How to choose the right HR software for your small business

As your business grows you’ll start facing more and more staff and admin issues – from simple things like holiday requests to more complicated tasks like onboarding new recruits and managing your employee benefits programme.

So how do you keep up with all the people-oriented spreadsheets while also running your business and managing your staff? For many companies – perhaps especially smaller businesses with no dedicated HR function – the answer could be HR software.

And thanks to today’s simple, powerful cloud-based options you no longer need a massive budget to buy the software or a small IT team to get it working!

Here’s our guide to choosing the right HR software for your growing business.

What is HR software?

In a nutshell, it’s software designed to combine the various systems and processes companies use to manage their people. This can include:

  • storing employee data
  • tracking holidays and absences
  • equipment inventory and allocation
  • employee benefits admin
  • managing payroll
  • organising the recruitment process

It’s by no means a new concept, with the trend for automating processes like payroll starting in the 1970s. But today’s HR software goes well beyond just process automation and aims to help improve businesses’ overall efficiency and performance as well as helping managers save time, enabling them to focus on their important day to day business needs.

The accessibility of the software has also progressed rapidly. Today’s HR solutions have shifted away from traditional on-premises software towards cloud-based solutions, which are cheaper and simpler to implement, making them more attractive to smaller businesses and remote teams. Many provide a freemium model with the option of paid-for upgrades as you get more staff or need more features.

In recent years, more sophisticated systems often used in larger businesses, have started to incorporate gamification technology, motivating employees by awarding them with badges or bonuses.

Problems you can solve with HR software

HR software aims to make life simpler for small business owners and busy HR departments alike. Here are a few problems that are common to growing businesses and the solution the HR tool can offer:

  • It currently takes forever to update employee records
    A simple name or address change doesn’t have to be a headache (and involve accessing five different spreadsheets). All your employee data is stored in an online hub and most cloud-based self-serve HR systems let employees update details like name, address, etc quickly and easily themselves.
  • You’re always being interrupted by people asking how many days holiday they have left
    Holiday tracking is a key feature of most HR software, making it easy for staff to see when they are off and how much leave they have left, as well as making it easy for you to manage approvals and plan for absences.
  • New starters spend their first few days filling in endless forms
    With an automated onboarding system, new employees will get all the form filling out of the way before they actually start, leaving their first days free to meet their colleagues and really get to grips with their new role, without constant interruptions.
  • You’re completely overwhelmed by applications whenever you recruit for a new role
    Application tracking systems can help businesses of all sizes manage their recruitment process from start to finish. You can track candidates through from application to offer, store all their information securely, and archive the details of unsuccessful but suitable candidates for future use.
  • You struggle to keep track of your equipment
    An equipment inventory is a simple way to record the allocation of office equipment such as laptops and phones. When items need to be renewed, or employees leave, you can easily see what needs to be re-allocated or returned.
  • Employee engagement levels are consistently low
    The simple act of investing in HR software can show employees you care about their health and well-being and want their working life to run smoothly. The software can also help manage your employee benefits programme, ensuring staff know what they are entitled to, and help monitor which benefits are most popular which can help feed into your wider HR strategy.

HR software features and why they are useful

Exactly what features are included in the software you buy will depend on the provider and how much you want to spend (as well as what features are right for your business at the time of purchase).

A lot of newer providers offer a free trial period where you can sample all the features to determine which one’s work for you. Others offer a freemium version that provides a core level of features, with the option to pay for additional features as your business needs change.

Here are some of the most common features – split into what a smaller business may find useful versus what a growing company may need – and what each can help you achieve:

For smaller companies

  • Managing annual leave – employees can request holiday within a few clicks; managers have full visibility of their team’s holiday, so they can approve it (or not!), be alerted to any leave clashes, holiday disputes, or resourcing issues.
  • Managing employee records – keep all important staff information in one secure place. Records are easy to update and in some cases, staff can even do it themselves taking the admin burden off you.
  • Employee benefits programmes – keep staff easily informed of their benefits and see which of your offerings is proving the most popular – an important thing to monitor as your workforce demographic changes.
  • Absence management – track and monitor sick days and store sick notes against an employee’s records. Some software will calculate absence spells and use it to create a Bradford Factor Score, predicting how much disruption absences are likely to cause to your business.
  • Keep on top of calendars – never miss important dates by syncing all your external calendars, e.g. Google Calendar and Outlook, and updating in real time.

For growing companies

  • Auto-enrolment – manage the process from start to finish and benefit from employee monitoring post-staging date.
  • On-boarding new staff – new hire forms, first-day checklists and verification requirements are all made easy. Plus, some software helps immerse new employees in the company culture from the off with messages, videos and other content aimed specifically at them.
  • Managing payroll – manage all pay groups across your business and rest assured that everything is fully regulation compliant.
  • Expenses payments – staff can easily submit their requests and get reimbursed automatically.
  • Recruitment – source, select and hire the very best staff with minimal admin headaches. Filter applicants and keep people updated throughout the process. Once you’ve made a hire, all their details should be converted to an employee record with a simple click. A useful tool to help your human resource planning run smoothly.

Which software features does your business need?

It’s easy to be wowed by a long list of impressive-sounding features in a product description, but does your business actually need all of them?

When it comes to choosing HR software, your business type and size will dictate which provider and package are most suitable. For example, smaller companies probably won’t need software that collects and dissects employee data as part of the onboarding process, or to help with company culture as you probably know the majority of people in the business pretty well.

The beauty with many of the newer offerings is that they can grow with your company, perhaps starting as a way to help manage people processes if you don’t have dedicated HR staff, and then as a way to complement your first HR hire freeing-up their time to work on the HR strategy for your growing company.

10 things to consider before you buy HR software

Investing in HR software can be a big commitment. While the actual cost may no longer break the bank, other considerations such as rolling it out to staff and selecting the features that will benefit your business are important. Before you take the plunge, it’s worth asking yourself a few questions:

  1. Is there a freemium or freeware option?
    If you like to try before you buy, then see if there’s a free option for the software you want to sample. Most newer players have a freemium version you can use to get you started and then upgrade as and when you need more features.
  2. Is there a free trial period?
    Similar to point 1, a free trial period can help you determine whether the software works for your business, and which features you actually need and use before you make an investment.
  3. What are the cost implications?
    HR software traditionally came with a number of upfront costs, including the licence fee and there were also ongoing costs such as maintenance, upgrades and admin to consider. However, with newer cloud-based models these have largely been eliminated in favour of monthly subscription payments. It’s worth considering how you will be charged – is it per employee-per-month or per-user-per-month, where you only pay for administrative staff? There are some options which just require a one-time payment, but these tend to be aimed at larger companies. There are also the hidden costs of managerial time and effort, including potential changes to HR policies and procedures, and change management as employees adapt to the new way of working to think about.
  4. Is it cloud-based?
    Cloud-based HR software is usually cheaper as it doesn’t require as much up-front investment and can usually be provided on a pay-as-you-go basis. It’s also ideal for remote workers and doesn’t require much internal IT support to get you going – perfect for smaller businesses. The majority of programmes are now cloud-based, but it’s worth considering if they are ‘cloud native’ or if they are an older on-premises system that has been moved to the cloud as the latter sometimes lack some of the advantages and innovative features of newer offerings.
  5. How easy is it to set up?
    Cloud-based HR software couldn’t be easier to set up. More traditional, complex systems used to require professional help to get you started and install various software and hardware, but with the cloud, everything is hosted and managed externally. You simply have to log in and enter your company information.
  6. How intuitive is it to use?
    While most of the newer kids on the block have very intuitive interfaces, it’s worth having a play to see how you get on. A product may have all the features you need, but if it’s not user-friendly and your staff struggle to use it, it becomes useless.
  7. Will it work on all devices?
    Today’s employees aren’t always sat at a desktop computer in the office, so it’s worth checking that software can be used across whichever devices your staff will be using, whether it’s laptops, tablets or smartphones. Many of the newer cloud-based systems, like Hibob, have a specific mobile version.
  8. Does it include employee self-service?
    This means staff can change their own personal information, view their annual leave balance and view payroll details – leaving several fewer jobs for you to do!
  9. What modules does it include?
    Get a comprehensive list of everything the software includes and what its functions are, so you can check if they match your needs. It’s also worth thinking about what your needs will be as your business grows and your need for HR solutions increases. You may not need recruitment features now, but what about in the next couple of years? On most systems it’s easy to upgrade as and when you need to, as long as your chosen system has the modules you require.
  10. Will it integrate with other software or apps if you need it to?
    If you already have software that you’d like to continue using, it’s important to check any new additions will integrate seamlessly with it. Many newer systems like BreatheHR come with an API integration tool so you can consolidate all your employee data without dropping the systems you already use.

HR software in the future

While HR software has already come a long way, there are several exciting developments that could further change the face of the technology and how it is used.

Cognitive automation technology

Employee-focused tasks could potentially be completely transformed as cognitive automation becomes a key part of HR software. Employees could update records in seconds using voice recognition and there’s also less room for error.

Slightly more futuristic is the move towards virtual HR assistants – think Amazon’s Alexa or IBM’s Watson – who can answer employees’ questions about benefits, pensions etc. These intelligent algorithms could eventually be used to automate aspects of the recruitment process, for example communicating with candidates.

Gamification technology

With employee motivation continuing to be a priority for businesses, it seems natural that HR apps will take further steps towards being used as an engagement tool. Using gamification tech allows companies to automatically reward employees for hitting certain targets, participating in wellness programmes or completing training. eBay and Pfizer are just two of the companies already using it.

Taking communication to the next level

For larger companies, intranets tend to be the hub of internal communication, but what if they were replaced with something which could push out comms direct to people? This is looking increasingly likely as employee apps are developed as a way to keep all employee information and communications in one easily accessible place.

Communicating your HR software

Once you’ve chosen which HR software is best for your company, the next step is to make sure the decision is effectively communicated to staff. After all, if they don’t know about it they won’t use it and will still be coming to you to ask how many days annual leave they have left.

How you communicate your new software will depend on many things including your company size and the demographic and location of your employees. Many of the newer HR solutions have been built around being simple to use with a friendly and intuitive user interface.

While it’s likely that several employees will be only too happy to ‘play’ with an app that ultimately makes their working life easier, for others a bit more hand holding may be necessary.

As well as a full demo, depending on the make-up of your workforce, you may want to consider FAQs and instructions staff can refer to as they familiarise themselves with the new software and processes. And don’t forget to update any HR policies that may be affected by the new processes.

To help ensure that your staff use the new software, it’s also important that you:

1 – Communicate the benefits effectively

You may be convinced of all the ways your new HR software is going to transform your company for the better, but are your employees? It’s well worth taking some time to make sure they understand not just how the software will benefit the business, but them personally. For example, emailing a holiday request may seem quicker than inputting the dates into a system, but the latter also means they can see whether anybody else is off during their chosen dates and see their outstanding holiday entitlement – something which can be difficult to calculate.

2 – Reassure staff their data is safe

The privacy of their personal information is important to employees and it’s not unusual for people to be sceptical when a new system is brought in. If you are asking your staff to input everything from their home address to their salary in an HR system, make sure you explain who will have access to their details and how they are protected.

3 – Get buy-in from managers

Lack of management buy-in is usually the number one culprit behind staff not using new systems. Managers need to make sure they are using the software themselves or risk staff reverting back to old, familiar processes, like sending holiday request emails.

If you’re the only managerial figure in your company, make sure you are visibly using the software (and shouting about its benefits!). Or perhaps ask an influential staff member to act as a ‘champion’ for the new system and help people out if they have any quick queries.

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