Advantages of HRMS for small businesses

Just a few years ago, an OfficeMax survey found that more than two-fifths of small businesses view admin as the biggest drain on their time and resources. This would suggest that an HRMS could bring significant benefits to a small business, being essentially an automation of (HR-related) administrative processes.

Often HRMS is seen as a more corporate solution, affordable only by larger enterprises and not worth the investment to a smaller firm; the reasons including:

  • Excessive cost;
  • HR is done on an ad hoc basis, tackling issues as they arise;
  • The manual (spreadsheet) approach works fine for a small team;
  • They’ve managed fine so far without one.

And yet, whatever the size of your business, you have the same basic people issues to tackle: recruitment, time and attendance, performance management, etc. and the right HRMS can ease that burden. Especially given the number of reasonably-priced options on the market, including many that specifically target smaller organizations.

Why HR software is important even for small businesses

In fact, there are several factors that make an HRMS particularly beneficial for the smaller or medium-sized company:

  • Legislative compliance: labor laws (both federal and state) require businesses to undertake recordkeeping responsibilities regarding various issues, including healthcare and tax codes. Such legislation and regulations are subject to change – sometimes frequent – and without a dedicated HR team, it can be difficult to keep up to date. An HRMS reduces errors and more importantly, the sanctions that can be applied for non-compliance.
  • Competing for staff: the labor market is competitive and smaller businesses often find it difficult to compete for talent with their larger brethren. For a small investment, an HRMS can make your recruitment process more efficient, enhancing your employer brand in the eyes of potential applicants.
  • Readymade systems and procedures: a smaller business has the same need to manage its workforce effectively but usually has less time and resources to invest in devising efficient ways of doing so. Performance management is a good example in that whatever the size of your operation, you depend on employee performance. Many HRMS include ‘plug-and-play’ processes, including performance management, which can be readily adopted by managers, the system prompting them to take necessary actions at the appropriate time.
  • No dedicated HR staff: the umbrella for the above factors is the fact that usually, a small business will not engage staff purely to deal with HR matters. Often, human resources is an add-on responsibility for a single manager or executive. That person usually appreciates any help they can get and the right HRMS offers plenty of support.

Check out the top 20 HRMS software for small business in our free comparison guide

Benefits of HRMS for small businesses

A broader list of benefits of an HRMS to small businesses would include not only addressing the issues mentioned above but also:

  • Better information management: all employers are required to keep employee data. When that data is recorded on spreadsheets in your office (paper or otherwise) the security of that data is your responsibility. With an HRMS in the cloud, the contractual responsibility lies with your HRMS supplier. What’s more, with a cloud solution, you are likely to be able to access that data anytime and from anywhere as long as you have an internet connection. And you can offer your employees similar ease of access to their own personal data.
  • A paperless office: filing cabinets, folders full of hard copies, you know how tedious, time-consuming and error-prone paper documentation can be. Any HRMS offers you a way out. Maybe you won’t be 100% paperless, but you’ll most certainly have a lot less HR documents to file!
  • Better management of your workforce: this is an obvious maybe, but think about how technology could transform your approach to attendance, employee training, recruitment, and payroll.
  • Better monitoring of KPIs: however you’re measuring your business success, most HRMS carry reporting or analytics functionality. This is the use of the data recorded by the system to give insights into overall business performance and the factors that influence it. Want to know who your high performers are? Ask your HRMS. Want to know if those same people are showing high performance in the areas that really make a difference to your business? Likewise.
  • Self-service: it’s standard for HRMS to offer a variety of self-service options for employees, from simply updating their own personal information to automation of routine procedures, such as requesting time off. Self-service features are usually welcomed by employees by making HR-related tasks simpler and quicker to carry out.
  • Improved communications: smaller businesses are defined by their smaller workforces and that usually means a greater need for collaboration and close teamworking due to the frequent overlap and sharing of duties and responsibilities. Many HRMS encourage collaborative working and may even have an instant messaging function or other, more sophisticated tools.
  • Cost savings: not only do the above benefits mean greater efficiency and therefore reduced costs, but there’s also the fact that cloud HRMS is available at relatively low prices, almost always with a flexible, pay-as-you-go tariff.

Finally, think about what message an HRMS will send to your workforce. As software specifically focused on better people management, an HRMS represents an investment in your people. A sign that you take your responsibilities seriously, are meeting your employer obligations, and are willing to include them in the process (self-service!) – a definite boost to employee engagement.

HRMS vendors specializing in small businesses

Though individual small business’ needs and requirements will of course vary, this is a short list of well-established vendors providing HRMS with the smaller organization in mind:

BambooHR: a well-established cloud platform designed for small and medium-sized businesses; focused in particular on those making the leap from paper to software.

Cezanne: a well-known name in cloud HRMS, Cezanne offers a broad range of features, including learning management, time and attendance, performance management, and optional extras around recruitment and compensation.

Kronos Workforce Ready: Kronos’s comprehensive platform offers recruitment, onboarding, performance management, compensation planning, time and attendance, scheduling, absence management, and payroll for one of the most comprehensive packages on the market.

OrangeHRM: the open source OrangeHRM is known for ease of use and affordability, offering a solid package of the basic HR processes around records/information management, time and attendance, leave management, recruitment, and performance; including employee self-service options.

Find more available vendors in our comparison guide of the top 20 HRMS software for small businesses

Whatever the size of your business, the key question is whether an HRMS will support your strategic goals while making it easier to manage your workforce. The ideal small business option is one that offers an accessible and easy to use entry to the world of HR automation; one that can grow with you as your business (and workforce) grows; and one that provides a reasonable return on your investment. The good news is that there is no shortage of options (the above four are the tip of the HRMS iceberg).

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Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

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Dave Foxall

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