Learn why every company needs an HRIS and what is the most important criteria when choosing the best HRIS for your organization.
If you are feeling overwhelmed with the amount of time you are spending on managing employee administration manually and you feel that your team is not putting their skills to best use due to administrative work, it might be time for you to start thinking about introducing an HRIS.
HRISs centralize core employee data and save time on repetitive processes. This makes them crucial components of your company’s HR stack. They are often the first software HR teams get to operate within a young company.
In this article, we will cover in detail why it’s never too early for an organization to acquire an HRIS system and what are its most significant benefits. You will also learn what is the most important criteria when choosing an HRIS for your company.
This article is part of our series on creating an optimal HR tech stack. It will be part of our “People Ops Guide for CHROs” e-book that’s in preparation. Sign up to receive updates and be the first to find out once the guide is out.
Why You Need an HRIS System
As a people analytics platform, Orgnostic connects different HR tools to provide HR and leadership with important organizational people insights. HRIS systems play an essential role in enabling teams to become data-driven. Naturally, we talk to a lot of HR professionals in our line of work.
When we talk to our customers and prospects in HR, we often hear them asking: What is the best HRIS system out there? — and the answer is always: It depends.
When talking about the benefits of an HRIS system, there are two different points of view to consider. First of all — why do you, as an HR professional, need it? And secondly, why does your organization need it?
Since the essential function of HRIS systems is to centralize all HR data, they first and foremost reduce the manual work that goes into collecting and maintaining employee data. In other words, HRIS systems help you automate certain HR processes and exercise more control over your data.
For example, employees can easily book their vacation and have it approved without the email thread between their manager, HRs, and other relevant parties.
Besides data centralization and process automation, HRIS systems make it easier for HR teams to scale their operations. It is a vital solution for HR teams in fast-growing organizations.
In other words, HRs need HRIS systems to improve their operational efficiency and increase productivity. This is especially important in smaller teams where the lines between different HR functions are blurry, and the main priority is growth.
Finally, all HRIS benefits translate into supporting strategic thinking and long-term resource-saving, which is a common organizational goal. The answer to “Why does an organization need an HRIS system?” is simple: because it will pay off. ROI of an HRIS system can be extremely high as it cuts time spent on repetitive and manual tasks, creating time that can be spent on strategy and planning instead. Moreover, there is no need to hire additional people to administratively manage these processes.
How to choose the best HRIS for your company
There is no magic formula when it comes to choosing the best HRIS for your organization. More importantly, there isn’t a one-size-fits-all solution. Instead, HRs and other decision-makers take several factors into consideration when picking an HRIS solution.
So, what do you need to consider when choosing an HRIS?
Company size
Your company size matters. Your choice of HRIS will be drastically different depending on whether your organization is an SMB or an enterprise. Luckily, most vendors don’t shy away from specifying the size of the companies for which they built their solution.
Growth plan
In addition to taking your company’s current size into consideration when buying an HRIS, you should also consider what its size will be in the future. If you are currently an SMB looking to grow into an enterprise in the next couple of years, it might make sense to go for an HRIS solution that is suited to enterprise organizations, too.
Why? Because it can be more expensive to later need to transition instead of choosing an enterprise solution from the very start. The price difference can be significant.
Geographical distribution
Every country and region has its requirements when it comes to HRIS. In some, you will need to collect and gather specific data or the system will need to be in a particular language.
Moreover, if your organization is distributed across different countries and regions, you will need to find an HRIS that can be set up in a way that supports multiple locations — mostly due to different legal regulations and requirements.
Budget
In many cases, budget is the single most crucial factor when buying an HRIS. Software Path’s research shows that the average cost for an HRIS solution is $8750 per company over five years.
Most HRIS pricing models are based on the number of employees in a company it supports, starting with around $5 per employee per month. However, some other costs factor into the final price of the HRIS system.
Furthermore, there are some additional costs to consider when creating a budget apart from the HRIS price. These include deployment-related fees, data migration, and staff training costs, among others.
Current customer portfolio
In some cases, the current portfolio of HRIS customers can play a crucial role in your selection process.
In most cases, the current list of organizations that use a certain HRIS can be reassuring for companies within similar industries, of similar size, or in the same country. They can be telling of whether a solution is a good fit for your specific context.
Integrations
Integrations are often overlooked, but extremely important: you should also take into account what are the data points that you can export, how you can connect a specific HRIS with other tools, and what other tools you can connect with a specific HRIS.
Features
And last but not least — features!
HRs usually expect to be able to manage all HR processes from the same tool. Unfortunately, this is rarely possible.
Every HRIS has a different scope of features. However, we can surely say that every HRIS supports core HR functionalities, an employee admin database, benefits and payroll administration, absence management, workflows, and a self-service portal.
There are other important HRIS features that sometimes play a key role in the purchasing decision. Nevertheless, the absence of these features should not stop organizations from buying a particular HRIS. Most secondary HRIS features have multiple standalone solutions that can easily integrate with HRIS software.
- Hiring. Most HRIS systems offer some kind of applicant tracking system. This functionality can be of crucial importance to fast-growing organizations.
- Learning and development. If your organization prioritizes empowering your teams to learn and grow in their roles, you should consider whether you want to choose a HRIS that offers this functionality. For example, Cornerstone built other functionalities around the learning management system, which is at its core.
- Time and attendance. Some companies’ core HR data includes daily attendance. This is common for agencies of all sorts. HRIS solutions like UKG cater to outsourcing companies and include this feature.
- Performance management. Although managers often expect it to come with the new HRIS, performance management often isn’t included in HRISs. Still, it’s an important add-on, so standalone performance management solutions easily integrate with most HRISs. Moreover, bigger HRIS vendors sometimes offer performance management as an additional module.
- Reporting and analytics. Basic HRIS reports include turnover, PTO usage, workforce planning, and more. Still, HRIS reporting and analytics can rarely give you a full picture of your organizational health and inefficiencies to drive actions and make strategic decisions. You can use Orgnostic to answer business questions related to growth (headcount, cost, time, quality) with people data.This way, you can get meaningful insights into important HR metrics and make evidence-based strategic decisions.
Customization
A lot of HRs expect to map their current processes in detail within a new HRIS. This is not always possible. In fact, one of the most common challenges that come with a new HRIS implementation is needing to be flexible about the process you’re used to. Most HRs don’t want a tool to dictate what their process looks like.
That’s when a lot of organizations look for customizable solutions. They can also be a good solution when it comes to important government initiatives or regulations.
Challenges When Introducing a New HRIS
The process of buying an HRIS is not always linear. If it involves more stakeholders, it will likely be longer and more complex — all the more reason to get an HRIS early on while the organization is still small.
However, when the selection is over, it’s time to actually introduce HRIS to your company. Here are some common challenges that can come with it.
Expecting too much of it
Some HRs expect a lot from an HRIS. The fact is, implementing an HRIS itself will not help decrease turnover; still, it can help you get more insight into who is quitting and why.
Moreover, managers and employees might expect too many features and functionalities from an HRIS system. That’s why it’s important to manage everybody’s expectations and be clear on what you’re getting.
Implementation
The HRIS implementation period can be tricky. It can take additional resources to clean up the data and to find internal or external experts to oversee the implementation.
Research shows that it takes on average six to eight weeks to implement an HRIS — including installation, data conversion, configuration, testing, training, and going live.
ROI isn’t high right away
Don’t start calculating ROI right after you’ve implemented your HRIS. The HRIS ROI will be higher the longer you use it due to high resource burn right after the purchase and implementation.
It’s more beneficial to calculate how much reduction in administrative hours you could see in 2 or 5 years to determine your potential ROI, or how many additional people you would need in the team to manage the processes automated by an HRIS.
Conclusion
There is no doubt that even the smallest organizations see multiple benefits when using an HRIS. In fast-growing companies, it’s most often a crucial part of the HR tech stack, and it is undoubtedly one of the most used HR tech solutions in large enterprises.
Although purchasing a new HRIS system can be stressful, it starts with pinning down some essential information about your organization — like size, growth plan, and geographical distribution — and finding your budget. After that, it’s time to seek potential vendors, always being mindful of the challenges ahead.
We hope that this post has clarified how to choose the best HRIS for your company. Get in touch with us if you would like us to help you get a better understanding of the potential of your organizations’ HR stack.
Big thanks to Mladen Radović, Head of People Innovations & Intelligence at Bitpanda, for helping us write this article by sharing his experience and insights 🙌