HCM vs. HRIS vs. HRMS – What Are The Key Differences?

The global HR software market is growing at a rapid pace. It is expected to grow at a CAGR of 12.7% from 2023 to 2030 to reach USD 56.15 billion by 2030.

The primary reason behind the growth is that the right Human Resource (HR) system helps companies streamline employee management. It also helps increase productivity and ensures statutory compliance. 

HRIS, HRMS, and HCM are commonly used interchangeably.  But they have slight distinctions. With time passing, HRMS and HR solutions have transformed into HRIS, which emphasizes data management.

This evolution has ultimately given rise to the current comprehensive and strategic HCM, which places a central focus on the well-being and development of employees.

In this article, we’ll understand the difference between HRIS vs. HCM vs. HRMS  to help you choose the right one based on your business needs. 

What is HCM?

Human Capital Management (HCM) is the process of recruiting suitable individuals, efficient workforce management, and the maximization of productivity. 

The aim is to enable organizations to concentrate on strategic initiatives instead of engaging in manual administrative tasks.

Pro-tip

When choosing an HR system (HCM vs. HRIS vs. HRMS), prioritize a solution that aligns with your business needs. Identify pain points, evaluate features, and ensure scalability.

HCM encompasses all HR functions, including data-driven, transactional, and strategic aspects. It revolutionizes the conventional administrative tasks within human resources, such as recruitment, training, payroll, compensation, and performance management, turning them into avenues for fostering engagement, boosting productivity, and creating business value.

How Does HCM Work?

HCM integrates various HR functions, using technology to streamline processes throughout the employee lifecycle. It includes modules for recruitment, onboarding, performance management, training, and compensation. 

HCM systems leverage analytics to offer insights into workforce trends, enabling data-driven decision-making. Overall, HCM enhances HR efficiency, unifies processes, and supports strategic workforce management.

What Are the Main Features of HCM?

• All the HRIS features.
• Talent management: Monitor each employee’s performance and productivity.
• Onboarding: Streamline the new employee joining process.
• Analytics: automated data collection, data analytics, predictive analytics, and self-serviceable insights.
• Position control: Ensure that the right employee is working on the right project (based on his skill set and expertise).
• HR services: Give access to company documentation, policies, and knowledge base.
• Global: Supports international needs, such as multilingual and multi-currency.

What Are the Main Benefits of HCM?

HCM delivers streamlined HR processes, enhanced workforce efficiency, and strategic management alignment. By centralizing and automating talent management capabilities like recruitment, onboarding, and performance management, HCM boosts operational efficiency. 

The system’s analytics provide data-driven insights for informed decision-making, fostering a positive work environment and improving overall business performance. HCM optimizes HR management, promoting efficiency and strategic alignment for organizational success.

What is HRIS?

A Human Resources Information System (HRIS) is a software tool designed to store, oversee, and handle employee details along with human resources policies and procedures.

Serving as an interactive information management system, the HRIS streamlines various HR responsibilities and procedures, ensuring consistent record-keeping and reporting.

 It offers access to a functional database, contributing to the efficient operation of HR systems, whether they are hosted on the company’s server, in the cloud, or managed by an external provider.

How Does an HRIS Work?

An HRIS software solution automates and centralizes HR processes. It efficiently manages employee information, streamlines tasks like payroll and benefits, and provides data-driven insights for strategic decision-making. 

HRIS promotes transparency through self-service portals for employees and ensures compliance with legal regulations. It enhances overall HR efficiency, accuracy, and strategic management within an organization.

What Are the Main Features of HRIS?

• Recruitment and hiring: Post jobs, manage interviews, store resumes, and track candidate information.
• Employee information management: Keep a record of each employee in your organization.
• Absence management: Manage unplanned and unauthorized leaves.
• Training and development: Help employees enhance their skills.
• Benefits administration: Allow employees to enroll in health insurance, manage 401K, and monitor their information.
• Self-service portal: Provides employees the ability to manage and change their information (like phone number, address, etc.)
• Compensation management: Manage paid time off, overtime pay, bonuses, incentives, salary, and more.

What Are the Main Benefits of HRIS?

HRIS systems streamline HR processes, reduce administrative tasks, and boost efficiency. They ensure accurate record-keeping for legal compliance and offer data-driven insights for informed decision-making. Self-service portals enhance communication and transparency for employees. 

Cloud-based HRIS adds flexibility and scalability, which is crucial for managing remote workforces. HRIS optimizes HR functions, promotes organizational agility, and aligns strategic goals with workforce management.

What is HRMS?

Human Resource Management Systems (HRMS) are software applications designed to aid HR professionals in efficiently managing HR functions. It supports HR across the entire employment lifecycle, spanning from recruitment to retirement and addressing all stages in between.

A human resource management system incorporates both hardware and software resources, offering essential business logic to the HR department and managing various HR-related tasks.

How Does an HRMS Work?

An HRMS automates HR functions by integrating tools for recruitment, employee data management, benefits, payroll, training, and performance. It streamlines administrative tasks, enhances data accuracy, and supports the entire employee lifecycle.

 With analytics, it offers insights for strategic HR decision-making, making it a vital tool for efficient human capital management.

What Are the Main Features of HRMS?

• Most features of HRIS and HCM.
• Payroll: Calculate employee salary, deduct taxes, and send direct deposits automatically.
• Time and labor management (TLM): Manage employee schedules and track project times to increase productivity.
• Performance Appraisal: Track relevant employee performance metrics to determine who to provide appraisal and how much.

What Are the Main Benefits of HRMS?

The main benefits of a human resources management system include streamlined processes, increased efficiency, improved data accuracy, and comprehensive employee lifecycle management. It automates tasks like recruitment and payroll, reducing manual workload and errors. 

The system centralizes information for consistency and often includes analytics for informed decision-making. HRMS optimizes human resource management, enhancing overall organizational performance.

What Are the Main Advantages of Using an HR System?

The main advantages of using an HR system are:

1. Minimal Errors

Automation within an HR system significantly reduces errors that can occur in manual processes. Basic HR functions like automated data entry, calculation of payroll, and benefits administration minimize the risk of inaccuracies, ensuring that employee records are precise and compliant. 

It not only improves the reliability of HR operations but also avoids potential legal and financial issues associated with errors in HR-related tasks.

2.  Improved Productivity

Implementing an HR system boosts productivity by automating time-consuming manual processes. HR systems streamline tasks like data entry, payroll processing, and benefits administration, allowing HR professionals to focus on strategic initiatives rather than routine administrative duties. 

Such efficiency translates to a more agile and responsive HR department, contributing to overall organizational productivity.

3. Enhanced Employee Experience

An HR system improves the employee experience by providing self-service tools and easy access to information. Employees can manage their details, access relevant documents, and initiate requests independently. 

This self-service capability empowers employees, reduces dependency on HR for routine tasks, and contributes to a more positive and efficient workplace experience.

4. Robust Security

HR systems prioritize data security, safeguarding sensitive employee information. Robust access controls and encryption measures ensure that confidential data, like personal details and payroll information, is protected from unauthorized access. 

It ensures compliance with data protection regulations and instills confidence among employees regarding the security of their information.

How is an HRIS, HRMS, and HCM Different?

Let’s understand the difference between HRIS, HRMS, and HCM.

HRIS vs. HRMS

HRIS primarily focuses on data management, encompassing tasks like maintaining employee records, tracking attendance, and handling payroll.

On the other hand, HRMS is a more comprehensive system that includes HRIS features and integrates additional modules for managing the entire employee lifecycle. It includes recruitment, performance management, training, and other strategic HR processes. 

The difference between HRIS and HRMS is that HRIS is mainly about data organization. In comparison, HRMS is a more complex tool that includes data management and helps with various HR tasks beyond storing information.

HCM vs. HRIS

HRIS  deals with handling employee information like attendance and payroll. On the other hand, HCM is a broader approach. It does what human resource information systems do and looks at bigger things like managing talents, planning the workforce, and developing the organization.

 HCM system is not just about managing data; it’s about making the most of the entire workforce strategically. 

The difference between HRIS and HCM is that HRIS focuses on the basics, while HCM takes a bigger approach to managing people and resources effectively.

HCM vs. HRMS

HCM is a strategic approach encompassing HR functions and broader talent management aspects like workforce planning, performance optimization, and organizational development. 

HRMS, on the other hand, is primarily focused on managing HR processes, covering areas like payroll, attendance, and employee records. 

HCM software extends beyond traditional HR tasks, focusing on managing and optimizing an organization’s overall human capital, while HRMS is more centered on administrative HR functions.

Which HR System Should You Choose? 

Your choice of system depends on your business needs. Just because HRMS consists of all the features of HCM and HRIS, it doesn’t mean it is the perfect solution for you. 

First, figure out what your company needs from its HR system. Look at where the current system is lacking, what problems the HR department often faces, and what makes it hard for employees to have a good experience. Also, see which HR tasks take up a lot of time and think about whether new software could make them easier.

Additionally, check the rules your company has about things like keeping data safe, using different vendors, and making contracts. See how comfortable your team is with using technology.

Next, think about what’s most important when picking an HR system. Consider if the system works well for your type of business and how big your company is. There are many options, so list the features your business really needs.

Which type of HR system do you use in your organization? What is your experience with your current HR system?

Priya Naha

Priya is a seasoned writer with expertise in the SaaS industry. With over five years of experience in the field, she deeply understands the requirement of this specific industry, its techniques, and tools. Her articles, whitepapers, and blog posts are known for their clarity, practicality, and actionable insights. Priya also possesses in-depth knowledge of SEO and content marketing, which enables her to develop effective strategies to increase website traffic and improve brand visibility.