HRIS stands for human resources information system, which is also sometimes called a human resources management system (HRMS). An HRIS/HRMS centralizes employee-related information, helping businesses keep track of employee data, job data, and many other employment and HR compliance records. Costs for these systems vary widely based on features offered and your employee headcount.
Payroll software like Gusto includes HR and onboarding. It can also set up and manage employee benefits. That’s why we recommend choosing HRIS software that does multiple HR functions in one system, like Gusto. It ends up saving you time by having all your HR, benefits and payroll data in one system.
HRIS/HRMS is somewhat of an umbrella term. Any software system that manages people information, including applicant tracking systems, benefits administration systems or payroll software, can be referred to as an HRMS or HRIS system because in order to track benefits, payment or applicant data, they, by default, must contain basic human resources (people) information—like name, address, etc. The software actually goes by a variety of alternative names, including HCM (human capital management system), HR system, HR software, or workforce management software.
HR software is often specialized, and some HRMS features overlap. For instance, some scheduling software tracks time for payroll, while others, like When I Work, track time for billing.
How an HRIS Works
An HRIS works like any database software in that you manually enter (or upload) data into it, and it keeps track of that data for you. It works by storing data across the employee life cycle—from hire to termination or retirement. That makes it easy to find information (it’s searchable) and to report on that data, such as how many FTE you have or how much you’re spending on benefits. An HRIS is set up using an employee ID, employee Social Security number, or an employee’s last name as the primary data field. However, many small business HR systems are set up so that the employees themselves are the ones entering the data, saving you time.
Because it’s software, an HRIS allows you to import and export relevant people data, such as the employee’s time and attendance information. Some HR systems, like Gusto, include payroll processing with direct deposit, while others allow you to interface with a third-party payroll system, such as QuickBooks payroll.
An HRMS typically provides software integrations to timekeeping and accounting systems so that you can share your human resource information across platforms. Others like Zoho People have built-in or add-on tools to do these functions. Either way, you can sync your data without having to manage duplicate data entry, reducing common data entry or keying errors.
In addition to tracking employee data from their first day until their retirement, some HR software provides safety reports, while others allow you to collaborate with employees by blasting out a newsletter or sharing social feeds. Newer HR software, like praise apps, improves employee morale. All of these can fall under the umbrella of an HRMS.
I’ve been an HR expert for the past 20 years and at our company, we use Sage. The most important feature is the employee self-service. Prior to our Sage implementation, we were inundated with requests for payroll and outstanding vacation day information. In fact, we had an employee who spent about half of her day answering them. Now, we simply direct people to our employee portal, where they can log in and find out everything on their own. The portal is so easy to use that we rarely even get a support ticket from someone who needs a little bit more help.
– Rich Franklin, Founder/President, KBC Staffing
Who an HRIS Is Right For
An HRIS (or HRMS) is right for any business and becomes increasingly more important as your business grows. For example, a startup with one employee may not need an HRMS system, as they can run payroll using free payroll software, keeping employee files in paper personnel folders.
However, once you have more than a handful of employees, keeping track of HR data as required by labor laws becomes more of a chore. Having an HRIS manage that data ensures compliance and saves time.
Here are the types of businesses that need HR software and why:
- All business – Any business with employees will benefit by using an HRIS to keep track of employee new hire paperwork, time-off requests, and employee information such as emergency contacts. An HRMS saves time.
- Businesses where licensing or certification is required – These employers may be required to prove that employees have the correct documentation; an HRIS does that.
- Business with 10 or more employees – These employers are required to maintain an OSHA log, which is much easier if you have an HRMS system to track that data.
- Businesses with 50 or more full-time equivalent employees (FTEs) – These employers must offer employee benefits. Most HRMS systems have a way to do so, either directly in the system or through a benefits insurance interface.
- Business with 100 or more employees – Additional labor law compliance issues, such as EEOC reporting, come into play; an HRIS makes compliance reporting easy.
- Businesses that manage hourly employees – These employers often need to manage schedules as well as track a worker’s time; an HRMS system often provides the interface so that employee data is maintained in one place, and then shared with the time clock.
- Businesses that want to be seen as a great place to work – Having an HRIS with self-service options improves the employee experience by offering features like an ability to view their direct deposit pay stub, add dependents, and check on their 401(k) balance.
While you may not need an HRIS when it’s just you and your partner running the business, as you grow it becomes more and more important that you track all relevant employee data. An HRMS will save you time from the get-go, and those time savings increase if you choose an HR software system that allows your employees to manage their own HR data and look up information themselves.
The one [HRMS] feature I find most valuable is the convenience of having access to all the tools I need to run the entire organization on one dashboard, plus an added bonus to earn points for learning through their educational and conversation community option … and having direct access to experts in the field.
This streamlined approach decreases time we would use if each tool was separated and helps with informational requests and data tracking for business intelligence on a daily basis based on engagement. If you are unorganized, partly organized or super organized, [an HRMS] will help shape and recreate how you do business in HR, and how your team has access to the information they need while helping you save money.
– Khalilah Olokunola, Vice President of Human Resource, Tru Colors Brewing
HRIS & HRMS Costs
HRIS costs can vary from as low as $1 per month per employee to thousands of dollars a year. In fact, huge enterprise HRMS systems like PeopleSoft, SAP, Sage and Workday may cost larger firms thousands or even millions of dollars to implement. Fortunately, newer cloud-based HR software fills the gap for small businesses by offering online HRMS systems that allow you to pay by employee or contractor (aka user) with no setup fee, in a price range from about $1 to $15 per month per employee.
Below are the costs you need to consider when choosing an HRIS.
- Software – Small business HR software costs between $1 and $15 per month per employee. Some firms add on monthly fees, while others provide only the basics.
- Setup fees – Setup fees are used to pay for the time of configuring the software to your business. They range in price from $0 to thousands per year, depending on the vendor.
- Consulting fees – Consulting fees vary from $0 (if included with your software subscription) to about $150 per hour if you use an outside HR consultant.
- Support fees – Some HRMS software companies charge additional software support fees that may run a few hundred dollars a year.
We recommend small businesses choose cloud-based HR software that is simple enough that it doesn’t require a consultant to set up; these also rarely charge setup or support fees. However, some HRIS vendors provide add-on HR consulting services to answer questions you may have about topics like hiring, onboarding, or whether to set an employee up as exempt or non-exempt.
HR Software Providers
You can find HRIS providers by searching for HRIS, HRMS or HR software online and reading reviews. Depending on what you need, some providers may be a better fit for your particular business than others. For example, if you need only HR, payroll and benefits, Gusto is a great option. However, once you grow past 100 employees or if what you need is to track employee training and certification, you might want to go with Paycor or ADP instead.
Here are some affordable HR software providers with the features most small businesses need:
Gusto is best for any small business that wants to manage all its HR and payroll data in one place. As an HRMS system, it also provides employee self-service, employee communications, employee feedback, onboarding, e-signature, and a full range of benefits offerings, even to the smallest of small businesses.
Gusto costs only $39 per month plus $6 per month per employee or contractor and integrates with the free timekeeping software Homebase—making it very affordable as an all-in-one HR platform. And, you can export your employee data to QuickBooks or other accounting systems, saving you from having to re-input payroll and tax account information.
Zoho People is just one in a huge array of software from Zoho. Its HR tool is free for small businesses with fewer than five employees; after that, pricing runs from $1 to $5 per month per user. However, the free and $1 per month packages provide only the most basic of HR features—employee data, employee forms and leave tracking. For example, if you want performance management, timekeeping or scheduling, it’s $1 to $3 per month per employee extra.
What makes it worth consideration (besides the low price) is that the Zoho suite offers tons of other business tools you can integrate it with—such as CRM, finance, sales, collaboration and custom business software. Read our Zoho People review to learn more.
Zenefits is HR software that includes benefits and payroll, much like Gusto. However, its HR functions are more robust in terms of workflow, scheduling, time sheets, org charts, employee forms, and integration with tools like Slack, SalesForce and Expensify. It starts at $5 a month per employee for the HR platform, and can grow with you as your business scales up.
BambooHR is a popular HR option that runs from $6 to $8 per month per employee and includes applicant tracking and onboarding, timekeeping and performance management. But it doesn’t have payroll built in, requiring you to purchase a separate payroll system, along with purchasing scheduling software if you need that. For more information, read our reviews and user feedback on BambooHR.
As an HR expert for the past 20 years, I’ve experimented with quite a few HRMS solutions. We’ve found BambooHR to be a great solution for our small, remote team. The pricing is great for our small team since we only pay per user and are therefore not forced into an overly priced package. While we love every feature of the platform, the applicant tracking system has really stood out. It greatly helped us improve our candidate recruitment experience. Prior to implementing BambooHR, we had a Google Drive folder with templates and a tracker that wasn’t always updated. BambooHR is so easy and actually fun to work with, so we had no problems convincing our staff to use it. The customizable templates allow us to personalize messages to candidates, and everyone on the team can track progress so there is no overlap and we keep communication clear. We’ve become a much more efficient team.
— Matt Dodgson, Director, Market Recruitment
Namely is another favorite among HR staffers due to its customization options. However, it’s on the pricier side, running from $15 to $30 per month per employee, more than double the price of Gusto or BambooHR. What you get for that is onboarding, benefits, performance management, and employee communication tools. For more information, read what users have to say about Namely.
Freshteam falls under the category of HR software that’s focused more on the recruiting and applicant tracking sides of the employee life cycle. It monitors and onboards your candidates so that you can communicate throughout the hiring process and keep track of them once they become employees. Freshteam starts as $75 per month.
However, to get other features like help desk, email or CRM software integrations, you have to sign up for those packages at additional cost. (It’s a model similar to Zoho People, where you can add on business modules as you need them.) If you’re already using Freshworks for your help desk or call center, then adding Freshteam makes sense.
Other Payroll Vendors
Because payroll is a huge and important HR function, consider asking your current payroll provider if they have add-on HR features like recruiting or performance management. For example, payroll providers like Paycor and ADP offer a full suite of HR functions—essentially fulfilling your need for HR software. For instance, Paycor offers a full performance management suite as well as an applicant tracking system (ATS) and learning management system (LMS) add-ons, and costs about half the price of ADP.
Timekeeping and Scheduling Software
These types of software include employee information in order to track schedules and time worked. They can therefore serve as a basic HR system while your business remains small. Some, like Homebase, offer recruiting functions as well, while others, like When I Work, allow you to export that data to your accounting and payroll systems.
Here are some of the types of features you might find when searching for an HRMS. Notice that an all-inclusive HRIS may include some or all of these within one application, or they may provide only a subset of the features needed to manage an employee throughout their employment life cycle—from job application to retirement. In other words, an HRMS can include many kinds of software features. But they all have one thing in common—they’re related to the human worker, whether employee or contractor.
Kinds of HRIS/HRMS Systems
Keeps track of applicants in your hiring pipeline and posts to job boards to help you find employees
|Applicant Tracking Software (ATS)||Similar to recruiting software, and may add resume parsing and onboarding|
Posts jobs and track applicants; some, like Indeed, have ATS features
|Payroll Software||Processes salaried and hourly payroll managing deductions and tax payments|
|Benefits Software||Manages health and retirement benefits, annual enrollment, claims and fees|
|Performance Management Software||Schedules and keeps track of employee reviews, such as one-on-ones and 360-degree feedback|
|Learning Management System (LMS)||Schedules and tracks employee training and compliance certification|
|Time & Attendance Software|
Keeps track of employee schedules and time worked in order to ensure labor law compliance and provide data to payroll
|Scheduling Software||Allows you to schedule employees for jobs or shifts, and may allow you to track attendance or bill clients|
|Workforce Management Software||Similar to time and scheduling tools, but often includes communication options, workforce monitoring, and metrics|
This table of types of HRIS software isn’t all-inclusive, as there is HR software used for testing employee skills, tools used for background checks, software to create org charts, and apps to conduct employee satisfaction surveys, as examples. Even banking software that manages retirement accounts like 401(k)s or helps you set up alternative payment methods like pay cards can fall under the category of HR software.
Pros & Cons of an HRIS or HRMS
Given the glowing recommendation for even the smallest of businesses to use an HR system, there are some downsides. Here we provide a review of the pros and cons.
Pros of an HRIS
An HRMS provides benefits even to the smallest of businesses, including:
- One-stop shop – Provides all relevant employee personal and job information in one place for key departments to access, such as HR and finance, as well as self-service.
- Saves time – Rather than digging through paper files, or manually tracking data in a spreadsheet, employee data is searchable, reportable and exportable.
- Provides data accuracy – Data entry mistakes are common, so the fewer systems you have to key information into, the more likely the data you have will be correct.
- Improves compliance – Once you reach 10, 50 or 100 employees, you’ll find compliance reporting much simpler with all relevant employee data in one system.
- Provides data analytics – As your business grows, metrics like labor costs and time to hire become more important. HR systems provide that.
- Workflow – HR software often allows you to set up workflow to ensure that no steps are missed in key processes, like hiring (signed W-4s) or termination (sick leave payout).
- Improves legal outcomes – If your HR system contains job descriptions, signed employee reviews, discipline data and rationale for promotions and terminations, you’ll find yourself better able to defend against or prevent employee lawsuits.
[An HRMS] makes it easy for newly-hired employees to start their onboarding process by automating all of the paperwork—the “new hire packet”—that they have to sign. When new hires receive all of the important forms and information about where they need to go, who’s on their team, and who they’ll be meeting with before their first day, it saves me a lot of time answering questions and chasing signatures. Plus, it helps make the new hire’s first day experience more pleasant—who wants to come in and have to sign a mountain of forms on their first day?
– Mikaila Turman, Director of People, GoodHire
Cons of an HRIS
An HRIS is software, and therefore, there are some downsides:
- Costs money – HRIS systems run from as low as $1 per month per employee to thousands of dollars a year. If you’re an accountant with an HR background, or have just a few employees, you may want to track all that data on a spreadsheet instead.
- Must be installed and set up correctly – Nothing is worse than employees being unable to access their pay stub or the wrong manager set up to approve time worked. You have to set up your HRMS properly for features and interfaces to work.
- Data accuracy – Data in the system is only as good as the data entry. If you input the wrong pay rate or choose the wrong benefits option, you’ll need to spend time fixing those errors. Therefore, whoever inputs your data must be attentive to detail.
- May not sync with your payroll or other software systems – Before you select your HRMS, make sure it integrates smoothly with other business apps you use. If not, you’ll need to connect with an API or do some programming and testing to make sure the data (like hours worked or pay rates) move from one system to the next easily.
- Rogue comments – Some HR systems allow users to upload documents or add comments. If, for example, a manager wrote a scathing employee review full discriminatory comments, that document could hurt as evidence in a lawsuit if it were found stored in your HRIS.
Alternatives to an HRIS or HRMS
Some smaller employers are happy keeping employee data in paper files or online folders using G Suite or Microsoft office. You may also find that software designed for other purposes provides enough HR data to keep your office running smoothly. And there may be options below you hadn’t considered.
Here are alternatives we recommend for employers:
Time & Attendance Software
Even free time and attendance software like Homebase, as well as scheduling software like When I Work, often contain basic HR data, such as employee name, contact information, job title, photo, department and managers’ names. Most also let you set up leave tracking so that employees can request PTO through the system. If you haven’t yet reached 50 FTE and those are the only HR functions you need, then time and attendance software may suffice until your organization grows larger. Check out our time and attendance software buyers guide.
Payroll software is a subcategory of HR software that often doesn’t get recognized for its robust HR features. Many payroll software providers, like Gusto, have recognized that small businesses need more than just payroll processing. Many provide add-on features such as document storage, onboarding, and even org charts. The benefit is that your HR and payroll data are maintained in one system. You can often set up role-based security to limit who can see which kind of data. Check out our payroll software buyers guide for comparisons.
Professional Employer Organization
Here’s an alternative to purchasing an HR system that many small businesses haven’t considered—working with a professional employer organization (PEO). What a PEO does is hire your employees on behalf of your business and then lease them back to you at a monthly rate starting as low as $79 per month per employee. You not only get an HRMS system but no longer have to worry about most of the back office HR paperwork. In addition, a PEO can save you on workers’ compensation costs and benefits insurance rates, as they pool your employees with those of other companies. To learn more about PEOs, read our ultimate guide.
If you’re looking for a PEO that can provide your employees with the professional employment experience of working for a larger corporate—complete with direct deposit and benefits—look no farther than Justworks. Justworks pricing starts as low as $79 per month per employee and saves you from having to implement an HRMS or hire HR staff.
A surprising number of very small businesses manage HR using paper files—that is until they can’t find someone’s I-9 form during an audit, or get sued for wrongful termination and can’t locate the performance documentation. If you choose to manage HR using paper documents, make sure you have a secure filing system set up, know which documents to collect and retain, and keep up on your filing. Read our article on personnel files for more information.
Electronic files stored in secure filing structures are another option that can work for smaller employers. In that case, you’ll want to audit your files on a regular basis so that you don’t miss anything and don’t keep documents longer than needed. Online HR files are typically stored by employee name and will include all the relevant HR information. However, managing your employee data this way takes significant upkeep as your business grows, or if you have a lot of turnover.
Frequently Asked Questions (FAQs)
An HRIS system, like a CRM system or accounting software, can do a lot. Here are common questions you may have as you’re considering an HRIS.
Is employee data in your HRMS discoverable in case of a lawsuit?
Yes. Any employee documents you retain, whether electronic in your HRMS or on paper—from offer letters to your employee handbook, performance reviews and disciplinary notes, are all subject to discovery. Therefore, it’s a best practice to monitor the data you store in your system, and to remove documents after their destroy by date is passed.
Are employees allowed to see the HR data you have in your HRMS?
The answer to this question varies based on the state in which your business is located. Some states allow employees to view their personnel files (that includes HR data you have on the employee). Other states only allow employees to request and view very specific pieces of information—like payroll data. Some states will let you charge the employee a fee for printing the files. And still others allow an employee to view their file only upon a court order signed by a judge. For state-by-state options, read our article on personnel files.
If I later decide to change my HRMS, is that possible?
In most cases, you can export the basic data (name, address, work location, job title, pay rate) to a CSV file and then import it into another system. But depending on how each vendor formats their data fields (for example, date or phone number), you may have to do a little work to massage the data into the format your new HRMS needs.
HRIS is HR software that makes your life as an employer easier. You can sign up for or purchase an HR system with the exact feature set you want, and most will interface with the other business tools you use. Using an HRIS will save you time, allow you to answer employee questions faster, and may even (if self-service is offered) take the pain out of HR by letting employees find and update their own information online.
Gusto payroll software serves as a great HRIS option for those businesses that want to engage employees with a welcoming onboarding process, provide direct deposit payroll with self-service options, and eventually offer benefits to sweeten their employment package.