Use this guide to understand the different kinds of human resource (HR) software on the market, the range of features they offer, and how to choose the right ones for your business.
Quality talent can give your company a competitive edge. To attract and keep the best hires, your business needs an efficient and robust HR technology stack.
In the early days of personnel management, HR—as a function—mostly maintained employee records and ensured businesses were in compliance. Today, human resources is recognized as a strategic business function with a range of responsibilities including recruiting, onboarding, training, succession planning, and more.
So, how can you begin the process of building the perfect HR tech stack for your business? For starters, building a stack requires you to analyze your organization’s size (employees and revenue) and current HR processes, as well as have a strategic understanding of HR technologies on the market.
To help, keep reading for the key considerations to keep in mind while building your ideal HR tech stack.
Evaluate your business’ HR processes
To build the right human resource tech stack, you need to first understand your team’s requirements.
Try this exercise with your team:
- Set up a meeting with different stakeholders from your human resources department. Together, map out the steps of different common HR processes (think recruiting and interviewing for an open position, mandatory training, or any other procedures the department regularly oversees).
- Write down each step of a given process on sticky notes or a whiteboard to create a visual workflow.
- Ask your team members to identify steps or workflows they find challenging. This will help you uncover bottlenecks (such as manual processes or lapses in communication) hindering your team’s efficiency.
Keep these bottlenecks top of mind as areas to improve on while building your tech stack.
Three areas of HR your tech stack should support
Human resource software is a large category that includes benefits administration software, applicant tracking systems, workforce management software, 360 degree feedback software, and many more tools. Instead of getting lost in the nuances of each subcategory while building your tech stack, focus on three core HR areas: administration, talent management, and workforce management.
The administration function of HR can be thought of as traditional, back-office HR responsibilities. Tools that carry out tasks related to administration include payroll software and benefits administration software. Let’s look at each.
What is payroll software?
Payroll software helps your business keep track of employee wage and salary rates and automates payroll runs. Payroll software calculates total compensation for a given pay period, debits the company bank account for that amount, and transfers funds to employees with one click. Many solutions also feature time tracking, tax management, and reporting functionalities.
Payroll software can help your business with tasks such as:
- Time tracking
- Payroll management
- Tax management
- Direct deposit
When to invest in payroll software:
Payroll software should be one of (if not the) first tools your business invests in. The reason for this is simple: Even if you only have one employee besides yourself, that employee needs to be paid accurately and on time. Check out our payroll software buyers guide for help finding a solution.
What is benefits administration software?
Benefits administration software makes enrolling in and managing benefits (such as health insurance or a 401k) an easy process for employers and employees alike. Typically, these solutions also track data for cost and compliance purposes.
Benefits administration software manages the following tasks:
- Online benefits enrollment
- Health/life insurance administration
- HSA/FSA administration
- Retirement plan management
- Deduction management
When to invest in benefits administration software:
Most benefits administration software purchases happen when businesses surpass 500 employees. That said, small businesses can also benefit from such tools as they give employees the ability to enroll in benefits and change options themselves (instead of filling out a form for HR to enter manually).
2. Talent management
Talent management includes tasks related to attracting, recruiting, and retaining quality hires. In other words: the talent management component of HR is focused on growing and maintaining a competitive workforce. There are a handful of tools that perform talent management functions, but the most prevalent ones are applicant tracking software and performance appraisal software. Let’s look at each.
What is applicant tracking software?
Applicant tracking software (ATS) streamlines the process of managing job applications. This tool helps recruiters manage job openings by collecting applicant information in an organized database.
Applicant tracking software helps your business with things like:
- Candidate tracking
- Candidate profiles
- Resume search
- Interview scheduling
- Resume parsing
When to invest in an ATS:
Applicant tracking software is most helpful for businesses with heavy hiring needs. Most organizations adopt an ATS around the 250 employee mark. Check out our applicant tracking software buyers guide for help finding a solution.
What is performance appraisal software?
Performance appraisal software makes the process of tracking and reviewing employee performance easy. Managers can use this tool to set individual and team goals, and create individual development plans.
Performance appraisal software helps your business do the following:
- 360-degree feedback
- Ongoing performance tracking
- Objective/goal setting
- Appraisal history tracking
When to invest in performance appraisal software:
Most businesses invest in performance appraisal software around the 500-employee mark. We recommend adopting this tool whenever employee development becomes a priority for your organization. Check out our performance appraisal software buyers guide for help finding a solution.
3. Workforce management
Workforce management is the area of HR that optimizes the productivity of an organization by allocating resources. While workforce management looks different at every business, it typically involves using data analysis for scheduling, budgeting, or forecasting purposes. Tools that carry out workforce management tasks include attendance tracking software and HR analytics software. Let’s take a closer look at each of these.
What is attendance tracking software?
Attendance tracking software tracks working hours and attendance for employees. These time management tools allow users to oversee employee and task scheduling, absence and leave management, overtime tracking, and document management.
Attendance tracking software manages tasks like the following for your business:
- Absence management
- Time tracking
- Employee scheduling
- Calendar management
When to invest in attendance tracking software:
Attendance tracking software is typically adopted by businesses early on, mostly because it becomes a significant administrative burden to track time and attendance manually for more than 50 employees. Check out our attendance tracking software buyers guide for help finding a solution.
What is HR analytics software?
HR analytics software is designed to help your HR department make data-driven decisions. Similar to business intelligence software, HR analytics tools can aggregate massive amounts of data, process it, and analyze it for meaningful trends.
HR analytics software helps your business tasks including:
- Data aggregation
- Data visualization
- Predictive analytics
- Workforce planning
When to invest in HR analytics software:
Because HR analytics software collects data from your other systems (payroll, attendance tracking, etc), wait to invest in this tool until your company is well-established and your tech stack is almost complete.
How do these tools work with each other?
Ideally, the solutions that make up your HR tech stack should integrate with each other, either through built-in integrations, third-party platforms, or an open application programming interface (API).
Keep compatibility top of mind while selecting solutions, because integration between tools can have significant payoffs.
Benefits of an integrated tech stack include:
- Lower IT costs
- Access to real-time data
- Better employee communication and collaboration
- More accurate data
We mentioned that HR analytics software collects data from other tools. This is a great example of how the solutions in your stack can work together.
For instance, an attendance tracking system can provide data on employee work and holiday patterns, which can help managers plan schedules more efficiently. Similarly, data from an applicant tracking system can uncover patterns in hiring or recruiting that later impact on retention, productivity, and employee satisfaction.
When it comes to preparing strategies for HR initiatives (such as improving employee engagement or streamlining your talent acquisition process), accurate data is essential.
Four final considerations to keep in mind when choosing tools for your HR stack
At this point, you’re probably wondering how to proceed. Don’t fret—we’ve compiled four final considerations to keep top of mind when evaluating tools and vendors for your HR tech stack.
- The size of your business: Your organization’s size is one of the most important considerations when selecting software tools for your tech stack. HR needs are different for small businesses and large corporations. For example, a small business may hire fewer than 10 people over the course of a year, while a large enterprise might hire 100+, meaning a powerful ATS is a higher priority for the latter.
- Software integration capabilities: Like we covered above, there are benefits to having an integrated stack. Most tools offer built-in integrations (a direct connection between two or more applications), but you can also connect your tools through third-party platforms such as Zapier, IFTTT, and Automate.io.
- The industry you’re in: Most HR tools are functionality-specific and not industry-specific. That said, it’s still a good idea to select a vendor that works with businesses in your industry so you can rely on their experience with ever-changing compliance requirements.
- What your peers are saying: One way to save time during the research portion of the software selection process is to look at reviews from actual software users. You can find reviews for tools you’re considering on third-party platforms (like ours!). It’s important to note that reviews are only helpful within the correct context, so focus on recommendations from similarly sized businesses in your industry wherever possible.
For more information on software selection, explore the following resources:
Note: The applications selected in this article are examples to show a feature in context and are not intended as endorsements or recommendations. They have been obtained from sources believed to be reliable at the time of publication.
Looking for Human Resource software? Check out Capterra's list of the best Human Resource software solutions.