HCM VS HRMS

November 2021

The automation of human resources management has been a game-changer businesses big and small. Although HR remains a people-driven discipline, so many of the functions that fall under its remit are repetitious or subject to human error. The automation process of, for example, employee leave management, or payroll clearly offers immense time savings and overall utilisation of company resources.

However, in the process, we have developed pedantic, subtle differences between management systems pertaining to human capital. In this post, we’re exploring these subtleties.

Defining HCM and HRMS systems

A Human Resources Management System (HRMS) commonly offers a suite of software data management processes in the HR realm, like benefits, workforce management, payroll, and other core HR functions. The system can also produce useful metrics to optimise HR processes, detect potential workforce problems, and more. Employees can access training on the system, and it manages payroll and all things associated with it.

HR can manage recruitment, onboarding, talent management, employee engagement and so on with an HRMS. The system is managed onsite.

The phrase Human Capital Management (HCM) is often used interchangeably with HRMS, but more commonly HCM refers to a broader, more strategic use of HR management software that is often Cloud-based, and that is meant to enhance the employee experience, as opposed to merely assist HR in managing the day-to-day practicalities of a workforce.

HCM

HCM is a broader term that HRMS fits into. It includes all the functions of an HRMS, but it considers a workforce also as an asset that should be strategically managed and invested in. HCM solutions can often include digital assistants, AI and collaboration tools to connect employees in a whole new way, and it often include modules on succession planning, leadership development, and so on.

 

HRMS

HRMS is HR software is a suite of tools that maximise the HR management function. In the UAE, using an HRMS specifically designed for the region’s idiosyncrasies will undoubtedly benefit your business when payroll and all it pertains to, remains automatically up to date with rules and regulations.

Comparisons of HCM vs HRMS systems

There are subtle differences between HCM and HRMS.

Key features

Both HCM and HRMS have merit for businesses. However, we look at key feature differences between the two and how a company can use it to satisfy its HR management requirements.

HCM

  • HR software in the Cloud allows for up- or downscale according to how the business needs change. So you can be flexible in adding or reducing functionality according to cost and financial considerations, or when you’re expanding or downsizing.
  • Enhanced data security. The Cloud has enhanced security controls.
  • Ease of innovation. With HCM a business can quickly develop and deploy upgrades, and updates happen automatically, without any human intervention required.
  • Tailored control over operational and capital expenditure. In the Cloud, you don’t have to invest in infrastructure or an IT department. You only pay for what you use.
  • Mobility and flexibility for improved usability. Employees can access cloud-based systems from any device, from anywhere. Staff can now adopt hybrid working patterns without the need for offsite system integration. Because the system is so adaptable, the user experience has also just upgraded.
  • HCM systems are easily configurable by the end user without the assistance of an engineer or IT specialist.
  • Offer modules beyond the normal scope of HR management. An HCM system invests in employees’ development to enhance skills and experiences in the company.

HRMS

HRMS offer all the features normal management of resources require, including the features listed above in HCM, plus:

  • Inhouse data management. Build and manage your own secure database.
  • HR software, and specifically HR software in the UAE, easily updates policies and compliance-related matters.
  • Easy workflow reporting. HRMS can create a structure report for summarising work tracks. You can measure and track specific metrics.
  • Employee self-service. The best HR software have self-service features where employees have a personalised experience within the organisation.
  • Increased employee engagement.
  • Payroll management.
  • Time and leave management.

 

Key Differences

Some differences to consider before making up your mind on which system to go with, include:

HCM

HRMS

·       More often Cloud-based.

·       Can be offered in House or Cloud-based

·       Good for people management and development on strategic level, like leadership development, driving employee engagement to understand what work environment suits employees best.

·       Good for managing specific HR activities by using modules to define HR department activities, like payroll, time management, benefit administration, etc.

·       Connect the workforce and integrate them wherever they are.

·       More based on core HR needs, and automating and managing those.

·       Rather than seeking patterns and solutions, the system is focused on the wellbeing and development of the employee.

·       Key metrics and reporting functions to detect patterns to manage the resource optimally.

Understanding which HR system is best for you

Ask specific questions to determine the type of system that would best suit your company.

Size of company

Small- and medium-sized companies function well with an HRMS to manage the crucial HR functions. HCMs are often employed on a larger strategic scale, when a business starts planning for leadership, talent development and larger overarching investment in the workforce.

Number of employees

When you have more employees, and especially when they are scattered across different branches or business units, an HCM system becomes crucial to ensure better integration between units and the company’s employees. The top advantage of a HCM system is that it is scalable.

Incentives

The offering and management of incentives for employees is more comprehensive on HCM software systems. A company is flexible within the system and can chop and change the offering according to the ebb and flow of employees’ needs.

Performance reviews

An HRMS offers some performance tracking capability. This is especially useful in a smaller organisation with fewer layers, while HCM software offers solutions for more complex company structures.

Turnover of staff

HR software comprises useful metrics of a company’s workforce. It can easily track the turnover rate and find patterns to identify causes. HCM systems analyse turnover on a more granular level and allow for the measurement of other people factors to detect correlations with staff leaving.

Type of employees

HR software should have the capacity to manage different employee classes according to their specific requirements.

Remote

When employees work remotely, having access to and a connection with the rest of the organisation becomes critical. Keeping policy documents, training and other information up to date and accessible no matter where they are will ensure a more cohesive workforce that is more likely to stay on board for the long haul. HRMS are ideal for this, and HCMs further enhance the experience for employees working remotely.

A company would invest beyond an HRMS when most of its workforce work remote, or when you have various branches or units.

Casual

If you predominantly employ casual labour, you are likely to have a comprehensive HRMS to manage the complexities of a fluid workforce, rather than an HCM.

Permanent

When your workforce is predominantly permanent, an HRMS becomes more than just a payroll and time management tool. You require onboarding, recruitment management, training, and more. If your business is larger or expanding, succession management becomes important, as well as leadership training and investing in employees you want to have around for the long term. Your business would need an HCM system.

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