Improving small business HR with HRMS

Small businesses may not realize it but they are ripe for HR technology. An HRMS can seem like a sizable investment – especially when operating close the line cost-wise, and also when your team is so small you tell yourself you can keep track of them in your head or at most, a spreadsheet – but manual processes and multiple paper files do not make for efficient HR.

In fact, an HRMS can perform the majority of the core HR tasks for a small business, bringing significant benefits, and it needn’t cost the earth…

What does HR do in a small business?

Let’s begin with the basics, the ‘foundation’ HR areas of responsibility:

  • Employee records: every employer must keep employee data on file and that data – including addresses, social security numbers, and banking details – is often highly sensitive, requiring solid security. Not only does and HRMS offer a more secure location than a filing cabinet, but it also makes that data accessible for specific HR processes (e.g. payroll).
  • Payroll: speaking of which, running your regular payroll can be mostly automated, pulling the relevant time and attendance data from elsewhere in the system and making calculations, payments and withholding (e.g. tax deduction) as necessary.
  • Time and attendance: the more basic the approach, the more difficult it can be to keep track of employee arrival and departure times, breaks, paid time off allowances, etc. Not only can an HRMS do these things, but it also significantly reduces the possibility of both deliberate and inadvertent time fraud.
  • Self-service: employees have direct access to their own information and can keep it updated, and they can submit basic HR requests, such as booking a vacation.
  • Reporting: most systems come equipped with a selection of template reports, including attendance, turnover, and even employee satisfaction, which can be used to understand your business and workforce better.
  • Hiring and onboarding: recruitment is easier with technology. Not only can the right HRMS give you access to a wider pool of candidates but applicant tracking systems help you manage the whole recruitment process.
  • Benefits administration: manual benefits enrollment tends to be a time-consuming process. So much better to give employees access to all the information and guidance via an online HRMS portal
  • Training: keep track of employee’s learning needs and training with an HRMS.
  • Performance management: many HRMS offer the option of agreeing on performance goals or objectives with employees and then tracking progress.

How can HR technology improve small business HR?

Compared with the daily battles on the marketing and sales fronts, human resources can be a low priority. However, the right HRMS can compensate for some of the common organizational drawbacks of smaller businesses.

One common drawback is the lack of dedicated HR staff. Small businesses don’t have large HR departments, instead of allocating HR responsibilities as extra roles to managers or board members. Unlike these ‘part-time HR-ers’, an HRMS is not distracted by other, often more pressing, responsibilities. Also, given the information and guidance that an HRMS can contain, in the absence of a qualified HR professional, an HRMS can be an invaluable source of advice to the smaller business.

Compare small business HR systems using our HRMS software comparison tool

Something no business can ignore with impunity, whatever its size, is labor legislation. Compliance with the (business) laws of the land is essential to survival long-term. A good small business HRMS includes prompts for the necessary actions on matters such as recordkeeping, healthcare, tax codes, and salary deductions. Thus ensuring fewer sanctions or penalties for non-compliance.

Furthermore, running automated, focused recruitment campaigns using an HRMS results in a better quality of new hire. Assuming your compensation package is competitive, both employee turnover and retention can improve.

Finally, while at the other end of the size scale, multinational corporations are able to invest millions in designing and running bespoke people management processes (e.g. performance management, time and attendance, access to learning, etc.) the small business simply doesn’t have that kind of time or resource to invest. An HRMS may come with readymade systems and procedures covering the HR basics. Such ‘plug-n-play’ processes can save a great deal of time and money.

Key areas HRMS can provide savings to small businesses

Naturally, many of the above advantages and benefits translate directly into financial savings, including:

  • Avoiding sanctions and penalties for non-compliance with labor laws.
  • More efficient operation of day-to-day HR processes, allowing more time to be spent on business and the bottom line.
  • Being less likely to be on the receiving end of litigation from disgruntled (ex-)employees. Simply following the systems automatic prompts for action can avoid a lot of claims.
  • A few years ago, an OfficeMax survey found that 41% of small businesses find the administration side of things the biggest drain on their time, resources and even motivation. An HRMS that streamlines your HR admin is less of a drain.
  • Cloud systems are very reasonably priced. The days of all HRMS being on-premises and requiring significant investment in hardware and maintenance are over. The cloud has democratized HRMS and made it widely available. Furthermore, the pricing model for cloud HRMS is usually on a pay-as-you-go basis, based on numbers of system users and/or records. That kind of flexibility means the system can change with you as your business needs change.

As a small business, investing in a modern HRMS speaks volumes. You’re telling your workforce (however small it is) that they are important to you, that you’re taking your responsibilities as an employer seriously. It clearly says that you are prepared to invest in the internal running of the business as well as how it appears to the outside world of customers and suppliers. This kind of attitude is at the heart of employee engagement – and the improved business performance that results – because when you show you care (or if “care” is too touchy-feely, how about “treat them as human beings”) they in turn are more likely to care about your business and put in that ‘extra mile’ that every employer wants.

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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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