I get it – the number of acronyms in HR Software can be daunting.

Whether you're in HR or another executive function trying to understand the difference between HRIS and HCM, this article will decipher it once and for all.

Because, as we embrace the future of work, grasping these distinctions is key to foster a happier world of work powered by the best technology.

In this article, I'll share the key differences between HCM vs HRIS, and guide you through choosing the right system for your business size and objectives.

Understanding HRIS

The HRIS, or Human Resource Information System, is an HR software platform that manages employee data in smaller or less complex organizations. (For a deep-dive, see my guide to HRIS meaning.)

It is primarily designed to automate and streamline core HR functions such as payroll, benefits administration, and employee data management.

This includes:

Core Functionalities of HRIS

1. Data Management: HRIS is your centralized repository for all employee information, including personal details, employment history, and documentation related to compliance.
2. Payroll and Compliance: It simplifies payroll processing and ensures compliance with tax laws and employment regulations.
3. Benefits Administration: Manages employee benefits such as health insurance and retirement plans efficiently.
4. Attendance Tracking: Automates record-keeping for employee attendance and time-off requests.

Automation and Efficiency

• Task Automation: By automating routine tasks, HRIS frees up HR professionals to focus on more strategic initiatives.
• Real-Time Access: Provides immediate access to data, facilitating quick decision-making and reporting.
• Integration Capabilities: Reduces the need for multiple systems by integrating with other employee management software like recruiting software, employee engagement tools, (free) payroll software, and employee engagement survey providers. 

Strategic Advantages for Small Businesses

• Scalability: HRIS systems are scalable, allowing small businesses to add functionalities as they grow.
• Cost-Effectiveness: Offers a basic set of HR tools at a lower cost, making it ideal for small enterprises or startups.
• User-Friendly: Typically designed with user accessibility in mind, ensuring ease of use for employees and HR staff alike.

By understanding these aspects of HRIS, businesses can better assess how this system effectively meets their current needs and supports their HR operations.

For more, see my detailed guide to the HRIS here.

Examples of HRIS Software

The range of HRIS platforms is wide, and the right fit for you depends on factors like budget, headcount, global and remote needs, and more.

A few HRIS software platforms we often see praised include:

1. Rippling

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Rippling integrates HR, IT, and finance services into one comprehensive platform, ideal for efficiently managing a diverse and global workforce. It automates administrative tasks and offers extensive customization options.

Key Features of Rippling include global payroll, benefits administration, compliance management, and seamless integration with popular business applications like Slack and Salesforce.

Pros and Cons:

• Pros: Comprehensive and scalable across different business sizes, and automation features that save time and reduce errors.
• Cons: the higher costs can be prohibitive for smaller companies, and extensive features may overwhelm new users.

2. BambooHR

BambooHR is tailored for small to medium-sized businesses, offering a user-friendly platform that covers the entire employee lifecycle from hiring to offboarding.

Key Features include onboarding, performance management, time-off tracking, and a centralized database for employee information.

Pros and Cons:

• Pros: Intuitive interface suitable for less technical users, and affordable pricing with a comprehensive set of HR tools.
• Cons: Limited functionality in payroll services, and fewer global HR capabilities.

3. Deel

Deel, originally an EOR, launched a modern HRIS software platform designed for startups and SMBs, especially those with global needs.

Amazingly, it provides free access for companies with fewer than 200 employees while  integrating HR, payroll, and compliance management across over 150 countries.

Key Features include integrated global EOR services, contractor management, and employee self-service tools.

‍Pros and Cons:

• Pros: Cost-effective solution with free services for eligible businesses, and a strong focus on global compliance and international payroll.
• Cons: As a newer platform, it may lack the robustness of more established competitors, and users report limited ATS capabilities with no mobile app currently available.

Deciphering HCM

Human Capital Management (HCM) is another category of HR software platforms.

It constitutes a broad management platform that extends beyond HRIS's functionalities, integrating advanced systems and processes to manage and optimize an organization’s human resources.

HCM have all that HRIS platforms offer, but adds complex features like onboarding, performance management, and global compliance.

HCMs are almost exclusively used by large enterprises that have the headcount and revenue to justify platforms like Workday and SAP SuccessFactors.

Key Features and Benefits of HCM

1. Strategic Employee Management: Unlike HRIS, HCM provides tools for managing HR tasks, enhancing employee engagement, and maximizing workforce ROI.
2. Advanced Analytics and AI: Incorporates cutting-edge technologies such as AI and data analytics to support strategic decision-making and operational efficiency.
3. Comprehensive Employee Lifecycle Management: These platforms offer support from recruitment to retirement, ensuring a seamless integration of all HR-related activities.

Examples of HCM Platforms

There are many options if you're exploring new a Human Capital Management (HCM) system. Here's a quick look at three major HCM platforms: Workday, SAP SuccessFactors, and Oracle HCM Cloud.

1. Workday

Workday is a comprehensive, cloud-based HCM system designed to streamline and enhance various HR functions, from hiring to payroll, primarily for large companies.

Key Features include centralized employee data management, advanced payroll and workforce management, talent acquisition, retention tools, and a personalized employee interface.

Pros and Cons:

• Pros: Offers a robust set of integrated functions and enhances strategic HR planning with strong analytics capabilities.
• Cons: Complex interface with a steep learning curve and high costs, making it less accessible for smaller organizations.

2. SAP SuccessFactors

SAP SuccessFactors provides comprehensive HCM capabilities with a strong focus on talent management and employee engagement that is suitable for various business sizes.

Key Features include performance management, employee experience management, HR analytics, and extensive integration with other SAP solutions.

Pros and Cons:

• Pros: strong integration capabilities, especially beneficial for existing SAP users, and extensive customization options to suit various business needs.
• Cons: Can be complex to implement and require significant training, and is sometimes reported as less intuitive compared to newer market entrants.

3. Oracle HCM Cloud

Oracle HCM Cloud offers a suite of HR tools designed to manage the complete employee lifecycle for medium to large enterprises.

Key Features include comprehensive talent management, workforce predictions, HR help desk, payroll, and benefits management.

Pros and Cons:

• Pros: deep analytical capabilities to drive HR decisions, strong security features and solid regulatory compliance support.
• Cons: the interface may feel overwhelming due to the extensive range of features, and implementation and customization can be resource-intensive.

As you can see, each platform has its unique strengths and may be better suited for different organizational needs and sizes.

This emphasizes the importance of aligning your specific business requirements with the capabilities of these HCM systems.

HCM Challenges and Considerations

While HCM offers extensive benefits, it also comes with challenges, such as managing the system's complexity, ensuring user adoption across all levels of the organization, and integrating with existing systems.

However, the strategic advantages often outweigh these challenges, particularly for larger organizations looking to optimize their human capital strategically in the long term.

As HR Tech guru Josh Bersin told me in our interview:

"Even though companies hate buying systems from multiple vendors, the bigger HCM vendors and ERP vendors just can't keep up with it. ADP has been working on this next-generation HCM platform that has a lot of dynamic capabilities for about 6 or 7 years." – Josh Bersin

By understanding the scope and capabilities of HCM, you can imagine how these sophisticated systems can drive HR efficiencies and broader business objectives, aligning workforce management with strategic goals.

AI in HCM and HRIS Platforms

I couldn't write about HRIS and HCM in 2024 without getting into AI.

As AI technology proliferates, its integration into HCM and HRIS platforms transforms how organizations manage, develop, and future-proof their workforce.

However, the adoption of AI within these systems varies significantly across different platforms.

This is why it's good to take stock of each platform's approach to AI if, like me, you believe the technology to be one of the biggest drivers of a happier future of work.

In my article on AI in HRIS, I conclude as follows:

1. Slow Adoption with Cautious Integration

Some platforms, like Rippling, demonstrate a conservative approach to AI integration. We literally

"We are a company that is relatively free of any AI products right now. There’s some stuff that we’re working on. But I am always very skeptical of things that are, like, super trendy in Silicon Valley." – Rippling founder Parker Conrad

Despite AI's potential to streamline HR processes, Rippling has implemented AI slowly and strategically, focusing on enhancing specific functionalities such as candidate feedback summaries without compromising the overall system integrity.

This methodical approach avoids the pitfalls of rapidly changing technology trends and ensures that AI features align with the platform's core offerings.

2. Aggressive Expansion and AI-centric Development

In contrast, platforms like Workday are embracing AI more expansively. Workday's strategy includes developing AI capabilities across various HR functions, from job description generation to employee growth planning.

This aggressive adoption is driven by the platform's large user base and rich data, which provide a robust foundation for developing effective AI tools. 

The aim is to leverage AI to automate tasks, gain deeper insights into workforce management,, and improve decision-making processes.

3. Niche AI Features and Strategic Integrations

Other platforms, such as Deel and Paylocity, are incorporating AI to address specific challenges within HR.

Deel focuses on enhancing global HR compliance and workforce analytics through AI, while Paylocity uses AI to enhance communication and engagement within its community hub.

These targeted AI features are designed to address specific user needs and enhance the functionality of the HRIS systems without overwhelming the core operations with extensive AI capabilities.

The Broader Impact and Future Trends

The varied integration of AI in HCM and HRIS platforms reflects a broader trend of cautious optimism.

While AI presents significant HR innovation opportunities, companies are also mindful of the challenges and implications of deploying AI at scale.

The future will likely see more nuanced and strategic integrations, possibly driven by partnerships with AI specialists and acquisitions of innovative AI startups, as companies seek to balance innovation with reliability and user trust.

Choosing the Right System for Your Business

AI or not, when selecting the optimal HR technology for your organization, it is crucial to align the system with your business's specific needs, challenges, and goals.

Here’s a structured approach to guide you through this critical decision-making process based on my detailed guide on how to choose HR Software:

Step 1: Define Your Needs and Goals

1. Assess Current Challenges: Understand the pain points of your HR department, stakeholders, and employees.
2. Set Clear Objectives: Outline what you aim to achieve with the new HR technology, focusing on business outcomes.
3. Form a Cross-Functional Committee: Involve representatives from various departments to ensure the system meets broad organizational needs.
4. Calculate Potential ROI: Project the return on investment to justify the cost of the new system and gain buy-in from key stakeholders.

Step 2: Evaluate Potential Solutions

• Live Demonstrations: Arrange demos for top HRMS solutions to see each system in action.
• Create a Scorecard: Develop evaluation criteria based on functionality, security, reliability, ease of implementation, customer service, and cost.
• Ask Critical Questions: Dive deep during demos to understand how each system can address your specific needs.

Step 3: Consider System Capabilities

• Comprehensive Features: HRMS systems often offer more extensive features than HRIS and HCM, including advanced data analytics and automated compliance monitoring.
• Employee Self-Service: Enhance employee engagement and efficiency by allowing self-management of personal information and benefits.
• Scalability and Flexibility: Ensure the system can scale and adapt to your growing business needs, especially as your employee count increases.

Step 4: Reflect on Business Size and Maturity

• Current and Future Needs: Consider your company’s current size and growth trajectory to choose a system that can evolve with you, transitioning from HRIS to HCM as needed.

The Bottom Line: HRIS vs HCM

As explored throughout this article, the differences between HRIS and HCM are significant.

Each caters to distinct business needs, scales, and complexities.

Understanding these nuances is vital for making an informed decision that aligns with your organization’s goals and the future of work.

Make sure to understand deeply what you and your organization need. Now, and in the future. Then, select an HRIS or HCM that will fulfill your needs and vision.

If you’d like any support, feel free to reach out.