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HRMS: Meaning, Types, and the Best Software for Businesses


HRM and Payroll Software

HRMS: Meaning, Types, and the Best Software for Businesses

The business landscape is becoming more competitive owing to many factors, therefore, having the right HRMS software can help businesses in many...........

May 7, 2024
min read
May 7, 2024
8 min read
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HRMS: Meaning, Types, and the Best Software for Businesses

Human resources (HR) is one of the most critical functions in any organization. It is undoubtedly a pillar for many businesses because it controls the workforce and can significantly determine the future direction of any business. 

HR professionals often have a lot of tasks and responsibilities to ensure the smooth running of the HR department and an organization at large. They have a lot to handle, from onboarding hires to talent management, ensuring steady business growth and productivity, operational excellence, salary processing, and finding resolutions to internal issues. Managing all these functions manually can be time-consuming and exhausting. It can also lead to human errors, potentially impacting businesses negatively. 

Investing in automated HR software is essential as HR functions get more complex each day. HRMS software can significantly facilitate and enhance HR functions, ensuring businesses remain committed to their goals. Additionally, it can ensure the workforce remains productive and reduce employee turnover. This article provides essential insights into HRMS and every related aspect. Keep reading to find out more. 

What is a HR Management Software? 

While often used as an abbreviation, HRMS stands for Human Resources Management System. HRMS is a set of software solutions HR professionals use to manage HR’s internal functions efficiently. 

HRMS software helps in critical functions, which include inputting new hire onboarding information, managing organizational performance, payroll processing, ensuring compliance with standard regulations, time tracking and PTOs (Paid Time Off), and conducting analytics. Ultimately, HRMS software optimizes HR tasks and processes to increase operational efficiency. 

Even though HR is the only department in any organization that primarily uses HRMS software, it is not the only one that benefits from it. Other departments and the whole organization can use and benefit from and it. HRMS software is categorized for three clusters: HR managers, line managers, and employees. 

HR Managers/Professionals  

HRMS software simplifies HR managers’ tasks by automating processes, helping them avoid routine tasks. For instance, automation can help avoid repetitive tasks such as data entry, talent acquisition, document management, analysis, and compliance. Regarding talent acquisition, HR professionals can easily publish jobs and communicate with applicants. They can also store employee data in one place, such as the cloud, which is accurate, safe, and easily accessible. HRMS software also helps HR managers to automate records and conduct accurate calculations. 

Line Managers 

HRMS software helps line managers to manage employees, operations, and performance efficiently. It also allows them to cater to employees’ needs. For example, HRMS software enables line managers to approve leave requests accurately so that they do not affect business operations. They can also track time to confirm each employee’s working hours. 

Regarding performance management, line managers can leverage HRMS tools such as progress reports, evaluation reminders, and meeting attendance history. They assist line managers in effectively evaluating performance, creating targets, and providing performance reviews and feedback. 


Some HRMS software have self-service features that allow employees to access the system and record and manage their data. They can enter personal information such as names, account details, job levels, and emergency contacts. Access to the system enables employees to update their information in case of any changes. For example, employees who want to change their bank account information or name can update it easily without going through HR and other long processes. In addition, employees can check suitable times to apply for leave and track the status of their requests. 

Employee self-service reduces HR managers' tasks since the employees input their data. This allows managers to focus on other things.

Why is HRMS Software Important for Businesses?  

The business landscape is becoming more competitive owing to many factors, such as technology, high employment rates, and increased entrepreneurs. Having the right HRMS software can help businesses in many ways to enable seamless functioning. 

Centralized Data Management 

HRMS software allows personnel to consolidate and access data from one database, offering a unified view. This eliminates the need to perform HR functions separately, which can be tiresome and time-consuming. HR professionals no longer need paperwork to store records and employee data.

Efficient Recruitment and Onboarding 

Using efficient HRMS software enables HR professionals to hire the right talent. Automated onboarding tasks such as resume screening, scheduling interviews, and applicant tracking systems have simplified hiring processes. 

Time and Attendance Management 

Time and attendance automated systems are part of HRMS software that allows HR professionals to use accurate data. These automated tracking systems eliminate manual functions and errors and enhance payroll processing. They are especially critical for organizations with remote or hybrid work models. 

Data Accuracy 

Since HRMS software operates on automated processes, it is connected to every other system linked to the HR. This means it provides accurate data, ensuring compliance. 


Any business that is on a growth trajectory must be scalable. This means they should have the capacity to adapt to changes. HRMS software is scalable and allows businesses to accommodate changes as they come. These changes include increased employees, business expansion, and other added functionalities. 

Cost Saving 

Manual processes such as paperwork can be expensive, costing businesses a lot of money. For example, companies might need to buy papers constantly. In case of payment errors, they risk experiencing employee turnover, legal fines, and court battles due to non-compliance. All these scenarios can be costly. However, HRMS is accurate and allows records to be stored electronically. Additionally, it is safe; only authorized personnel can access crucial information—all these help to reduce costs. 

How Does HRMS Software Work? 

Even though there are two types of HR management systems, cloud-based and on-premise, many people use the online version. This is because it reduces manual processes and is accurate. The big question is, how does it work?

Cloud-based HRMS software is customizable and can be integrated with other systems related to HR functions. Organizations can choose various systems, integrations, and features they want for their HRMS. However, business needs will significantly determine the kind of integrations to use. After that, they can be implemented in HRMS.  

Once implemented, every authorized personnel, such as employees, line managers, or HR managers, will create login credentials like passwords, usernames, or employee numbers. They can then input their information on the system, and this data will appear on the entire platform. Please note that the system will need regular updates to ensure businesses use the latest version and remain compliant. 

Types of HRMS Software 

There are two main types of HRMS software: on-premise and cloud-based. When choosing an HRMS, organizations must consider which one best suits their needs. 

On-premise HRMS Software 

Derived from its name, on-premise HRMS software is an HR management solution installed, hosted, and used on a company's server. It requires the company to control, customize, and update the hardware on a regular basis. On-premise HRMS software requires IT knowledge and is therefore managed and controlled by the IT department.  

All in all, On-premise HRMS means the application is in-house and is only managed within the company’s premises. Some of its benefits include giving businesses full control over their system and data. Additionally, even though it is expensive, it requires one-time installation and implementation costs, meaning that businesses don't need to pay regular fees when using the software. 

On the negative side, On-premise HRMS can be very expensive because businesses must buy suitable hardware and software, which are pretty costly. You will also incur extra costs related to repair and maintenance. 

Cloud-based HRMS Solutions 

Unlike on-premise, cloud-based HRMS software is hosted by third-party service providers and can be accessed remotely on internet-based platforms. Here, the third-party provider maintains and updates the system. Businesses must pay a specific monthly or annual fee for the services the third party provides.

Cloud-based HRMS solutions have several benefits. First, they are scalable and flexible; they can be easily customized to adapt to business changes. Second, organizations are spared IT burdens such as upgrades and maintenance since it's the third party's responsibility.

Users can also access the software from any location as long as they have an internet connection. This facilitates operations, especially in remote work setups. Additionally, many third-party service providers have robust security measures that protect sensitive employee data. Lastly, cloud-based HRMS software allows for automatic updates, ensuring businesses use the latest features and comply with the ever-changing laws. 

Cloud-based HR management software also comes with limitations. Businesses don’t have full control over their systems and data. Moreover, the organization’s information security heavily depends on the provider’s security measures. 

Components of HRMS Software 

A good HRMS software can handle your business's daily operations efficiently. It should have the following key components: 

Payroll Management 

Payroll processing and management entails critical functions like tax calculations and deductions, salary disbursement, and keeping financial records. Any HRMS software must feature payroll management to automate these functions, facilitating HR payroll responsibilities and reducing the risk of errors.  


Onboarding integrates new employees into a company and ensures they are familiar with all operations, culture, and policies. Automating onboarding simplifies the whole process, ensuring the HR team uses less effort and time to integrate new hires. HRMS should have an onboarding module to allow new hires to commence their responsibilities immediately. 


This is typically among the most chaotic functions for every HR department. They have to post a job, receive applications, interview applicants, score, and identify potential hires. Selecting the best from the rest can be challenging. An ATS (Applicant Tracking System) component streamlines all these processes and picks suitable candidates. 

Data Management

A good HRMS should have a module responsible for all employee data management and filing processes. A data management module should store all data digitally and in one place for easy access.  

Performance Evaluation and Management 

A performance management system is a must-have for any HRMS software. It gauges employee performance using criteria such as attendance, work hours, completed projects, etc. This component puts all this information in a centralized place and evaluates performance against KPIs (Key Performance Indicators). 

Attendance, Time Tracking, and Leave Management 

This feature, essential for HRM software, helps the HR team to provide accurate attendance and leave reports. They can also manage timesheets, develop work schedules, and attend to everyone’s leave requests. 

Reports and Analytics 

The HRMS Software should also have a system with reporting and analytics capabilities. It gives businesses a deep insight into their organization's HR department operations. As a result, businesses can develop better performance and growth strategies. 

Exploring HRMS Software Options 

There are many different HRMS software for organizations to choose from. Businesses ought to be diligent when selecting HR management software to ensure it does its intended purposes. Here are some considerations for small businesses: 

HR Management Software for Small Businesses 

HR management software is not only for large and established businesses, as many believe. Small businesses need it, too. 

Since many small businesses typically have limited resources, they require HRMS to reduce manual processes. It can automate tasks such as data entry, time tracking, compliance, and tax calculations. Moreover, due to the complex process, small businesses often need help to onboard new hires. HRMS for small businesses makes onboarding processes easier and ensures they select the right talent. 

Lastly, good HR management software allows small businesses to save time and money. That said, we highly recommend a cloud-based HRMS for small businesses.  

Free HR Management Software

Small businesses operating on tight budgets can leverage free HR management software. They are a cost-effective solution that helps businesses to enjoy HR benefits. 

Some HRMS software providers offer free plans with a few basic HR management features. Workpay, Africa's leading and most popular HRMS software service provider, offers various plans, allowing small businesses to understand how we work and the advantages of using our platform. 

What is the Best HRMS Software for Business?

There is no one-size-fits-all answer to this question. This is because businesses have varying needs that call for different HRMS software services. Despite this, businesses must invest in the right HR management software suitable for their needs. The best HRMS software ticks all the boxes regarding functionality, benefits, and cost-effectiveness. 

When choosing an HRM software, choose one that is scalable, accurate, cost-friendly, and easily integrated with other HR systems. Workpay provides all HRM services from payroll, time and attendance tracking, perks and benefits, tax calculation and compliance, and more. Visit us today to learn more about our services and why we are Africa's leading HR management service provider. 

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Workpay is a HR and Payroll software company that offers time & attendance, payroll, human resource, leave, expenses and remote teams solutions to businesses across Africa.

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