Hiring and Growth

What is an Applicant Tracking System (ATS) and How to Choose One

Kim Porter  

Ready to grow your team? Great—there’s a tool that can help with that. Applicant tracking systems, or ATS, automate parts of the recruiting and hiring process. These software programs can help you post job listings, collect and sort through resumes, identify strong candidates, and even help you follow compliance laws. They’re a must for nearly 99% of Fortune 500 companies, but they can help businesses of any size streamline the hiring process from end to end.  

What are applicant tracking systems?

An applicant tracking system is a type of software that human resource departments and business owners use to manage the recruitment and hiring process. Sometimes known as talent management systems or candidate management systems, these software programs filter out unsuitable applicants and highlight the ones that are the best fit. From start to finish, they can post job openings, examine resumes, identify and score standout candidates, and schedule interviews, among other functions. 

Here’s a basic rundown on how an ATS works: You post a job listing online, and applicants submit their resumes and cover letters. The ATS scans the application materials, uploads them into a database, and pulls out the best candidates based on criteria selected by the employer. Recruiters or hiring managers can review the list, make notes, and tag their preferred candidates, moving them through the hiring process. The ATS can automate communication, schedule interviews, and mail rejection letters, too. Once the company hires a candidate, human resources uses information from the ATS to put them on the payroll. 

Pros and cons of using applicant tracking systems

Although applicant tracking systems can save your company time and money, these benefits should be carefully weighed against the potential drawbacks.

Pros:

  • Streamlined hiring process: Hiring managers may wind up saving hours of work because they’re not sorting through dozens or hundreds of applications. These programs also speed up the time-to-hire process, which saves the company money and keeps top candidates engaged. 
  • Better candidate experience: Applicants can easily apply and receive updates throughout the process. 
  • Easier to track resumes: These programs store resumes in a database, so employers can pull up relevant applicants for future roles. 
  • Predictive analytics: Some ATS platforms use data analytics to help predict which candidates are a good cultural fit, their potential level of performance, and how likely they are to stay with the company. 

Cons:

  • Potential technical issues: The ATS software might not be able to read some resumes with simple formatting problems, which could filter out good candidates or create bottlenecks in the hiring process. 
  • May overlook qualified candidates: Because applicant tracking systems are designed to target keywords and filter information, some qualified candidates may fall through the cracks if they don’t meet the exact criteria.
  • Upfront and ongoing costs: Initially, your team will spend time and money installing the software program and learning how to use it. Over time, you’ll likely spend money on the subscription service. These usually start around $60 per month per user and can go up to several hundred dollars a month, based on the vendor and your company’s needs. 

How to choose an applicant tracking system

Choosing a new applicant tracking system is a big decision, so you’ll want to think about what your company needs and see what’s out there. When you’re comparing options, here’s what to look for: 

Cost of the service

Each ATS platform has a different pay structure. For instance, some vendors charge a monthly or annual fee based on the number of employees who have access to the software. Subscriptions may range from about $60 to $400 or more per month, and clients may be able to add users and features for an additional cost. Plans either let you pay-as-you-go or require a contract.

Other vendors charge a fee for each job posting or a batch of postings. Anyone within the organization can access the software, but these systems typically have fewer features for screening candidates. You might also come across vendors that sell entire human resources information systems, some of which include an applicant tracking system within the suite.

Available features

Even if you have a budget in mind, read through the features in each pricing tier. You might start out with the cheapest plan but upgrade later based on your company’s needs. Also check whether you can customize the system based on your own needs. These programs may include features such as:

  • Basic job postings 
  • Resume analysis
  • Predictive data
  • Candidate communication, such as email or text
  • Interview scheduler
  • Automated reference checking
  • Customizable scorecards and candidate comparisons
  • Interview guides
  • Employee referrals
  • External recruiter portal
  • Access to different job boards and recruiting pipelines
  • Integration with HRIS software 
  • Job offer templates
  • Data storage
  • Compliance information and tracking
  • Online and mobile-friendly platforms 
  • Support in several languages

Compliance tracking

Companies should be aware of compliance rules and follow them carefully. For instance, federal equal employment opportunity (EEO) laws and some state-specific laws protect job applicants against discrimination during the hiring process. 

Depending on the type and size of the business you run, the applicant tracking system may help you draft compliant job postings, generate fair interview questions, create reports, submit forms, and track the notes you make about candidates throughout the hiring process. These features should help you comply with legal requirements on the federal, state, and local level. 

User experience

When researching your options, ask whether the company has demo software you can take for a spin. On the hiring side, test the process of posting a job listing, reviewing candidates, and communicating with users. On the flip side, candidates should be able to easily upload job applications and resumes, receive notifications about their progress, and stay in the know for future opportunities. After cycling through both processes, bring up user-experience problems and questions with the vendor. 

Training and support

Training sessions can help ensure your hiring managers understand the software and get the most out of it, while technical support is necessary when you need to troubleshoot an issue. Some vendors offer basic training for free, while others may charge for these sessions, especially if they’re done at the client’s site. Basic support, whether it’s via phone call or email, is usually included in the base price. Some vendors may offer advanced support options or access to a dedicated customer service manager.

Updated: December 9, 2021

Kim Porter
Kim Porter Kim Porter covers personal finance topics for AARP The Magazine, Bankrate, U.S. News & World Report, Reviewed, Credit Karma, and more. When she’s not writing, you can find her training for her next race, reading, or planning her next big trip. Twitter | LinkedIn
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