A step-by-step guide to select the right HR Management System

Anna Sauter-Getschmann & Silvia Tosatto

Selecting the right HRMS (Human Resource Management System) for your business is a crucial decision that can have a long-term effect on your organization. With the right HRMS, you can streamline processes, free up HR resources for the things that matter, and guarantee compliance with legal regulations. Nevertheless, with so many HRMS solutions available, it can be hard to decide which one is the best fit for your company. The challenges of the selection and implementation process might even keep some businesses from doing it at all. Considering the benefits that the software can bring, it is a pity to miss such an opportunity because of the initial effort it requires. 

We´ve been supporting a couple of clients with the task of selecting an HRMS and the more often we do it, the easier and faster the process gets. That is why we decided to gather our best practices and tips in this article and provide you with a step-by-step guide to make the right decision for your company. 

For those of you who are just starting to get familiar with the landscape of HR softwares, we begin with …

👉…  a short introduction to the HRMS and its benefits

In a nutshell, HRMS is a software solution that helps organizations manage their human resources processes. The core functions usually include:

  • Attendance / Absence Tracking
  • Storing employee data (incl. employee self-service)
  • Managing payroll information
  • Custom Reports & Data Analysis

Many tools also include: 

  • Onboarding / Offboarding Automation
  • Recruitment / Applicant Tracking System 
  • Performance Management & Goal-Tracking
    … and many other features

The list can differ depending on the provider but the main idea behind the HRMS is to streamline and automate your HR processes.  

That's why the use of the HRMS should result in: 

✔️Improved Efficiency: HRMS helps to reduce the time spent on manual tasks and increases the efficiency of the HR department, enabling you to focus your efforts on initiatives that matter.

✔️Accurate Data: HRMS store employee data in one place, which makes it easier to access and update. This ensures that the data is accurate and up-to-date.

✔️Cost Savings: HRMS can help to reduce costs by automating manual processes and eliminating paper-based systems.

✔️Improved Employee Access to data: HRMS can help to improve employee engagement by allowing your employees to manage their own information as well as finding the most relevant information on holiday absences, orgcharts etc.

✔️Improved Compliance: HRMS can help to ensure compliance with regulations and laws, for example when it comes to holiday tracking, sick notes or GDPR-compliant storage of sensitive employee data.

✔️Improved Decision Making: HRMS can provide HR professionals and managers with access to real-time data and analytics, which can help them make better strategic decisions.

Although the list of benefits is long and from our point of view convincing, you might ask…

🤔….whether every company should have an HRMS? 

The degree to which an HRMS is indispensable depends on the size and complexity of the business. Mid-sized & large companies shouldn´t hesitate to implement a system to help manage their HR processes. If it comes to smaller companies it is not a must (they can manage their HR processes manually) but can be helpful and doesn't have to mean a huge investment. HRMS software is not one-size-fits-all: there are different solutions on the market that can accommodate your company's needs & budget no matter if you are a large corporation or a small team. We are a company of three and still decided to implement an HRMS with some basic functions (Humaans).

It is important to NOT establish what the best solution on the market is but rather...

💡….what is the best solution for YOUR company? 

Based on our experience the following steps can help you answer this question: 

  1. Identify your needs & budget: Before selecting an HRMS, it is important to establish what are the most important processes & tasks that you would like to automate. Should the focus lay on payroll and benefits management? Or is performance management equally relevant? Maybe you already have an ATS, so you don't need a recruiting module as part of HRMS. You need to make sure that you know what you are looking for before you start the search phase. Check our list of core functions for an initial reference ⤴️. It is important to know that many HRMS providers offer the core functions as separate modules so you don't need to book them all. 

      💵 You should also think about your budget - the cost of software can vary according to your needs and the number of employees so make sure to know yours.

  1. Decide on the “must-have” and “nice-to-have” features: Identifying the needs (step 1) goes hand-in-hand with creating a list of more detailed criteria that you are going to focus on during your research. We recommend preparing a table overview (e.g. excel or google sheet) with all the “must” and “nice-to-have” features, such as for example: 
  • payroll accounting or payroll integration 
  • attendance tracking
  • time tracking
  • digital personnel files
  • inventory tracking for employees 
  • travel expenses management
  • overview of birthdays, anniversaries, etc.
  • Employee Self-Service 
  • E-Signature 
  • Templates & customizable workflows 
  • Analytics & Reporting

       Also, don´t forget to include other important aspects:  

  • Compliance with data protection regulations
  • Integrations with other tools you use (e.g. payroll, calendar tools, communication tools...)
  • Usability

       → With the list ready, you can enter the research phase.

  1. Create a longlist and select your favorites: You don't need to do in-depth research at this point but try to focus on the “must-have” features and exclude all solutions that don't have them. You can also check out customers' reviews on, Capterra or OMR Reviews to narrow down your choices.

  2. Book demo calls & trials: after choosing softwares that fulfill your main criteria, you can make a deep dive. Demo calls and free trials can help you decide whether the tool meets your expectation in terms of usability and all the nitty-gritty details. It is also a time to run a thorough check on the data protection policy of the providers to make sure they are compliant with the regulations applicable to your location. 
  3. Make a decision: take your time and make sure that all your questions are answered before you choose the right tool. Many providers are flexible in their sales process which means that you might be able to run extra trials or include more team members in the test phase.

After running this process for a couple of companies, we picked a couple of HRMS you could take a closer look at: 

Good luck with your research! 

👉 Do you want to read more content like this?
Well, then stay up to date by subscribing to our newsletter and receive input around people strategy and organizational effectiveness. 

February 5, 2023