HRMS or ERP: Is It Really an Odd Question?

It may seem a little odd to even ask the question: HRMS or ERP? After all, they perform different functions; surely they’re complementary systems? But that doesn’t necessarily mean you need both for your business. Increasingly, as each new business intelligence software release strives to become the ultimate all-singing, all-dancing solution—packing in more and more functionality—HRMS and ERP systems begin to overlap.

On a basic practical level, you may only have the budget to invest in one major IT system this year, and on that basis alone, it may be an either/or choice. So, what are the broad advantages and disadvantages of HRMS and ERP packages, and do you really need or want both?

In terms of their origins, HRMS and ERP evolved from very different starting points. HRMS arose from a need to computerize the management of employee data and better handle processes such as payroll, time and attendance, performance records, benefits management, and so on. ERP, on the other hand, was driven by the competitive advantage that comes from efficient management of stock, production, finances, and supply chain operations.

Convergent evolution

Over time, the evolution of HRMS and ERP has shown more convergence. ERP systems now have modules to handle employee information, manage recruitment, pensions, and payroll; similarly, HRMS systems tap into production and resource data and cross-reference it to people-related information to produce sophisticated analytics. Add CRM into the mix, and surely the end result will be a single, do-it-all system that handles everything?

If you want to maximize your business efficiency, then you’ll probably be opting to have both, leaving you with some integration issues and some choices over which system handles what. For example, do you run your payroll from your ERP or your HRMS?

Sometimes a best-of-breed purchasing strategy is more favorable; just factor in the work needed to overcome the integration challenge.

Integration challenges

On the integration front, the issues include data quality, access, and self-service. For instance, if you decide to use the ERP for payroll, it will need easy access to the time and attendance data in your HRMS. This is when it can be tempting to just believe the vendor’s sales pitch and buy the whole setup from a single source. However, behind the hyperbole lie endless stories of integration breakdown between HRMS and ERP.

Recommended reading: A beginner’s guide to ERP integration

For self-service functions, the issue is one of user experience. Employees and managers may be dipping into the HRMS for pay data, scheduling, training management, etc., and the ERP for production data, resource management, and so on. While these functions are completely separate and easily distinguished, from the user's point of view, the ideal is a single access portal with a uniform feel for everything. There may be two (or three) systems beneath the surface, but what the user wants (whether a factory floor employee or a C-suite director) is the ‘appearance’ of a single system via a common interface.

The Decision: HRMS, ERP, or both?

Ultimately, it depends on what you need the system or systems to do for your business. You may well find an ERP that has sufficient functionality in its HR module to keep you happy. If you want something a little more sophisticated on the people side of things, you may need to consider a separate HRMS. What is certain is that if you do end up with the “both” option, then for optimum functioning, they should be linked, integrated, and dealing with common data as far as possible.

Can ERP replace HRMS entirely?

While ERP systems now include HR modules, they may not offer the depth of functionality found in dedicated HRMS systems, particularly in areas like talent management and employee engagement.

Are there any industries where having both HRMS and ERP is essential?

Industries with large workforces and complex operational processes, like manufacturing, retail, and healthcare, often benefit from having both HRMS and ERP systems to manage their diverse needs effectively.