Core HR software, often referred to as HR Management System (HRMS), is software for managing the back-end administrative HR tasks, some elements of which are essential to the everyday running of an organization. Core HR systems are the employee systems of record and are fundamental to all human resource administrative processes.
Core HR is distinct from other HR technology categories with which it is sometimes confused. The following table gives an overview of the HR technology landscape and of the main categories of HR software, including Core HR
Core HR software, as the employee system of record, is very closely connected to payroll tasks. Payroll is sometimes considered a separate activity and most (but not all) Core HR vendors also provide payroll capabilities. ADP is the giant in the payroll space, and many HR vendors integrate with ADP to manage payroll externally. There are dedicated payroll applications and also a universe of outsourcing companies who handle payroll on behalf of companies. These are not covered in this guide.
The following section outlines the primary capabilities common to most Core HR software products:
The primary function of Core HR software is to provide a central database containing records for all employees and contractors, past and present. These records contain data on employee personal information, employment history, job profiles, workflow for transfers, promotions, pay raises, benefits information, etc.
Features related to Human Resource Management are:
- Ability to enter detailed demographic data for each employee
- Ability to track previous positions held
- Creation and management of job profiles with descriptions of specific jobs
- Workflow for transfers, promotions, pay raises
- Benefits information and management
- Ability to manage employees across multiple geographic locations, including internationally
- Ability to comply with federal workplace regulations like COBRA and OSHA by capturing all relevant data in database
Payroll management capabilities provide for calculation of employee pay and benefits, in addition to managing direct deposit, salary revisions and payroll tracking.
Features related to Human Payroll Management are:
- Calculate employee pay including state and federal deductions
- Ability to integrate with external payroll vendors
- Ability to issue off-cycle checks
- Maintain payroll history for each employee
- Administration of health insurance plans, 401k plans and other benefits
- Ability to electronically transfer pay to an employee's personal bank account
- Payroll tracking and auditing
- Ability to modify individual employee pay increments or other modifications
- Statuary form management
Leave and attendance management streamlines communication between HR and employees, and facilitates efficient management of employee leave including requisitions, approvals, balance calculation, and annual carry-forward.
Features related to Attendance Management are:
- Workflow process for approval of employee paid time-off requests
- Email notifications to employees regarding time off requests
- Maintaining paid time-off balance after request approval
- Enable unused paid time-off days to be carried forward to new year, or paid in cash
Employee self-service is a portal allowing employees to view and update their personal information. This removes considerable administrative burden from HR staff.
Features related to Employee Self-Service are:
- Employee login to portal
- Ability for employees to view pay and benefit data and print pay stubs
- Ability for employees to update personal profile with change of address, dependents, etc.
- Ability to view personal job and performance history
- Access to company handbook, corporate policy documents
- Ability to view company news and information, organizational charts, etc.
- Ability to recognize or thank a team member for work well done
Some Core HR systems have the ability to keep a record of assets such as laptops, pagers, cell phones, etc. issued to employees. The record typically includes asset type, number, serial number and date of issuance.
Features related to Asset Management are:
- Ability to track laptops, pagers, phones, and other company equipment
- Asset issue and transfer management
- Asset return tracking
- Warranty and after-sales maintenance tracking
HR reporting has come to be seen as more important than ever as HR data is now considered strategic to the running of any business. Some vendors build their own reporting capabilities, while others partner with BI vendors to embed 3rd-party functionality.
Features related to Reporting are:
- Ability to build custom reports via graphical user interface
- Pre-built reports on employee retention, and other key metrics
- Ability to bring data from external systems like CRM and combine with HR data. For example, sales performance metrics from a CRM system might be combined with data from the HR employee system of record to determine the relative performance of geographically dispersed sales teams.
Workforce Management is often considered to be a Core HR capability and is designed to manage scheduling and optimization of a large contingent or hourly workforce.
Features related to Workforce Management are:
- Time and Attendance
- Employee Scheduling
- Absence Management
- Workforce Planning
Core HR and Payroll products have largely comparable feature sets, but a strong trend towards category convergence, even among other HR categories such as Talent Management, has been underway for some years. Thus, the dividing lines between HR categories are blurring.
Most Core HR vendors offer at least some capabilities from adjacent categories in an attempt to broaden their offerings beyond mere back-end administrative and data entry systems, in order to capture some of the attention being given other HR technology categories, which are viewed as more strategic.
As corporations strive to capture strategic advantage through hiring and training top-quality staff, and aligning their work in pursuit of strategic corporate goals, talent management systems in particular have received enormous attention recently. Evidence of this can be seen in the quantity of M&A activity, with large enterprise vendors rushing to complete their HR offerings with these new talent capabilities. For example, SAP acquired SuccessFactors in 2011 for $3.4billion, while Oracle acquired Taleo two months later for $1.9 billion. Salesforce's acquisition of Rypple in 2011 even indicates some appetite for entering this space by vendors not traditionally associated with HR technology.
The debate between best-of-breed and complete suite solutions is a perennial one in many software categories, not just HR. But as customers increasingly look for product suites with a broad range of interconnected capabilities in order to avoid the difficulties of having to integrate software from different vendors themselves, the appeal of software suites is easy to understand. In the HR software world, convergence of capabilities has lead to the creation of a relatively new HR software category: Human Capital Management (HCM). Vendors from many different categories are attempting to broaden outwards from their core competency. Several traditional Core HR vendors are adding talent management capabilities, while a number of talent vendors are adding back-end Core HR functionality. For example Oracle, Ultimate Software, SAP, and ADP all offer some level of talent management capabilities. Conversely, SilkRoad, which started out as a talent management vendor, added Core HR functionality to the suite in 2009.
Workday integrates all elements of HR and financials into a single cloud-based ERP application. Integration with financials, enables financial metrics to be included in HR planning so that, for example, during the annual planning and goal alignment process, employees goals can be aligned to support the overall corporate goals, and financial targets can be included as a part of this planning process. There is also some evidence that Workday's ambitions go beyond just HR, and that the ultimate goal is to create a top-tier ERP platform that competes with SAP and Oracle.
Human Capital Management systems increasingly span the entire spectrum of capabilities from back end administrative HR to talent management capabilities, and even including Applicant Tracking Systems (ATS) and Learning Management Systems (LMS). Few HCM suite platforms provide equally strong capabilities in all areas, but convergence is nonetheless a real phenomenon.
On-premise vs On-Demand or SaaS
Traditionally, on-premise licensed software was the most common deployment model for this category of products, but more recently the cloud deployment model has become pervasive. Workday was originally architected as a cloud solution, and Ultimate Software made the switch from on-premise to cloud technology in 2002 by completely re-architecting their product, making them the first vendor to deliver HR and Payroll solutions in the cloud. But virtually all other vendors including Oracle, SAP and ADP now offer cloud solutions, even if their offerings tend to be a patchwork of on-premise and cloud solutions without the advantage of having designed their systems specifically for the cloud.
The advantages of cloud software are well understood:
- No CapEx expense: No outlay for infrastructure and software. Instead, software is paid for monthly on a pay-as-you-go plan
- Access the software from anywhere: Users can access the software from anywhere they have an internet connection
- Document control: Software acts as a central repository for all documents, regulatory forms, etc.
- No upgrade or patch worries: Vendor updates the software and all customers are automatically on the latest version
Many users of back-end HR systems, such as payroll and benefit administrators, may not have a technical orientation, and it is vitally important that these systems be very intuitive and easy to learn and use. User experience has become a key buying criterion, and companies like Ultimate Software are bringing cutting-edge science and usability engineering techniques, such as eye-tracking technology, into the design process in order to deliver engaging and enjoyable user experiences. Newer products like Workday have the advantage of building from the ground up with a consumer-like user interface that non-technical staff can learn on their own with very little training.
The idea of switching from “systems of record” to “systems of engagement” was initially proposed by Geoffrey Moore, but has now become mainstream as vendors endeavor to build products that people will actually want to use.
There is no escaping the fact that Core HR and Payroll systems are fundamentally systems of record used for back-office administration, mainly by members of the HR department. However, even within these systems there is increasing focus on employee empowerment through self-service abilities delivered through employee portals. Products are increasingly being designed around a user engagement model that makes people want to use them rather than simply having to use them. Josh Bersin wrote in an article on this subject that in a recent survey “58% of surveyed organizations said that they would consider Workday because of its user interface”1. Another example of this focus is Ceridian Dayforce, which introduced Engage in 2013 as a new “social” user interface designed to encourage collaboration and a much better user experience. Yet one more example is Ultimate Software, which is building all its solutions to be mobile-ready using responsive design to match the experience to the type of device being used whether it's a laptop, tablet or smartphone.
User interface design will grow more and more important as consumer-like expectations become the norm in business product decisions.
HR Data and Analytics
Another recent trend is the importance of HR data, and an increased focus on reporting tools. The data revolution has probably affected almost every facet of modern business except for the HR department. HR has been slow to understand the value of data, but as the shift from administrative support to strategic leadership continues, data has become more and more crucial as a lever of competitive advantage. Many of the major HR technology vendors like SAP, Oracle, Ultimate Software and, more recently, Workday have made strides in building powerful data analysis capabilities, sometimes even incorporating predictive analytics, to help HR leaders make decisions informed by good data. Just as in other business functions, new vendors are starting to pop up focused entirely on HR analytics. HR analytics allow HR staff to analyze data to see, for example, a list of promotions for a particular division over the last two quarters at the press of a button. More broadly, HR analytics are vitally important in quantifying the bottom line impact of HR processes and identifying workforce trends like employee turnover before they negatively impact the organization.
HR Staff Size
The HR staff required by a company depends entirely on the size of the company. Companies typically do not even think about hiring an HR leader until they have more than 50 employees. The kind of software required is strongly related to number of employees. Talent management is probably less critical for small, growing companies than the ability to handle pay and benefits for each employee. But small, growing companies need some level of talent management functionality, particularly recruiting automation. Conversely, smaller companies, may outsource pay and benefits to a specialist HR pay and benefits provider. But eventually many companies bring these back-office functions in-house once they reach a certain size. For this reason, there is a wide range of Core HR products serving different segments of the market. For example, Paylocity customers tend to be considerably smaller than Workday customers'. Having a clear sense of what features and functions are required is the first step to choosing a solution appropriate to the size of organization. Payroll management is the most basic function for all companies, but leave management and asset management might not be necessary for a 100-person company.
Mobile capabilities are becoming mainstream in the HR sector after a relatively slow start. Many Core HR vendors are building tablet and smart phone apps allowing employees to submit time-off requests, and even punch in and out. Some apps also provide access to payroll and HR data, employee directories, and expense report submission.
Some of the more innovative uses of mobile in the HR sector are in the area of performance management, where managers can send kudos to an employee, which is automatically logged in the performance management system. For example, Ultimate Software's partnership with Yammer allows employees to praise peers in Yammer and have it automatically display in in the Talent Management solution for managers to use during performance reviews. Learning management systems present another good use case for mobile access, where content can be downloaded to a tablet for study at home or when traveling.
Recruitment, is the area getting the most attention as recruiting processes are gradually moving to a mobile environment. A large percentage of job seekers now use mobile devices to search for jobs, and companies are starting to use mobile as a candidate sourcing strategy and connecting mobile candidate outreach to more traditional applicant tracking systems.