What is HCM Technology?

Human capital management (HCM) technology is software that helps businesses manage HR, payroll, benefits, time tracking, employee data, compliance tasks, reporting, and other workforce processes in one place. Instead of relying on spreadsheets, manual workflows, or disconnected systems, an HCM platform gives your team one central place to manage employee information and day-to-day HR tasks.

For small and mid-sized businesses, HCM technology becomes more important as the company grows. A process that worked for 10 employees can start breaking down at 50, 100, or 200 employees. Payroll takes longer. Benefits administration gets harder. Compliance requirements become easier to miss. Reporting becomes less reliable when employee data lives in multiple places.

The right HCM technology helps reduce that friction by connecting core HR functions, automating repetitive tasks, and giving business leaders better visibility into their workforce. In this article, we’ll explain what HCM technology is, what it includes, how it compares to other HR systems, and how to choose a platform that fits your business.

If researching the types of HR technology feels like sorting through alphabet soup, we understand. With acronyms like HRIS and HRMS and definitions that vary greatly from one HR technology provider to the next, it can be a confusing process.

To provide some clarity, here’s a simple breakdown of the three common types of HR technology systems, and how they reflect the transformation of HR over the last several decades:

• Human resources information system (HRIS): A central system for employee data, simplifying time and attendance tracking and benefits administration.
• Human resources management system (HRMS): Beyond basic employee data management, this system provides a broader suite of tools, including payroll administration, talent management, and reporting.
• Human capital management (HCM): A unified platform that builds on HRIS and HRMS functionality with features such as recruiting and performance management.

When exploring potential HR technology systems, however, it’s best not to focus too much on the type of system it is. What matters most is whether the system – and the software provider – can support your team’s current and future HR needs and drive business growth.

HCM software is generally the most robust and comprehensive HR platform, and it is integrated so that data flows easily from payroll to benefits and other modules. HCM software provides your business tools to:

• Process payroll, administer benefits, and track time and attendance.
• Recruit, onboard, and develop succession plans.
• Evaluate employee performance through goal setting, performance reviews, and feedback systems.
• Provide professional development opportunities, e-learning courses, skill tracking, and career development planning.
• Forecast headcounts, predict trends, or anticipate skills gaps through workforce planning and analytics.
• Enable workers to complete tasks on their own, such as accessing and updating their sensitive personal information, enrolling for benefits online, or requesting time off.

Manual HR processes can be error-prone and time-consuming, and using multiple HR technology platforms that lack integration may require reentering data across systems or moving back and forth between platforms. Human capital management technology is a unified system that provides your team a better employee experience, reduces the risk of data entry errors, and saves your team valuable time.

The benefits of human capital management technology include (but are not limited to):

• More time for you and your team: Human capital management technology streamlines HR processes, automates tasks, and gives employees self-service options. This means valuable time back for you and your team, especially for small or mid-sized businesses with limited resources.
• Reduced data errors/mistakes: With an integrated HR platform, you eliminate the need to reenter data across multiple systems, reducing data entry errors. Time and attendance tracking, paid time off systems, and automatic deductions help increase payroll accuracy, minimizing time spent on corrections, while also minimizing the potential for fines.
• Help with regulatory compliance: HCM technology offers valuable tools to help you stay compliant with ever-evolving workplace regulations. Meet state or industry training requirements through learning management systems that allow your employees to complete e-learning courses when their schedule allows. HCM technology also gives you the ability to compile policies and procedures in an electronic handbook, require electronic acknowledgments from employees, and track when employee credentials or certifications are expiring.
• Scalability with your growing business: As your business grows, so do your HR demands. HCM software can grow with your business, giving you access to benefits administration when you need it, time labor management as scheduling and tracking time become more complex, a recruiting platform to find the right talent for your organization, or compliance support as you expand to multiple locations.
• Data analytics and insights: Customizable dashboards with real-time data let you stay on top of current HR trends and make informed decisions, while predictive analytics help you address potential issues like employee satisfaction and engagement before they become problematic.
• Better employee experience: Start job candidates and new hires off on the right foot with HCM technology that efficiently reduces time to hire and guides new employees through the hiring and onboarding process. Then provide employees with professional development opportunities, feedback through performance management, and tools that measure employee engagement.
• Protection for sensitive data: HCM software uses tools (such as two-factor authentication) and access controls to help limit who can view sensitive employee data.

Effectively managing the workforce of your growing business requires robust, timely, and accurate reporting. But if you’re using multiple HR technology systems, you may be spending valuable time collecting data from different sources, inputting it into complex spreadsheets, or waiting until month’s end to review reports.

HCM technology offers powerful reporting that can transform your HCM strategy and lead to data-driven decisions that optimize processes and drive business success.

Let’s examine how reporting with HCM technology can elevate your human capital management strategy:

• Centralized data: With unified HCM software, all employee data is consolidated from multiple sources into one platform. This eliminates the need for manually entering data from various sources into complex spreadsheets.
• Real-time data insights: HCM technology eliminates the need to wait for certain reports to be generated once a month. Instead, your HR team can access up-to-date information through real-time dashboards for quick decision-making.
• Automated report generation: Schedule reports to be automatically generated with the latest data, saving your business time and reducing reporting errors. HCM technology also enables your team to capture custom reports with the data they need, such as employee demographics, training data, or compliance metrics.
• Easy-to-read graphics: Visually appealing graphics make digesting and understanding complex HR data easier. They also help identify trends and areas for improvement.
• Predictive analytics: Using artificial intelligence (AI), historical data, and other insights, predictive people analytics help you forecast trends and predict outcomes. As a result, your HR team can make more informed workforce decisions and mitigate potential negative outcomes, such as a spike in employee turnover.
• Compliance reporting: Generate timely and accurate reports for regulatory compliance, such as alerting your team to potential wage and hour violations or tracking employee eligibility for health insurance.

Some HCM software providers, such as G&A Partners, offer different plans, so you can choose the option that best suits your HR needs. A basic plan will include technology for core HR functions that keep your business running smoothly and streamline common HR processes, such as:

• New Hire Reporting & Onboarding: Create a streamlined experience for new employees that simplifies onboarding and helps ensure new hire reporting is completed on time.
• Time and Attendance: Ensure accuracy on payday by efficiently and easily tracking employees’ hours.
• Payroll and Direct Deposit: Streamline payroll processing and reduce the risk of payroll errors, plus provide direct deposit options for employees.
• Tax Filings and Withholdings: Properly calculate payroll taxes, withhold deductions from paychecks, and automate tax filings using G&A’s HCM technology solution.
• Basic HR Data Management: Manage employee documentation, data, and certifications in a central location.
• Dashboards and Report Library: View HR insights and generate reports on demand.

As your business grows or your HR needs become more complex, you’ll need a flexible HCM technology solution that makes it easy to scale and gives you the ability to add more features.

Examples of additional features include (but are not limited to):

• Job costing and general ledger reporting
• Employee offboarding
• Multi-entity/location management
• Benefits enrollment and reconciliation
• COBRA, HSA/FSA/HRA, and 401(k) administration
• Affordable Care Act dashboards and reporting
• Enhanced compliance support

When evaluating potential HCM technology solutions, it’s important to review all packages and determine whether they can support your company’s objectives. For example, if your growing business plans to acquire companies in other states, having a robust onboarding platform along with multi-location management and compliance support will be key.

The right HCM technology can help you transform employee experience, streamline compliance, and enhance efficiency for your business, so selecting the best solution is crucial.

Consider the following questions as you evaluate HCM technology solutions:

1. What are your company’s most pressing HR challenges? What manual or time-consuming HR processes – such as scheduling and tracking time in spreadsheets – is your business relying on? Also, consider fines you’ve recently incurred from inaccurate payroll or time spent correcting data-entry mistakes.
   
   
2. What unique HR needs does your business have that HCM technology can help solve? Scheduling complexities, tracking labor on projects, or calculating payroll for employees who work multiple roles with different pay rates are examples of unique HR needs. Ask potential software providers how their solutions can help address these needs.
   
   
3. Which core HR functions do you want to streamline or automate first? For example, is a lengthy recruiting process causing your business to miss out on top talent, or do you lack resources to process payroll in a timely manner?
   
   
4. What is your budget for HCM technology, initially and long term? Be sure to evaluate your budget for up-front costs related to software implementation and training as well as long-term, ongoing costs. However, also evaluate the potential return on investment and savings the business will realize over time from streamlined processes and improved efficiencies.
   
   
5. Does the HCM technology solution integrate seamlessly with any existing platforms that your business will continue using? You may already be using a best-in-class platform for recruiting or payroll that works well for your business. Ask potential HCM software providers if their solution seamlessly integrates with your specific platforms and what actions you’ll need to take for data to flow between platforms.
   
   
6. Can this HCM solution easily scale with your business as it grows? Small and mid-sized businesses often experience rapid growth, so it’s important to choose an HCM solution that can easily scale with your business as its needs change. A flexible solution will allow you to add or remove features as your business evolves.
   
   
7. What level of support and training will the vendor provide during implementation and long term? Several HCM technology providers are focused on software, which means your business is responsible for setting up, running, and maintaining the system. Ask potential vendors if they will handle setting up and transferring data into the HCM software, if they provide training to your employees, and how they support your business if you encounter issues with the system.
   
   Additionally, consider the level of HR expertise you have in-house. If you have limited internal HR resources, ask potential providers if they have HR experts on staff who can guide you through complex issues, such as payroll taxes or Affordable Care Act compliance. At G&A Partners, we provide HCM technology and training to ensure you get the most from your investment. We also offer additional levels of HR support if you’d prefer to outsource HR to a third party.
   
   
8. Is the user interface intuitive and easy for employees to navigate? An easy-to-use interface will help minimize training time, increase employees’ adoption of the platform, and maximize employee engagement.
   
   
9. What employee self-service options are available? A significant benefit of HCM technology is the ability for employees to complete tasks on their own rather than relying on an HR team or manager to do so. This streamlines many HR processes and saves time. Examples of employee self-service include inputting and updating sensitive personal information, changing their direct deposit details, punching in/out, or requesting paid time off.
   
   
10. Can employees input and update their personal sensitive information? Not all systems give employees access to their personal sensitive information, so be sure to ask the vendor how their HCM technology secures and allows access to this data.
    
    
11. How does the system protect sensitive employee data? Access controls limit who can access sensitive data based on the employee’s role and which data is accessible.
    
    
12. Does the vendor provide regular security updates and patches? These updates and patches address security vulnerabilities to ensure the system is protecting sensitive data from threats and to maintain system integrity.
    
    
13. What are the vendor’s disaster recovery and business continuity plans? If your HCM technology provider is impacted by a natural disaster, how will they ensure your business operations are minimally disrupted? A disaster recovery plan addresses how data is backed up and will be restored, while a business continuity plan outlines how the vendor will restore services and minimize downtime, allowing your business to continue operating smoothly.
    
    
14. How does the solution support compliance efforts? HCM software solutions may include features that will help you manage compliance, such as alerting managers when employees are approaching overtime, calculating and withholding federal payroll taxes, generating required Affordable Care Act and EEO reports, or tracking required industry-specific certifications/trainings for employees.
    
    
15. Does the HCM technology solution offer reporting that will satisfy compliance requirements? Payroll taxes, benefits information, employee demographics, COBRA notifications and elections, overtime hours worked, and workplace injuries are examples of data that HCM technology can gather into reports.