Team Management

What is an HRIS and Does My Company Need One?

Kim Porter  

An HRIS, or human resources information system, combines several employee-management features into one program. Whether your company has a handful of employees or you’re managing a team of dozens, an HRIS can make things like running payroll and keeping up with compliance easy. If you’re considering an HRIS for your business, you’ll want one that meets your current needs and has the flexibility to grow with your company over time. Here’s what to know.  

What is an HRIS?

A human resources information system, or HRIS, is any program that manages employee information and keeps it in one place. These are also sometimes known as human capital management systems (HCMs), workforce management software, HR systems, or HR software. Every program comes with its own key features and pricing, but most help businesses track employee data from the hiring process all the way through the life cycle of employment. 

For instance, let’s say you decide to hire a new employee. You’d enter their personal details, upload their required documents (like an I-9), and add information about their pay and benefits. Over time, you can use the HRIS to do things like collect information about the employee’s training records, track their performance reviews, process paychecks, and distribute benefits. 

The software makes it easy to filter and search through every employee’s information and create reports, such as how many full-time employees you have or how much you’re spending on benefits. You can typically also connect the HRIS to other systems such as timekeeping and accounting software, which allows you to share information across platforms and sync data.

Some of the more common HRIS features include:

  • Job recruitment and onboarding: HRIS programs can help recruiters screen job candidates, scan resumes, conduct background checks, and generate offer letters. Once an employee is hired, the HRIS might pull all of the candidate’s information and application documents into the main employee database. 
  • Database of employee information: You’ll also be able to store important employee information such as names, addresses, salaries, titles and position history, reporting structures, and performance evaluations.
  • Company documents: Managers can keep up-to-date copies of company documents like safety guidelines, emergency protocols, and employee handbooks in the system.
  • Payroll: The HRIS usually connects with your other financial software and calculates each employee’s wages, deducts taxes, and tracks benefits. 
  • Attendance and scheduling: Employees may be able to check their work schedules and clock in and out using HRIS software. The information can feed directly to payroll to make sure paychecks are just right. 
  • Benefits administration: You may also be able to track employer-offered benefits such as health insurance, retirement savings plans, and tuition reimbursement.
  • Compliance: Tax laws and employment regulations vary in every state and even in some localities, and HR software can typically track these changes—and adjust payroll—as they occur.

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What to look for in an HRIS system

Choosing a new HRIS program 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, you should check:

What’s included in the price?

Every HR system has a different price, but most charge a base dollar amount per employee per month. You might pay additional fees to add certain features, too. Check the price on the following features, and ask what’s included in each and when you have to pay for it:

  • The software itself 
  • Setup fees
  • Consulting fees
  • Support fees

Training and support

Some HRIS programs are complex, and you might need some guidance setting it up, understanding the features, and resolving any software or user-error issues as they pop up. Before buying a new HRIS program, take a tour of the software and ask what the company offers for training and ongoing support. Make sure those ongoing services are written into your contract.

System features

Before investing in an HRIS, you’ll need to consider which features your company needs. If you have plans to grow your company, you might choose a product that offers more than you need at the moment—because you’ll eventually use all or most of the features. It could be more difficult to get a simple version now and try to upgrade later. 

How to tell if my company needs an HRIS

An HRIS could be a good option for any business that plans to grow beyond one or two employees. Here are some questions you can ask yourself when making the decision:

How many employees will I have?

Your business might only have a handful of employees right now, but it may have twice that number in a few years. It’s a good idea to consider your plans and choose a system that grows with your company. Some compliance guidelines are based on the number of employees you have, so you should take this into consideration. For instance:

Are my employees salaried or hourly? 

If your employees are hourly workers, you may need help managing schedules and tracking your workers’ time. An HRIS often provides an interface where employees can clock in and out. With salaried workers, the software may help them submit time-off requests.

Do I want to offer employee-facing features? 

HRIS programs can also improve your employees’ experience by offering features like the ability to add dependents, check on retirement account balances, review pay stubs, download tax forms, and enter vacation days, sick time, and personal leave. Some systems also help you boost employee morale with social feeds and praise apps.

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Updated: October 13, 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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