HRMS selection guide: the definitive six step checklist

So you’ve decided to begin the search for a new HRMS. Maybe you’re upgrading from a previous a system or you’re starting from scratch. The big question: how do you choose an HRMS to suit your organization's needs? HRMS selection can be a complex process but if you follow our 6 step checklist you’ll have a solid foundation from which to build success.

1. Requirements Gathering

The requirements gathering process can be broken down into stages:

Assess what you have: before jumping into HRMS selection, look at your current processes to identify any shortcomings and to provide an objective benchmark for additional capabilities.

Be specific about what you need: for example, don’t just indicate that benefits administration capabilities are needed if the particulars of what you’re looking for are actually employee self-service, event management  and compliance.

Gather input on what you want: the HR department alone cannot compile a comprehensive list of functional requirements for example, system reports might be needed by executives and self-service capabilities vital for employees. The only way to find out this informations is through focus groups and one-on-one interviews with selected superusers.

Aim to include the following stakeholders at this stage of selection:

Stakeholder  Requirements
Senior management Analytics, reporting
HR department Core HR functions, payroll, benefits, management
Department managers Analytics, performance management, manager self-service
Employees Employee self-service, social collaboration tools
Outsourced recruitment, payroll and benefits providers System integration
Centralized reporting teams Reporting, analytics
Downstream system owners Interfacing, integration
Retirees Pensions and retirement benefits, self-service

 

2. Delivery Method

A dilemma for many, having taken the decision to select a new HRMS, is whether to go with cloud HRMS or not. SaaS technology is becoming familiar and with more organizations moving towards the cloud, there’s more vendors to choose from. Several factors can help you decided between the cloud or an on-premise HRMS.

HRMS security

A key consideration is security. With a culture of BYOD and expectation for mobile access to HRMS functions, it’s no wonder that, according to  Ernst & Young’s 19th Information Security Survey, 73% of companies were concerned about poor user awareness when using mobile software.

Ask yourself: can we implement suitable mobile device security measures where necessary?

Speed

Speed of implementation can dramatically impact ROI. If you have all the hardware needed and a dedicated in-house IT team for an on-premise HRMS then it might make sense to go that way. But if you’re facing a large hardware investment then cloud deployment is likely the better option.

Ask yourself: do we need to upgrade our hardware? How long will that take? How much will it cost?

Cost

Usually a SaaS price tag will be lower than the on-premise equivalent. In accounting terms, cloud subscriptions can be classed as operational expenditure whereas an on-premise system is a capital cost which can make a difference to budget.

Ask yourself: how long with HRMS last, and when would subscription payments break event with an on-premise upfront license fee?

 

3. Budget

To calculate the potential ROI on your HRMS, you must first put together a comprehensive budget which covers deployment-related costs, customization, consultancy fees, user-training and the price of updates and maintenance. Remember to include a 10% contingency buffer to cover any unexpected expenses.

HRMS ROI can be expressed in a number of ways for example, financially, through staff gains and handling of management information. Identify the HRMS metrics you can measure before and after implementation. For financial HRMS ROI, be clear of the current cost of your existing system and calculate the total cost of ownership (TCO) of the new system.

Here are some hidden costs to look out for:

Hidden cost What's involved
System installation Acquiring the system, implementing it successfully.
System upgrade Recurring costs related to upgrading your HRMS
Direct non-labor costs Consultants, HRMS vendor fees and facilities, related corporate overheads
Direct labor costs Labor costs for the staff necessary to support the system
Maintenance costs Labor costs for employees involved in HR activity such as collection of staff data, timesheet approvals, answering staff questions etc
Retirees Pensions and retirement benefits, self-service

Further information on can be found in our seven step guide to building your HRMS budget.

 

4. Reaching out to vendors

Your relationship with your HRMS vendor is integral to the success of your selection project. Early communication with potential vendors will be about the requirements of the system. Make sure you have a clear and concise statement which details necessary features, functionality and deployment. Some HRMS offer an intimidating amount of functions. As starting point, here’s a HRMS functional requirements checklist outlining some of the most sought after functions:  

  • Job and pay histories 
  • Ad-hoc report writing 
  • User-defined fields 
  • Attendance and leave accrual tracking • Employee self-service • Benefits open enrollment.
  • Performance management

Depending on which functions you have outsourced, you may also be looking for:

  • Payroll 
  • Benefits administration 
  • Recruitment

What about RFPs? The classic request for proposals will contain a summary of your HRMS functionality requirements and will be sent to vendors and resellers inviting them to pitch their products.

Should you go down the traditional route sending out RFPs, you’ll need to follow a process. In summary:

HRMS RFI (Request for Information)

It can be difficult to get vendors to answer your initial questions on their applications, services and support. A formal RFI can help by posing questions to the vendor in a manner that shows your organization is serious about a purchase and the vendor’s solution.

HRMS RFP (Request for Proposal)

Put in a Request for Proposals to your top choices. Be wary of all-inclusive sales demos and remember you list of requirements.

HRMS RFQ (Request for Quote)

By this point you should have a shortlist of roughly two to six vendors. Although you will have gathered information at the previous two stages, now it’s time to formally address questions of costs, payment terms, maintenance and Support Level Agreements (SLAs).

 

5. Evaluation  

Congratulations! You’ve reached the evaluation phase. Given your broad research, you’ll be faced with the task of whittling down your potential HRMS vendors and inviting them to give you a full product demonstration.  At most invite three vendors or systems.

Which HRMS vendors should we invite to demo?

A simple rating scale can help you assess each system against key criteria for example:

0 = does not meet requirements

1 = partially meets requirements

2 = fully meets requirements

3 = exceeds requirements.

Assemble a demo team which includes an HR representative but also someone with IT knowledge to address any essential technical questions. Your procurement team might need to be involved as well as a C-level staff member who can offer some senior endorsement.

For a step-by-step overview of mastering HRMS demos please see our helpful guide.

 

6. Decision time!

When making your final decision keep in mind the following points:

  • Price: whilst this is important, a system's fitness for purpose takes president.  
  • Stakeholder engagement: look to senior level influencers for hierarchal backing and system users for grassroots endorsements. 
  • Follow-up on references: all vendors under consideration should have provided references and following up on these by asking referees about the HRMS implementation process can help you analyse your own potential ROI. 
  • Draw up an HRMS contract: seek professional legal advice at the point of signing your contract. 
  • Beware hidden extras: the upfront cost or license fee is far from the full cost. Investigate hidden extras that may not be included in the initial price negotiated for example, maintenance costs. 
  • Ensure your future needs are being met: future-proofing is tricky. Still, there are measures you can take for example, even if your HRMS is currently in compliance with data laws you should check that the contract offers provision for 
  • Make your decision: It’s as simple as that! Use the research you’ve gathered to make an informed decision and try not to look back.

A final thought…

If you adopt a methodical approach to HRMS selection and address the issues raised in this article, you should be able find a system within your budget  that fits the needs of your company. After selection is complete, HRMS implementation becomes the next challenge.

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Kathryn Beeson

About the author…

Kathryn is the editor of hrmsworld.com. Whilst she spends a lot of her time coordinating and editing content from the HRMS World writing team, she sometimes finds time to write articles herself. Outside of work she can usually be found running, bouldering or playing squash

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Kathryn Beeson