08 Sep HRIS vs. HRMS vs. HCM – Understanding The Difference

There’s no denying that HR management software has evolved into an integral part of business operations, streamlining HR work from employee engagement and productivity all the way to statutory compliance and beyond.

Yet, with that comes the variants of human resource software and its terminology. So often, we hear a lot about HRMS, HRIS, and HCM, and everyone very frequently tosses the terms around. But what do they really mean? Does anyone know, or is it just a guessing game? Is there a difference between them?

This article will attempt to clear out that blurry line and highlight the differences and similarities of HRIS vs. HRMS vs. HCM.

Back to Basics

First things first, since these buzzwords are often used interchangeably, let’s begin by at least defining the acronyms and what they stand for. Here are what the terms refer to:

• HRIS: Human Resource Information System
• HRMS: Human Resource Management System
• HCM: Human Capital Management

As you see, even their full terms aren’t precisely definitive of what each of them entails. Yet, the known fact is that they share a common purpose: providing a comprehensive solution for handling workforce management needs. And how do they do that? Using software – namely, through a blend of cloud computing, databases, and other elements.

Are HRIS, HRMS, and HCM the Same?

The answer to this lingering question is far from straightforward: it depends on how you look at it.

If we’re talking at a fundamental level, we could say that they’re one and the same since they seek to accomplish the same goal. But if we delve deeper into the particular functionalities of each, subtle differences start to arise to distinguish the three from each other.

A good description I came across to put this into perspective once said, “Think of them like three different restaurants. Each one serves food, and while there’s an overlap, their menus aren’t identical.”

That’s one thing. Then, the other is that it also goes back to each vendor’s understanding of the terms. So, for instance, you can acquire an HCM software (and it’s marketed as one) only to find out that it’s actually an HRIS, for example.

Since there’s no consensus yet on the specific definitions of each, it’s best not to assume that a software that’s marketed as being a particular one will automatically have what you’re looking for. Instead, always take the time to do your own research and delve deeper into particular software’s specific features and capabilities to ensure that you’re getting what you’re looking for.

In a nutshell, today, you can’t rely on the terms to mean what they’re said to be because the differences aren’t pronounced to begin with. While products were much more specific in focus in the past and served only several purposes, that’s no longer the case today.

HRIS vs. HRMS vs. HCM: How They Overlap

In very simple terms, all three systems have the same vision: allowing business owners to manage their employees better and more efficiently. With that being so, on a more detailed level, here are some of the functions they serve:

• Identifying workforce needs
• Maintaining employee files, including personal information and relevant data
• Maintaining contact information for job applicants and potential hires
• Tracking hours worked by employees
• Providing employee history reports and recording overtime and bonuses
• Administering benefits
• Automating work progress and performance reviews to provide reports for career goals

Now, Let’s Discuss Differences

That was the general umbrella of what the three solutions offer and what you should expect to get regardless of the one you choose. Let’s now move on to the very specifics of each HR management software on its own and explore it on a closer level to pinpoint some differences.

HRIS

At its core, HRIS works to manage people (employees), policies, and procedures. With that being the case, it basically supports anything and everything people-related. To put things into perspective, here’s what an HRIS typically caters to:

• Recruitment: With the support of applicant tracking systems (ATS), HRIS software manages to post job descriptions and coordinate interviews and filter out resumes depending on particular criteria and keep all applicant resumes on file.
• Personnel Tracking: HRIS software keeps a record of contact information and employment information of all employees.
• Training and Development: HRIS systems can identify employee skill gaps based on performance evaluations and determine suitable employees for particular learning or development opportunities.
• Absence Management: Right through an HRIS, you can manage employee absences and state reasons for them – whether they’re sick leaves, maternity leaves, military leaves, annual leaves, or more.
• Compensation Management and Payroll: Closely related to the previous point, an HRIS is capable of handling salaries, overtime pays, bonus programs, paid time off, and any other form of funding related to the business and its employees.
• Benefits Administration: Through an HRIS, employees can easily enroll in benefits like health insurance, track their benefits, opt-out if needed, and more.
• Self-Service Portal: With certain access settings, you can grant employees access to a self-service portal where they can update their contact information, stay up to date with company policies, request HR letters, and beyond.

HCM

Next in line is HCM, and this is where the line gets blurry. HCM and HRMS (which I’ll get to shortly) are too similar in nature, often leading them to be used interchangeably. The main debate is because both are super extensive solutions.

At the moment, let’s just say that HCM is more extensive than HRIS. It offers all that an HRIS does and incorporates talent management capabilities (beyond those of an HRIS). We’re talking compensation planning, succession planning, career planning, and even learning and development.

Here’s a list of its most common features:

• The core features of HRIS software
• Onboarding: HCM supports new hires in settling in, getting acquainted with business policies and procedures, filling in paperwork for benefits, and streamlines the process overall.
• HR Services: Through an HCM, your business can have its own knowledge base that can be made available to all employees, including documentation and data along with policies and procedures.
• Position Control: With an HCM, you’ll be able to review job descriptions, seniority levels, revisit responsibilities, and ensure that every employee has the proper duties and responsibilities.
• Analytics and Reporting: HCM software provides key analytics relating to KPIs you set depending on your definition of success and what’s vital to your business.
• Employee Performance: From performance evaluations to goal management and learning and development support, HCM can significantly help with assessing productivity.

HRMS

When it comes to HRMS, the easiest way to put it would be to say that it’s the most comprehensive type of HR software. When you choose to go for an HRMS, you’re selecting the features of both an HRIS and HCM combined.

With that being said, here’s what to expect:

• The core features of HRIS and HCM software
• Time and Labor Management (TLM): HRMS software can track and manage employee schedules and goes further to monitor project times and deliverables to ensure productivity, efficiency, and profitability.
• Payroll Processing: HRMS software doesn’t only keep track of employee payroll information but also automatically calculates salaries, makes necessary deductions, sends direct deposits, and more.

How to Go About Choosing the Right Solution for Your Business

As evident by now, the process of putting your finger on the distinguishing features between HRIS, HRMS, and HCM isn’t straightforward. Until the industry reaches a consensus on definitive definitions for each software, we’ll have to work with what we have.

If I were to give you a piece of advice to help you choose the right solution, it would be to first consider your needs. Don’t go for the most advanced software if you won’t really leverage all that it has to offer.

Then, take your time to do your research in an effort to determine the specific product tailored to those needs. As I mentioned earlier, the vital part is to understand the vendor’s definition of each software so that you can pick a solution that actually meets your expectations. Remember that everyone has their own definition of HRIS, HRMS, and HCM.

Last but not least, ask questions when you need to during the selection process to save yourself the effort and time of opting for software that isn’t right for you.

Final Thoughts

When everything’s said and done, it’s okay to be fuzzy and confused with all the products available on the market today, along with the confusion surrounding the terminology differences.

Having said that, an excellent starting point is to take the information I’ve just discussed into consideration when you’re investing in a new system. And, of course, figuring out your requirements should empower you to seal the deal easily since you’ll be aware of what you need to manage your operations more efficiently.