and increase efficiency and organizational productivity.
An HCM system offers a more comprehensive set of strategic HR tools. It covers the entire employee lifecycle, from recruitment and onboarding to talent management, to enhance workforce development and effectively harness human capital.
Focus
An HRIS is transactional and process-oriented. It aims to simplify and automate administrative HR tasks to optimize efficiency and accuracy.
An HCM system takes a people-oriented approach.
It goes beyond processes and transactions to spotlight the overall employee experience. HCM systems provide a robust suite of tools for talent development, including employee performance management, learning and development programs, and succession planning.
Outcomes
The desired outcomes of HRIS and HCM systems also differ.
With an HRIS, you’re looking to improve efficiency and accuracy in your HR administration. You’ll expect to see fewer errors and have more time for HR personnel to focus on other essential tasks.
With an HCM, the goal is to enhance talent management and drive strategic outcomes. Its broad scope covers developing and retaining top talent, fostering a positive work culture, and aligning HR strategy with business goals.
These different orientations can profoundly influence your HR operations, employee engagement, and your organization’s overall success and growth.
So, where does HRMS come in?
As a reminder, HRMS stands for human resource management system.
Simply put, HRMS technology incorporates features of both HRIS and HCM systems. Think of it as the best of both worlds.
HRMS technology is attractive for businesses that are on a growth trajectory. They’re focusing more on talent management and might be outgrowing their HRIS functionality, but they aren’t quite in need of a full-blown HCM.
HRMS examples include Rippling, UKG Ready, SAP SuccessFactors, and Cezanne HR.
HRIS vs HRMS vs HCM
Here’s a handy chart with an overview of the main workforce management features and differences between these three HR technology systems (considering the overlap between individual systems on the market).
The HRIS vs HCM choice: key factors to consider
Choosing between an HRIS and an HCM — or taking a different route altogether — depends on your organization’s needs and circumstances.
Here’s what you’ll need to remember:
Business size
Your business’s size and complexity significantly influence the choice between HRIS, HRMS, and HCM systems.
An HRIS focusing on core HR tasks might suffice for smaller businesses with simple, straightforward HR requirements.
However, if you’re managing a larger organization or grappling with intricate HR needs, the expansive capabilities of an HCM or HRMS could prove more beneficial.
Business goals
Your vision, mission, and primary business goals may help determine which HR solution best fits your needs.
If you’re looking to streamline and automate HR processes to devote resources elsewhere, an HRIS might fit the bill. It’s also a good option for companies looking to scale internationally if they have already established legal entities.
HCM may be better suited for companies looking to expand while maintaining consistent processes and a unified approach across the employee lifecycle — ideal for recruiting and retaining top talent.
Employee experience
While you can automate services to increase efficiency, maintain compliance, and reduce the risks of human error, an HRIS’s focus isn’t on the employee experience.
HCM integrates all components of the employee lifecycle, from recruiting to onboarding, to ensure a consistent experience across the board. Since it includes employee development and career planning, you’re better positioned to keep your best employees engaged and on the books with HCM.
Finding remote talent isn’t easy, especially if you’re expanding to a new country. So, HCM might offer better support.
HR needs
Your primary HR objectives are critical in determining the best system for your organization.
If you focus on streamlining administrative tasks and improving operational efficiency, an HRIS will likely meet your needs well.
However, say your goals include enhanced talent management and strategic HR initiatives, such as succession planning, learning development, or workforce analytics. Then, an HCM or HRMS, with its more comprehensive suite of features, might better align with your objectives.
Budget
Your budget also plays a pivotal role in selecting an HR system.
HRIS systems are typically less expensive to implement and maintain, which makes them a practical choice for organizations with tight financial constraints.
HCM systems may present a higher initial cost, but they often provide a greater return on investment in the long term. This is due to their focus on strategic outcomes, such as improved talent management and workforce planning, which can significantly enhance a business’s overall performance and growth.
Compliance
You can maintain rigorous compliance with your HR processes no matter which system you opt for. The trick may be in determining exactly where you need to be compliant.
If you’re staying local, an HRIS or HCM helps you maintain compliance with all local tax, employment, and labor laws.
If you’re expanding into the global marketplace, your business must stay up-to-date with laws, regulations, and updates. You may incur costly fees, fines, or penalties if you don’t understand the nuances of staying compliant with international laws when it comes to contracts, wage and leave requirements, and accurate classifications.
Global employment
Compliance is one factor as you decide which HR automation approach would be most helpful for your business if you’re expanding internationally.
Different systems offer varying levels of support for managing a diverse, globally distributed workforce. Choosing a system that aligns with international expansion goals can significantly streamline HR processes across borders and cultures.
At some point, your company will have to decide whether it’s time to open an international entity in the countries where you do business. Selecting an advanced HRIS, HRMS, or HCM system for your organization will become a crucial question.
If you’re not at that stage in your company’s growth cycle, a cost-effective SaaS service, such as Remote’s global employment platform , might be the better solution.
Making the right HR platform choice for your organization
We hope this article has given you a clear understanding of the differences between the three main types of HR technology and which one will best fit your company’s needs.
HRIS systems focus on automating repetitive HR processes, including time tracking and payroll.
An HRMS takes this a step further by including some recruitment and talent management features.
HCM pulls everything together by integrating HR processes to enhance the employee experience throughout their working lifecycle.
If you’re expanding internationally but aren’t ready to invest in costly HR software to manage a multinational team, consider using a global HR platform like Remote.
Remote enables global compliance and simplifies a multinational team’s onboarding, payroll, and benefits. Its employer-of-record services allow you to start recruiting and hiring a remote workforce immediately without worrying about establishing legal entities for every country of interest.
Using one simple hub, it’s your best-in-class solution for compliant payroll for domestic and overseas team members.
Learn more about how Remote can help you manage a global team.
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