HR technology (human resources tech)

What is HR technology (human resources tech)?

HR technology (human resources technology) is an umbrella term for hardware and software used to automate the human resources function in organizations. HR technology, often referred to as HR tech, optimizes core HR functions with the goal of helping HR professionals streamline time-consuming tasks. Core technology systems include employee payroll and compensation, talent acquisition and management, workforce analytics, performance management and benefits administration.

HR tech has developed rapidly in recent years, with large employers around the world widely adopting core HR technology systems from enterprise software companies such as Oracle, SAP and Workday, as well as specialized HR tech vendors. Many of these employers are entering a second generation of HR technology by migrating from their on-premises systems to cloud platforms, including software as a service (SaaS). Small and midsize businesses (SMBs) are also digitizing their human resource functions, commonly turning to SaaS platforms or cloud-based HR technology outsourcing vendors.

Why is HR technology important?

HR technology helps HR professionals manage tasks throughout the employee lifecycle. Its tools aid several processes, including reducing the amount of administrative work. Because of the automation features these tools provide, HR professionals have more time to focus on other functions, such as improving recruitment practices or increasing employee engagement and retention.

For employees, HR technology reduces the time they spend waiting for HR to make changes, updates or to respond to requests.

What is human capital management?

Human capital management (HCM) refers to a set of practices and tools used for recruiting, managing and developing employees. HCM views employees as valuable business assets to be managed objectively and invested in.

In its most basic form, HCM is usually automated with integrated software that pulls together employee records in core HR and talent management systems. HCM systems can include discrete subsystems for recruitment, performance, learning and compensation management, succession planning and compliance.

Many HR technology vendors specialize in dedicated systems for specific aspects of HCM, such as talent acquisition. Examples include online job boards or marketplaces in which prospective employees and employers find each other.

HCM vs. HRIS and HRMS

Core HR technology systems have long been marketed under the labels human resources information system (HRIS) and human resource management system (HRMS), but HCM has begun to displace both terms in recent years.

Although there are few differentiators among the three labels, HRIS tends to provide technology for storing employee data and automating core HR functions, while HRMS vendors add HCM features, including talent management.

HCM is both a set of HR processes and the name of the category of software. HRMS, in contrast, is a set of integrated software applications and other technologies used to manage HR processes.

HRMS is nearly synonymous with the less commonly used HRIS. HRIS, however, can mean just the core administrative system. Another way to look at it is that HRIS is the core administrative system, while HCM also covers employee-centric processes and HRMS acts as the most generalized term.

Examples of how HR technology is used

The following highlights different core functions HR technology provides:

Payroll. While some HR tech vendors specialize in payroll, many HCM systems also incorporate the function of paying and tracking employees' wages and salaries and withholding taxes and other deductions.

Cloud-based HR tech outsourcing vendors provide payroll services as a key component of a suite of digital HR offerings or as a standalone service, particularly for SMBs.

A significant challenge facing HR technology payroll providers is administering wages and salaries and withholding tax across multiple U.S. jurisdictions, such as states and counties, as well as in different countries with unique governmental requirements.

Some employers use time and attendance software to track the hours that employees spend on the job and keep records of wages and salaries paid.

Compensation management is also related to payroll but is a class of HR software designed to determine the best pay rates for attracting and retaining employees and rewarding performance. It's a component of most talent management suites.

Travel and expense management. Also related to payroll is travel and expense software, which HR departments use to provide travel services to employees, record related expenses, pay providers and reimburse the employee through a link to the payroll service.

Some organizations use expense report software to provide managers with a clear picture of the organization's spending through automated analytics and reporting.

Mobile expense management tools provide usage and cost information about the mobile devices and services the organization provides to employees, and they're often administered by HR.

Talent management. Talent management is the process of recruiting, developing, evaluating and compensating employees. It's often managed in separate applications or in talent management software suites that consist of integrated modules for recruitment and onboarding, learning and development, performance management, compensation management and succession planning.

HR technology vendors have developed various applications and SaaS platforms to recruit job candidates, evaluate candidates pre-interview and track them during the hiring cycle.

Closely related to talent management is talent acquisition, the strategic process of finding and hiring the right employees to help achieve an organization's goals. As employers have come to view workers as assets, acquiring employees has become increasingly important, particularly in competitive markets such as the technology industry.

Some examples of talent management and acquisition technologies include the following:

• Applicant tracking system (ATS) used to post job openings on a corporate website or job board, screen resumes and generate interview requests to potential candidates by email. Other features of an ATS might include automated resume ranking, prescreening questions and response tracking and multilingual capabilities.
• Candidate relationship management, which lets recruiters identify, build and maintain a pool of qualified candidates whom they can consider for open roles.
• Employee referral software that allows HR to collect recommendations from current employees about potential and current candidates.

• Employee assessment software that helps an organization decide whether a job candidate is suited for an open position. While some assessments gauge a candidate's cultural fit with the company or their personality traits, others focus on skills or critical knowledge.

In addition to purveyors of candidate recruitment and tracking systems, as well as job boards, major technology and social media companies have become important players in the talent acquisition market.

Also associated with talent management technology is succession planning software that helps guide strategic replacement of key executives.

Performance management. In addition to automating other previously manual HR functions, employers have also started to embrace the idea of monitoring employees' job performance continuously instead of with the traditional annual job review.

Both performance management modules within HCM systems and separate performance management platforms often also offer interactive features that enable employee feedback in a process called continuous performance management.

Workforce analytics uses individual performance management and skills data to optimize the allocation and development of human capital and identify the need for new departments and positions.

Employee engagement. One tool used increasingly in performance management is employee engagement HR technology. Employee engagement platforms and apps use a variety of approaches to try to keep workers interested in and enthusiastic about their jobs.

Among these are mobile apps with social media-like posting and commenting capabilities, communications platforms that allow employers to disseminate information and workers to respond, and gamification techniques that seek to motivate employees by making apps entertaining.

Other engagement strategies include sophisticated employee recognition programs, app-based enterprise-wide contest platforms and software to coordinate volunteer civic projects.

Benefits management. As a whole, HR technology for benefits administration began to become digitized more recently than core HCM tasks, not only by putting benefits information online, but also by enabling employees to engage with benefits choices more easily.

As that digital transformation has picked up speed in recent years, benefits have come to mean more than just health and disability insurance, vacation and sick days.

Corporate wellness and well-being have become central to many employers' benefits programs -- online, on-premises and app-based -- as well as using technology in conjunction with human wellness coaches.

Many HR technology vendors sell specialized software systems that incentivize workers to participate in health-oriented wellness programs, and sometimes use wearable tracking devices to measure activity. Some make a distinction between wellness and well-being, and corporate well-being has come to mean a combination of engagement, health-oriented wellness, financial well-being for employees and overall corporate morale.

Another notable trend in HR technology benefits administration is the emergence of vendors that optimize health insurance benefits by applying analytics to claims data and tailoring benefits packages for individual workers.

Learning management software. Corporate training and education programs are migrating to interactive online platforms created by HR technology vendors.

Whether using real-time or asynchronous video or text-based communication, employers use learning management system (LMS) software that can customize training programs, track whether employees have completed their training and assess student performance. An LMS can also enable students to use interactive features, such as threaded discussions, video conferencing and discussion forums.

Current trends in HR technology include the following:

• Artificial intelligence (AI). AI-powered HR technology can increase automation for HR tasks, such as assessing employee satisfaction or automating resume scoring.
• Cloud-based HR systems. These HR technology systems are hosted on cloud servers. Basing HR technology in the cloud enables HR technology services to provide employees with chat functions and self-service portals.
• Self-service technology. Some HR technologies are aimed at the organization's employees to give them easy access to paperwork such as pay stubs or tax forms. This means employees won't have to contact their HR team for help, giving HR professionals more time to focus on other tasks.
• Improving the employee experience. Organizations are considering the employee experience more holistically, from onboarding to offboarding. HR technology is a part of the recruiting and hiring process, onboarding and training, offering benefits, employee well-being and offboarding.
• Upskilling and reskilling. HR technology includes LMS software designed for upskilling and reskilling employees to improve employee retention.
• Supporting various work models. Some organizations are embracing remote and hybrid work models, using HR technology to implement a consistent work environment. These tools include collaboration, onboarding, training and communication applications.
• Committing to diversity, equity and inclusion (DEI). Businesses are creating an inclusive and diverse work environment by recruiting, hiring and developing employees from different backgrounds and ensuring that all employees have the same opportunities for success within the organization.
• Global hiring. With remote work becoming more common, organizations have started hiring international workers. HR technology tools help keep track of global hiring and offer a variety of benefits, including onboarding, payroll system integration and compliance with local labor and tax laws.

There are many HR tools available for the different tasks that HR professionals might want to automate. Follow these tips to choose the right HR tech.