The Differences Between HCM vs. HRIS vs. HRMS

Ready to invest in new HR technology for your business? As you explore the many options on the market, you will see them described by various acronyms. These labels can be confusing at first glance: What are the differences between HCM, HRIS, and HRMS? What functionalities does each one provide, and how will that impact the daily operations of your HR department?

Sometimes, these terms are used interchangeably, which adds to the confusion. Is there a measurable difference between HRIS and HRMS? Which one will help you achieve your goals more effectively? Is there any overlap of critical HR functions across the 3 types of systems?

To answer these questions and determine what's best for your human resources needs, you will need to gather some additional information. Here's a closer look at the key differences between HRIS, HRMS, and HCM solutions and what you need to know as you evaluate your HR software options.

Understanding the Differences Between HRIS vs. HRMS vs. HCM

Let's start with a bit of history. The earliest software systems helped HR teams gather, manage, and maintain employee data, HR policies, and information related to benefits administration, payroll, and core HR processes. As the HR department expanded its responsibilities to include more strategic endeavors like recruiting and talent management, software evolved. And so did the terms used to describe the various solutions available.

It's helpful to understand this progression over time, but it's also important to remember that there is an overlap between the capabilities of HRIS, HRMS, and HCM systems. With that in mind, let's look at what each term means in today's market:

• HRIS (Human Resource Information System) refers to software that is primarily designed for data management. HR teams use these systems to store and analyze employee data, policies and procedures, and operations data.
• HRMS (Human Resources Management System) became widely used in the early 2000s. These systems were usually hosted on-premise, and they helped connect the data management side of HR with the operational side. HRMS describes the next software iteration that gives HR teams flexibility to manage a broader range of HR functions.
• HCM (Human Capital Management) is a comprehensive term referring to strategic HR processes and tools and to the cloud-based HR software solutions used to implement HR strategy. HCM solutions focus on the overall employee experience, from core HR functions to talent management.

A Closer Look at HCM vs. HRIS vs. HRMS

If you still feel like you're not quite sure which system does what, that's okay. The differences between HRIS, HRMS, and HCM are not always clear, and many people use the terms interchangeably. The goal is to demystify the HR technology selection process so you can efficiently compare the systems on your shortlist, determine which system best meets your needs, and put that system to work in your HR department.

To do that, you'll need to understand the benefits of HR technology in general, dig into system capabilities and limitations, and evaluate the potential impact of each system on your HR operations.

Similarities Across HRIS, HCM, and HRMS

Today, most HR software systems live in the cloud, providing strategic HR support through various functions. They offer a secure, streamlined way to store and analyze employee data, which frees up HR teams to focus on creating value for the organization. HRIS, HCM, and HRMS platforms all typically support many of the same HR functions, such as:

• Payroll
• Time tracking
• Benefits administration
• Employee information records
• Self-service portals

Differences Between HRIS, HCM, and HRMS

The differences between the 3 types of HR software systems center on the breadth and depth of capabilities each offers. Data storage and management is the baseline shared by all 3 types, and it is the defining function of the HRIS. HRMS and HCM systems build on that baseline with additional features that provide more strategic support. Identifying the differences between HRIS and HCM systems or HCM and HRMS solutions is secondary to understanding how a given platform can support your business where it is today.

For example, an HRIS may be the perfect, right-sized solution for a small business transitioning away from spreadsheets and manual processes. However, a larger organization focused on strategic HR development may need the broader capabilities of an HCM platform to achieve its goals.

HRIS vs. HCM vs. HRMS: Are They Interchangeable?

In its historical context, each term had a specific, unique meaning intended to differentiate it from the previous solutions. HRIS and HRMS solutions focused on different areas of people management, and HCM systems brought strategic muscle to the equation. Today, however, the boundaries between these types of systems have blurred, and the terms are often used interchangeably.

As you evaluate your options, don't get too hung up on the terminology used to describe a particular system. Instead, focus on your business needs and the specific capabilities of that system to determine whether it is a good fit.

Comparing HR Systems Side-by-Side

What do these similarities and differences look like in practice? Let's break it down.

Differences between HRIS vs. HRMS

HRIS and HRMS software can automate common human resource functions, but HRMS typically offer expanded, customized capabilities. While an HRIS houses data and demographic information, an HRMS normally integrates additional resources and functions such as performance review tools, expanded analytics capabilities, an applicant tracking system, and extra security measures.

Differences Between HCM vs. HRMS

HCM systems provide the most extensive functionalities to assist with HR strategies, while HRMS systems focus on streamlining and automating HR responsibilities. An HCM solution generally offers built-in analytics to support strategic decision-making around a broad range of HR processes. Comparatively, HRMS is most often used to add efficiency to HR processes.

Differences Between HCM vs. HRIS

HCM solutions are focused on comprehensive people strategy. As the most extensive of the three systems, an HCM platform offers a wider, more strategic focus than an HRIS. It allows you to move beyond data management with functions like recruiting, onboarding, performance management, training, and professional development typically integrate data from various sources to support strategic goals with advanced quantitative and qualitative analytics.

HRIS vs. HCM vs. HRMS Comparison

Within the human resource management industry, the terms HRIS and HRMS are often used interchangeably, and there is overlap in their capabilities. For example, both types of systems include organizational and employee data management, payroll administration, and benefits administration.

However, a significant difference exists between HCM and HRIS/HRMS systems. HRIS and HRMS usually offer core services but don't always tie into broader planning or management strategies. Companies may link them together by creating workarounds to help them communicate, or they may partner with third-party providers to expand their service offerings. HCM systems, by contrast, provide a broader focus that incorporates strategic capabilities and helps you align HR with organizational objectives.

If your goal is to leverage human capital assets for maximum impact, an HCM strategy is essential. Choosing an integrated HCM system over a single-function HRIS software platform will give you access to high-quality insights that inform decision-making, reduce risk, and shrink administrative workloads.

Data Safety: Evaluating the Security of HR Software

Data transfers, sharing, and storage create significant risks including cyberattacks and data breaches. Data breaches carry potentially enormous costs for your company and may have far-reaching impacts on your employees. As you evaluate HR systems, take the time to assess security measures and ensure that your critical data will be safe.

Key elements of effective security for cloud-based systems include:

• Segmentation: Sensitive information should be available only to specific individuals based on job requirements.
• Multi-factor Authentication: The system should employ advanced multi-factor authentication technology for an additional layer of data security.
• Password Security: Passwords represent a security weak point for organizations. A password manager (approved by your company’s IT department) can help ensure that employees use strong passwords, follow password best practices, and have a way to safely share passwords with authorized users when needed.

Today certain cloud-based systems offer increased security. Some experts even argue that your data is safer in the cloud than in an on-premises server. That's because cloud providers are held to strict security standards, and you can segment access by user role and authorization. No matter which option you choose, however, the key is to evaluate and understand security protocols before you buy.

Choosing the Right HR Technology for Your Business

The value of an effective human resource management system for a growing business can't be overstated. HCM, HRMS, and HRIS software solutions deliver significant HR benefits that can help you build and implement your HR strategy, achieve your goals, and create exceptional employee experiences.

To get the best results, spend time researching and evaluating which platform most effectively meets your company's specific HR needs. Talk to software vendors and determine whether the solutions they present solve the true challenges your HR team faces.

Like all business software, HR software options vary greatly. Keep these tips in mind when making your selection:

• Determine whether a system's functions can adapt to evolving compliance laws and regulations
• Compare and contrast software vendors to evaluate their track records and customer satisfaction ratings
• Narrow your choices to the software technologies that meet your company's specific needs and provide the best user experience

Today's HR landscape is vastly different than it was just 5 years ago. Remote work, flex hours, digital nomads, and technology innovation have changed how we collaborate and interact on the job, and businesses need a reliable way to stay ahead of the curve in the HR department. The right HR software platform can help you manage the growing body of HR data flowing into your organization, stay compliant with evolving employment laws and regulations, recruit, hire, and onboard new employees, and create exceptional experiences for the employees you have.

Explore Paychex Flex^®, our all-in-one HR software and service solution, to help you achieve your human resources goals.