An HRMS, or Human Resource Management System, is a set of software applications used to manage human resources and related processes throughout an employee’s lifecycle. An HRMS allows a company to fully understand its workforce while complying with changes in tax laws and employment regulations.
Human resources leaders and employees are the primary users as they carry out day-to-day human resources activities and are responsible for compliance and performance reporting. However, human resources are not the only department to benefit from this. Companies can authorize self-employed managers and employees for common tasks, an important asset for younger employees. Managers can use an HRMS to generate data on workforce trends and their business implications.
Since personnel costs are one of a company’s biggest expenses, the integration of HRMS with the accounting system is invaluable for teams. Leading vendors go beyond basic accounting to help a company extract more financial information from HR data.
HRIS vs HRMS
You may hear the term “HRIS”, an acronym for Human Resources Information System, used interchangeably with HRMS. Its roots go back to the 1980s when IT departments were commonly known as Management Information Systems (MIS) departments. When information and HR processes were automated, a derivative of MIS – HRIS was born.
A central function of HRIS was the electronic record and management of personnel files. Therefore, HRIS is the acronym used by many HR professionals to describe when HR records, processes and reports become electronic through the use of the software.
As the technology evolved and the personnel file tracking system expanded, HRIS became known as HRMS. Today, the terms are still used interchangeably to describe software systems that capture employee information and automate HR processes in a company.