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Software ImplementationHuman Resources

What Is HR Software?

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headshot of Capterra senior editor Kathryn Todd
Written by:
Lauren Spiller

and edited by:
Kathryn Todd

Published
9 min read
Header image for the blog article "5 Top-Rated Human Resources Software for Small Businesses"

Learn all you need to know about human resources software.

If you’re searching for human resources (HR) software, you’re likely an HR manager or small-business owner looking to manage employee records, digitize HR processes such as recruiting, hiring, and performance management, and automate common administrative tasks such as payroll and fulfillment of HR compliance.

Diversity and inclusion manager Freda Daniels headshot

Freda Daniels, diversity and inclusion manager [1]

Freda Daniels, [1] diversity and inclusion manager at AFS International Programs, is looking to upgrade her team’s current HR software solution. She’ll help us uncover the features of HR software that are important to real buyers. 

What is HR software and why is it important?

HR software enables organizations to manage employee records, digitize HR processes, and automate common HR tasks. HR technology covers a wide variety of employee needs such as recruiting, payroll, benefits administration, and performance management.

HR software is important because it enables businesses to manage and optimize each HR process. Whether you’re recruiting job candidates, onboarding new hires, administering employee benefits, conducting performance reviews, or doing anything else related to talent management, there’s an HR system out there that can support it.

Payroll function shown in human resources platform UKG Pro

Payroll function shown in human resources platform UKG Pro

HR apps, like the one shown above, allow HR professionals and managers to run payroll, track hours worked, and reimburse employees for various expenses. Having a way to automate such processes ensures that employees are paid on time and that records of pay are accurate and up to date.

Fast facts about HR software investment
  • Over the past year, 23% of software buyers in our 2024 Tech Trends Survey purchased an HR software tool that they intend to use permanently.*

  • 55% expect a positive return on investment (ROI) from their HR tool within 12 months.

  • 21% said that human resources software is a top priority for their yearly budget.

Who uses HR software?

In Daniels’ organization, the roles that rely most on human resources software include those in benefits, payroll, and talent acquisition. But you don’t need a robust HR department to benefit from these tools. Companies from all industries and sizes leverage HR tech to streamline HR processes, or because they’re lacking some crucial functionality with their current methods.

See the chart below for a breakdown of industries that human resources software reviewers on Capterra come from. [2]

Human resources software reviewers on Capterra by industry

Types of HR software

There are two main types of human resources software: human resources information systems (HRIS) and human capital management suites (HCM).

HRIS

A comprehensive HRIS prioritizes the collection, organization, and storage of employee data. The following software subcategories fall under the umbrella of HRIS software: 

  • Attendance tracking software: Allows HR staff to track employee work hours and attendance. It can help users with employee scheduling, time management, absence and leave management, overtime tracking, document management, and wage records.

  • Compliance software: Helps businesses adhere to the legal and regulatory requirements of their industry. HR teams can use these tools to track employee training and certification on policies such as anti-bribery, data protection, event safety, and social media usage.

  • HR analytics software: Helps HR departments make informed decisions by aggregating, processing, and analyzing massive amounts of data.

  • Learning management system (LMS) software: Supports the creation, management, delivery, tracking, and reporting of employee training programs. These tools help HR leaders provide structured and engaging learning experiences for employees.

  • Onboarding software: Optimizes and automates onboarding tasks to improve new hires’ welcome experience. These tools help recruiters and HR leaders handle paperwork, training, system setup and access, and ensure legal and company policy compliance.

  • Payroll software: Automates management of employee salaries, wages, bonuses, and deductions. Payroll software is designed to help businesses accurately and efficiently manage their payroll processes in compliance with relevant laws and regulations.

  • Performance management software: Automates the employee review process and management of individual development plans. Performance management tools provide features for goal setting, continuous feedback, performance evaluation, and employee development planning to align individual and team objectives with business goals.

  • Recruiting software: Enables recruiters, hiring managers, and talent acquisition professionals to automate the entire recruitment process, from job posting and interview scheduling to candidate selection and onboarding.

  • Time clock software: Automates the tracking of employee work hours and attendance schedules. It replaces traditional manual timekeeping methods with a digital tool that employees can access from their computers or mobile devices to clock in and clock out.

  • Workforce management software: Helps companies plan, track, and manage employee operations like scheduling and tracking time and attendance. Workforce management solutions help organizations optimize scheduling, reduce labor costs, and increase employee engagement, all while ensuring compliance with applicable labor laws.

HCM

An HCM covers the same features as an HRIS platform but is more concerned with employee experience. Organizations that seek out these tools are typically looking to improve recruitment, morale, training, and employee retention rates. 

The following subcategories are considered HCM:

  • Career management software: Helps employees develop their careers through individual development plans and goals. Managers can use these tools to figure out what skills would be most beneficial for an employee to make their desired transition, and point them towards an internal position or a side gig that can help them develop that skill.

  • Employee engagement software: Aims to assist managers with maintaining employee awareness of corporate culture and increasing their level of investment in the company to improve productivity and morale. Solutions commonly offer surveys, gamification tools, team sentiment analytics, and applications that streamline communication.

  • Succession planning software: Helps organizations identify and prepare employees for future leadership roles. These tools commonly include features such as competency modeling, internal talent pools, performance dashboards, and training plans.

Key features of HR software

Key features of human resources software include employee database, HR management, and reporting/analytics. Activity dashboard and 360-degree feedback are common as well. For the three most critical human resources features according to Capterra software reviews, see the table below:

Feature

Description

% of reviewers who rate it as critical or highly important

Employee database

Securely store and manage a database of employee information.

84

HR management

Automate core HR functions such as payroll, benefits administration, and compliance.

84

Applicant tracking

Manage job applications and resumes as candidates move through the recruiting process.

82

Daniels echoes the importance of reporting/analytics as an HR feature, which in an HRIS helps users track metrics like cost per hire and turnover rate. Because Daniels is looking to help her team further their professional development by tracking progress toward goals like attendance at workshops and seminars, she’d be better served by an HCM like the example below.

Employee goal tracking capability shown in HR tool Unit4 HCM

Employee goal tracking capability shown in HR tool Unit4 HCM

Benefits of HR software

One of the benefits Daniels appreciates most about her current HR solution is how it streamlines HR processes like processing payroll, administering benefits, and onboarding new employees. The table below lists a few more benefits of human resources software as well as excerpts from human resources software reviews on Capterra. [2]

Benefit

Description

Review excerpt

Improves HR performance and efficiency

Thanks to automation, digitized record-keeping, and employee self-service, users say HR software enables them to do more in less time.

“The capabilities provided by the platform have significantly streamlined our tasks and contributed to enhancing our overall efficiency.”

–Mara D., senior HR manager, nonprofit

Facilitates small business growth

Managing a workforce gets complicated quickly as you grow. Users say their HR software has kept up with their growth and allowed them to scale their HR processes with ease.

“With our company growing from 150 to over 800 employees in the past 5 years, [our product] remains an essential partner in our success.”

–Julie G., HR and operations manager, food and beverage

Provides a secure storage space for employee data

HR software reduces errors and security concerns associated with more manual methods, such as paper files and spreadsheets.

“It gives us a consolidated database of accurate employee information.” 

–Jessica D., game programmer, computer software

Click here for even more human resources software benefits.

Considerations when looking for HR software

Budget

Most HR solutions on the market are priced per month, with a typical entry-level plan averaging about $313 per month for up to 100 employees. [3] These systems include the core HR function of an employee database, basic HR function management, and reporting and analytics.

Premium subscriptions can cost upwards of $2,009 per month, or more, if you have 250+ employees. These often include additional features such as customizable reports, an employee self service portal, and an activity dashboard.

Thirty-five percent of respondents in our 2024 Tech Trends Survey who already use HR software expect to spend between $1,000 and $10,000 on these tools over the next 12 months.*

35% of companies that use HR software will spend between $1,000 and $10,000 on these tools in the next year.

To determine a budget for their own HR solution, Daniels’ team “shopped around to get an understanding of the cost for a full suite and then had that amount placed on the budget for the upcoming fiscal year.

Deployment options

Capterra advisor Daniel Harvey shares that most HR solutions he recommends to buyers are cloud based, which are easier to implement since you don’t need a server or technical expertise in house. [4]

headshot of Capterra advisor Daniel Harvey

Daniel Harvey, Capterra advisor [1]

One drawback of a cloud-based HR software tool is you’ll be more dependent on the [technical expertise and customer service of] the vendor,” Harvey clarifies. “However, this usually means the tool is more affordable since the vendor has all the hardware you need to run the system and provide technical support.

Challenges

According to Daniels, the biggest issue posed by HR tools her team has used in the past has been “having to do things manually when processes don’t work as they should, which is time-consuming and inefficient.” For example, “sometimes we don’t get the analytics data we need from a report, so we have to go back and retrieve it manually.

To safeguard against this, Daniels recommends prioritizing functionality as well as ease of use when shopping for a new system. “Support during and after implementation is also an important factor for us,” she shares.

Ready to start your search for HR software?

Capterra Shortlist identifies the top HR systems based on user ratings and popularity, helping small businesses find the best HR software for their needs. We even offer a comparison tool so you can see how your favorites stack up against each other.

Once you’ve found a tool you like, download our How To Identify and Budget for Software Guide below. This eBook shows you how to plan a budget as well as understand and compare pricing models. It also explains total cost of ownership as well as pricing packages and ranges. Fill out the form below to learn more.

Note: Questions and responses have been edited for brevity and clarity.

Note: The screenshots of applications included in this article are examples to show a feature in context and are not intended as endorsements or recommendations.


Survey methodologies

*Capterra’s 2024 Tech Trends Survey was designed to understand the timeline, organizational challenges, adoption & budget, vendor research behaviors, ROI expectations, and satisfaction levels for software buyers. The survey was conducted online in July 2023 among 3,484 respondents from the U.S., U.K., Canada, Australia, France, India, Germany, Brazil, and Japan, with businesses across multiple industries and company sizes (5 or more employees). Respondents were screened to ensure their involvement in software purchasing decisions.

Sources

  1. Freda Daniels, LinkedIn

  2. Capterra reviews data: Capterra reviews are collected from verified users for individual software products. For this report, we analyzed reviews from June 30, 2023, to June 30, 2024. Read the complete methodology.

  3. Capterra software pricing data: Only products with publicly available pricing information and qualified software products within the category are included in our pricing analyses. Read the complete methodology.

  4. Daniel Harvey, LinkedIn


Looking for Human Resources software? Check out Capterra's list of the best Human Resources software solutions.

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About the Authors

Lauren Spiller profile picture

Lauren Spiller is a senior content writer at Capterra, covering sales and CRM with a focus on retail and customer experience. After receiving an MA in rhetoric and composition from Texas State University, Lauren has pursued a career that allows her to help others through writing.

Lauren’s research and writing for Capterra is informed by nearly 300,000 authentic user reviews and more than 15,000 interactions between Capterra software advisors and CRM or sales software buyers. Lauren also regularly speaks to leaders in the sales and CRM space so she can provide the most up-to-date and helpful information to small and midsize businesses purchasing software or services.

Lauren previously taught college writing and served as writing center assistant director at Texas State University. She has presented at the European Writing Centers Association, Canadian Writing Centres Association, and the International Writing Centers Association conferences. She currently lives in Wimberley, Texas, with her husband and their three cat sons.

headshot of Capterra senior editor Kathryn Todd

Kathryn Todd is a senior editor at Capterra. She specializes in editing data-driven research reports that cover the latest technology trends. She has almost a decade of experience writing and editing content to help small businesses stay ahead of trends and find the best tech solutions for their needs.

Kathryn holds a bachelor's degree in English Language and Linguistics from Sheffield Hallam University in the U.K. When not editing content herself, she enjoys reading content other people have edited and can usually be found with her head in a fiction book and a cup of tea in hand.