February 2022


Human Capital Management (HCM) and Human Resources Management Systems (HRMS) are two sides of a coin. They are not the same, but they create a unit that can strengthen organisations from the inside out. Afterall, our greatest expense – or asset – is our employees, and without them business would not be, well, a business.

Defining HCM and HRMS

HCM and HRMS ultimately looks at employees from a slightly different angle.

HCM views employees as an asset that warrants investment and management as an asset. Therefore HCM systems focus on employee engagement strategies, how employees are trained and onboarded and a range of means to achieve ultimate asset growth.

HRMS in its simplest terms manages the costs involved in having employees. It is an extensive system where human resources can collate and access information on the workforce and manage them more effectively. Things like payroll, leave management, overtime, absence leave tracking and employees’ personal details are maintained in the system. A good HRMS can perform analytics across the HR spectrum, and can also include human capital management elements, like access to employee engagement modules, staff training and benefits.


HCM helps employers manage employees and their needs similar to how HRMSs do, but there are differences between the two. HCM software is an HRMS that focuses on strategic aspects of HR in a way that improves employee productivity with incentives and engagement methods. This includes organisational development plans, change management, employee engagement, and leadership development.


HRMS typically focuses on organising and facilitating daily HR tasks. In other words, HRMS focuses on the operational aspects of HR.

HCM vs HRMS systems

The two types of software systems have similar and different key features, with HCMs containing all the modules of an HRMS plus additional one that deal with the entire employee life cycle, from recruitment, talent acquisition and onboarding, through to training, employee engagement, benefit management, employee wellbeing, offboarding and much more.        

Good HR software offer HCM solutions tailored to your organisation’s specific needs. It offers advanced analytics and helps employers to gain insights into the best ways to recruit and retain talented employees. It also offers HR administration and gives employees access to their own data and tools for things like requesting holiday on a mobile app or connecting with a mentor in the company, which has been proven to improve employee engagement.

Similarly, excellent HRMS systems help organisations to build and manage HR processes and policies more efficiently, also according to the business needs, but it doesn’t necessarily offer the unlocking of the investment potential of employees.

The benefits of HCM software include:

  • Improving employee engagement through tools like employee recognition schemes, benefit programs and employee surveys.
  • Tracking employee productivity, analysing productivity across the business and by department, role and for specific individuals.
  • Development and training solutions for employee growth and development.

HRMSs offer solutions for the administrative and operational side of HR. It easily enables payroll management, leave and absent leave management, scheduling key HR events, like appraisals notifications, and so on.

Understanding which HR system is best for you

Some might assume that the all-encompassing HCM solution is perfect, while HRMS is perhaps second best.

However, companies have specific needs at specific points of their lifecycles. These are important considerations for when you’re investigating HR software solutions

Company size

If you are a large global company that operates in diverse jurisdictions with different compliance and international payroll needs, an HCM solution would probably benefit your organisation, covering HR functions across the entire employee life cycle.

If your company is still small, but growing, or you’re transitioning to a medium-sized operation, an HRMS is perfect in managing the day-to-day HR activities. You can start adding certain targeted HCM modules, but a full HCM system might be an overkill at this point.

How many employees

If you have a large employee base, but they are mostly contractors or seasonal workers, an HRMS can easily simplify HR management in your organisation, especially with complex payrolls as are often the case with contractors and seasonal workers.

If your organisation is small, but the company’s product or service is the competence of its staff, for example in specialist engineering consulting companies, you will benefit hugely if you retain the cream of the crop in your business. Employee engagement is supremely important, but you don’t necessarily have the time to invest in HR strategy. Then an HMC would be invaluable.

Equally, more employees could mean that you might have a harder time keeping them focused. So, an HCM would be beneficial.

If you have only a handful of employees, an HRMS might be sufficient because you can handle the employee engagement and incentives more easily face to face.


If your incentive scheme is straightforward and generic, you don’t need the HCM capability of tailoring incentives. Equally, if your inventive scheme is qualified and graded, it becomes more complex and harder to manage. Then an HCM might be a better solution.

Performance reviews

HCMs offer great opportunities for interactive and engaging performance reviews. Here you can choose between manager and employee reviews, peer reviews, peer recognition awards, and so much more. HCMs are flexible enough to build performance reviews exactly according to your organisation’s needs.

Staff turnover

Large staff turnover is often indicative of poor employee engagement. You can make employee engagement more focused, specific and oh-so easy with an HCM.


Type of employees

Different types of employees have different HR management needs.


If you have a contingent of employees who work remotely some or all of the time, your organisation can benefit from having an HCM. Employees working offsite can potentially disengage with their organisation, work and colleagues if they become too isolated. A good HCM can include modules to specifically cater for improved communication, wellbeing monitoring, and other support mechanisms to get the best from your workforce.


If you have a mostly casual workforce, for example seasonal or contract workers, your HR system requirements are having strong administrative and payroll capability, tracking who works when and for how long, and what their pay is for specific tasks. You must ensure compliance according to the worker category, and often workers could have different payment intervals.

A rock-solid HRMS can easily handle the workload and variables, but you probably won’t invest in an extensive HCM.


If you have mainly permanent employees, good HR administration is also important. Some work half days, others might work on a job-share basis, while others might just be plain, traditional fulltime employees. A good HRMS can handle the different configurations, and if your employee base is medium to large, considering tailored HCM modules can only be beneficial.


Whatever your organisation’s situation, ensure usability as a primary need, and ensure your solutions can grow or contract as your business needs require them to.


gulfHR has region-specific HR software solutions that are flexible and customisable


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