HR Systems 101: Complete Guide for Business Owners in 2024

Explore the world of HR systems to automate workflows and streamline everyday HR operations, saving time and resources for your business.

Hiring and Growth

Ever found yourself buried under a pile of timesheets, swamped with paperwork, and chasing the employees for updates?

We feel you.

And this is exactly why you need HR processes and an HR system for your company.

An HR system is an incredible tool that can help you improve employee efficiency, save time, and streamline your HR workflows.

In fact, with more HR professionals leaning towards AI to boost their company's productivity, an HR system works like a virtual team manager that helps you tackle all your HR tasks.

This article will discuss everything you should know about an HR system, including its numerous benefits and remarkable features.

Let's start!

Key Takeaways

  • What is an HR system and what are HR processes?
  • Explore the 4 main advantages of using HR software for your business.
  • Understand the different types of human resource management systems.
  • Learn the key functions of HR software.
  • Get insights into the 7 signs your HR teams need when considering HR software.
  • Learn about the 7 features you should look for in HR software.
  • Complete guide on how to choose the right HR software for your team.

About the HR System

Your organisation is like a machine composed of several components.

All of these parts must work together in harmony to ensure the smooth operation of your business. But HR is the main engine of your business. It manages all the major functions, interconnecting the company's various departments. 

The HR system is well-equipped to support you in times of disorganisation.

What is an HR System?

The HR system is a centralised tool that unifies all HR functions on one platform. This includes various HR functions, including hiring and onboarding recruits, managing payroll, and providing feedback.

Subsequently, the HR system helps optimise the workflow and enhance the company's overall employee experience. 

An HR system is like a virtual assistant that does all the complicated work for you and helps you avoid errors in HR functions. 

4 Benefits of an HR System

It's time to say goodbye to juggling admin tasks with spreadsheets and sticky notes.

Here are 4 of the most important reasons your business needs an HR system.

1. Helps You Save Time

Consider how much time you spend manually conducting difficult HR tasks such as managing employee payroll and administering leave management, among many others.

The HR system frees up your time and energy so you can work on curating strategies for your organisation's development. 

An HR system allows you to manage multiple spreadsheets and documents because all the required information is available on a single platform. 

Do you need to check an employee's vacation balance or generate a report on your team's performance? No problem. An HR system can quickly complete these ordinary and repetitive tasks.

2. Helps You Stay Compliant

Keeping up with all the rules and regulations can feel like treading carefully on a tightrope. One wrong step, and you might find yourself falling into the pit of legal hot waters. 

However, an HR system ensures that your business is always aware of all the necessary rules and regulations. This way, your business always meets all deadlines and covers all important policies.

3. Helps You Stay Transparent

Miscommunication in an organisation can lead to many obstacles, such as project delays and missed deadlines.

However, a powerful centralised HR system can help avoid communication errors and improve organisational transparency. Packed with features such as an employee self-service portal, an HR system empowers your team to control your details and make requests with only a few clicks.

This way, employees no longer need to send long email threads requesting time off. This ensures transparency among an engaged and satisfied workforce.

4. Helps You Make Strategic Decisions

The HR system has features such as real-time dashboards and compensation benchmarking tools that provide analytics and real-time data.

This information can help you identify trends and potential issues before they become a serious concern for your business. 

For instance, an HR system can help you notice when departments consistently hit their targets and reward them accordingly. Plus, you can replicate their success across the organisation for better outcomes for the overall business. 

Types of HR Systems

Much like a coach guides a sports team, your company must rely on effective systems to manage its workforce.

Here are three main types of HR systems in your company:

HRIS system (Human Resources Information System)

HRIS (Human Resources Information System) is the most comprehensive solution for efficiently managing and organising crucial employee data.

It is your centralised record book, storing information such as contact details, performance reviews, employment history, employee records, training records, and more.

Do you need to access someone's work history to make informed decisions quickly?

With HRIS, you can effortlessly retrieve this information in seconds. Whether conducting performance evaluations, processing payroll, or addressing employee inquiries, having all relevant data at your fingertips streamlines your HR processes and ensures accuracy and consistency across your organisation.

HRMS system (Human Resource Management System)

HRMS (Human Resource Management System) is not just about storing basic employee data; it's a multifaceted tool that empowers you to manage your team and prioritise their well-being effectively.

An HRMS offers a comprehensive suite of features to streamline HR operations, from onboarding new hires to tracking the attendance of current employees.

Additionally, you can utilise its capabilities to administer training programs, manage employee benefits, facilitate performance evaluations, and much more.

With HRMS, you can optimise your HR processes, enhance employee engagement, and drive organisational success.

HCM system (Human Capital Management)

Human Capital Management (HCM) is more than just a data repository; it's a strategic tool that enables you to align your employees with your organisation's overarching business objectives.

Leveraging HCM can help you gain valuable insights into your team members' roles, contributions, and potential pain points.

With HCM, you can develop targeted strategies to nurture and develop your employees' talents, ensuring they are fully engaged and motivated to contribute to your company's success.

By fostering a culture of continuous improvement and professional growth, HCM empowers you to optimise your workforce and drive sustainable business growth.

Difference Between HRIS, HRMS, and HCM

  • HRIS is all about data management.
  • Its primary goal is to store and arrange personnel data to ensure it may be easily accessed and updated as needed.
  • HRMS helps maintain and organise employees' data.
  • HRMS provides additional features, including payroll processing, benefits administration, and performance management.
  • HCM focuses on workforce management.
  • It emphasises long-term planning and development, assisting companies in making the most of their human resources to accomplish their objectives.

Functions of HR Systems

HR systems are comprehensive tools to streamline various organisational human resource management tasks and processes.

Here are a few key functions of HR systems include:

1. Digital Data Library

No more rummaging through filing cabinets! 

HR systems are like digital filing cabinets where you can find employee data. They store personnel data, everything from birthdays and contact information to previous performance reviews.

Want to throw a surprise birthday? Or maybe reach out to an employee's emergency contact? 

There is no need to scour through endless files. With HR systems, everything is at your fingertips, saving you valuable time, as the required data can be promptly accessed. 

2. Hiring New Recruits

Remember the days of sifting through endless resumes and scheduling interview after interview?  

HR software can make that disorganised and chaotic process run smoothly without hiccups. 

You can swiftly handle applications, recruit the best individuals, and seamlessly integrate new employees by posting job descriptions that are clear and compelling.

HR systems are equipped with AI features that enable you to conduct resume screening, performance prediction, and personalised learning recommendations. It is just like having a hardworking team of (digital) recruiters working 24/7 to help you find the missing piece of your team. 

3. Time Tracking Made Easy

Ditch the tedious process of finding timesheets! 

HR systems make monitoring employees’ work hours and daily attendance easy. Their self-service portals let employees to clock in and out with a few clicks.

Plus, this helps managers view real-time scheduling data to monitor everyone's availability, eliminating ambiguity and confusion for you and your team members. 

Plus, this ensures that everyone receives accurate and timely payment. This can, in turn, boost employees' trust in your company. 

4. Performance Powerhouse

Motivating your staff to achieve their true potential is the key to a successful team. 

HR systems might be your secret weapon in performance management. The system enables you to collaborate with your team to develop attainable objectives, monitor performance, and offer constructive criticism to nurture the talent and growth of your team members. 

Moreover, the HR system allows you to locate areas for development and recognize your team members' accomplishments through meticulously organised performance reviews. 

5. Building a Learning Culture

Investing in employee training is an investment in your business's long-term success.

A study by Survey Monkey shows that 59% of employees agree that workplace training initiatives can significantly bolster their job performance. 

The good news is that HR systems can help you track individual progress, plan and manage training programs, and identify areas where your staff might need more support.

It's like having a customised learning and development plan for every team member, ensuring they have all the resources and tools required to cultivate a continuous learning culture. 

6. Beyond the Basics

Many HR systems in the market, from basic to advanced ones, offer top-notch features that cater to all business types.

These include payroll processing software, employee engagement surveys, AI-powered screening programs, disaster recovery plans, video interviewing, benefits administration tools, etc. 

It all depends on your company’s size and unique requirements to determine the best solution for your business. 

7 Signs Your Business Needs an HR System

Here are the 7 most important signs that indicate your business could benefit from implementing an HR system:

1. Overwhelmed HR Team

How often have you found yourself—or your HR team—drowning in endless spreadsheets and paperwork? 

Fortunately, HR systems can efficiently automate tedious and repetitive processes, enabling your HR staff to spend precious time on more important projects like talent development and employee engagement. 

2. Compliance Concerns

Consider investing in an HR system if you need help with ever-changing labour rules and regulations. With an HR system, you can generate reports, monitor the regulation landscape, and monitor fast-approaching deadlines. 

3. Scattered Employee Data

If your employees’ data is scattered throughout the company, this can lead to many errors, inconsistencies, and compliance issues.

It is easier to use an HR system to centralise all your employee data in one secure location. This way, you can easily access, update, and manage everything in one place.

4. Tedious Recruitment Process

The days of tedious and complicated recruitment processes are long gone. These procedures could delay hiring and turn off potential employees, eventually costing your company money and time. 

Using applicant monitoring features in an HR system can streamline hiring procedures and improve results. With only a few clicks, you can post job positions, screen applicants, and set up interviews quickly! 

5. Poor Onboarding Experience

An onboarding program is very telling of a new employer. If they can’t get the beginning right, how much confidence can an employee have for their career growth?

With an HR system, you can automate the onboarding process so new hires can easily access everything they need early on.

Plus, with online forum features and chat functions, HR systems can facilitate communication between new and current employees, helping bridge any onboarding gaps. 

6. Lack of Performance Management

Need help keeping track of employee performance and giving insightful feedback? Well, you're not alone. 

It's quite a common issue. 

Setting specific targets, assessing progress, and spotting improvement areas might be easier with an effective performance management system. However, an HR system with performance management tools can easily track employee performance by carrying out these vital tasks. 

7. Limited Employee Engagement

Ever heard the famous saying, Happy Employees, Happy Company?

An unsatisfactory team can lead to a lack of productivity and a negative work environment. Interestingly, engaged employees are reportedly more productive, significantly reducing absenteeism and employee turnover. 

Fortunately, an HR system can help improve things. Its robust features enable you to acknowledge excellent work and advance employees' careers.

Investing in your employees' well-being can show them they are important, leading to a more positive and productive work environment.

7 Features to Look For in a Human Resources Management System

When evaluating the best HR software systems for your organisation, consider the following key features:

1. Centralised Employee Data Management

HR systems are popular for centralising employee data, company policies, and training materials. 

So, select one that lets you store and retrieve all employee-related data in a singular secure location.

Also, ensure that the system you choose is secure. The system keeps the user's personal information, employment history, performance reviews, training materials, etc. 

2. Employee Self-Service Portals

This feature empowers employees to access and manage their data, allowing HR professionals to boost their productivity and build a thriving workforce while ensuring employee transparency. 

So, look for an HR system that allows employees to: 

  • Update and access their data.
  • Submit time-off requests.
  • View pay stubs.
  • Participate in training programs, etc.

3. Automated Administrative Tasks

HR professionals spend around 14 hours/week on tasks that can be easily automated, with more than 300 hours/year spent on administrative and repetitive HR tasks. 

But this is where automation helps: improving efficiency and reducing errors in HR processes. Go for a system with robust payroll processing, leave management, and benefits administration features. 

4. Recruitment and Onboarding Tools

Hiring and onboarding new hires doesn’t need to be a difficult task.  

With features like automated screening, applicant tracking systems, and onboarding procedures, the HR system helps recruits quickly adjust to the company.

These tools can also help expedite the hiring process and guarantee a seamless onboarding experience for your new employees.

5. Performance Management

Do you know the driving force behind employee engagement? It's effective performance management. 

That is why search for an HR system that enables you to monitor employee growth over time, conduct evaluations, and set performance targets. 

You might find exceptional employees, identify the skills gaps, and connect personal goals with corporate objectives with the help of a plethora of amazing features, such as goal setting, 360-degree feedback, and performance statistics. 

6. Analytics and Reporting

An HR system provides deep insights and analytics. These can help your HR team make smart decisions and streamline HR procedures. 

So, opt for an HR system with remarkable features, including analytics and reports. This way, you can easily visualise HR metrics and generate custom reports.

7. Training and Development Tools

Want to know one of the easiest ways to increase employee engagement? 

Invest in employee training and development programs with the help of an HR system. 

These systems are fully equipped with features such as module creation for digital training, employee feedback surveys,  Learning Management System (LMS) integration, and skills gap analysis to help you design and deliver impactful training initiatives.

How to Choose the Right HR Software For Your Business

Choosing the right HR system for your business is crucial for streamlining processes, improving efficiency, and supporting your organisation's growth.

Here are steps to help you make the right decision:

Consider the Needs of Your HR Teams

There are so many HR systems on the market. To find the one that fits your business, take a step back and assess its needs. 

There might be a few specific HR tasks causing you the most headaches. Or you might need a (digital) hand with payroll, recruiting, and performance management. Understanding your priorities will help you narrow down your options.

Consider Scalability

While your business might be small and growing, what about the future? 

Scalability is important because you'll want an HR system that can develop and expand with your company. Finding a solution that can meet your demands now and provide flexibility for future growth within your workforce is essential.

Evaluate Ease of Use For Your HR Professionals

You're already drowning in hundreds of tasks. You don't want to add “learning a new software” to your checklist too. 

Make sure to pick a system that has an intuitive and user-friendly interface. This way, you - or your team members - will not be scrambling for a manual to learn the basics of the HR system.

If the solution you select has an onboarding specialist — even better.

Check Integration Compatibility

Owning a business means juggling various balls—in this case, software—simultaneously. You might want your HR system to integrate with the other tools and systems your business relies on. 

So, go for a system that seamlessly integrates with your existing software, such as your current email platform or project management tool.

Review Customer Support

While navigating the HR system, you might encounter several obstacles. In that case, it's important to ensure that help is just a phone call, chat, or email away. 

Look for an HR system that provides prompt customer support to help you troubleshoot issues and get back on track on time. 

Factor in Budget

Budget plays an important role in picking the most suitable HR system for you. 

You may feel like signing up to the best HR system on the market. But don’t forget that the most expensive doesn't equal the best one. Plus, it's important to stay true to your budget. Look for software with features you can easily afford without impacting the company budget. 

Read Reviews and Get Recommendations on HR Management Systems

Stay aware of the service providers' flashy visuals and false promises. 

Do your research, read customer testimonials, and ask fellow business owners for recommendations. Finally, free trials or demos can be requested to see the systems in action.


HR systems can effectively lighten the HR burden, facilitate professionals' automating of daily HR tasks, and streamline the workflow. 

Given that many HR systems are on the market find one that meets your business's needs and helps you build a thriving, engaged team. 

Conduct thorough research, compare their features, review the customer support, and request a free trial to see the application in action.

Want to get started today?

You can start with our incredible HR system, Knit People. With a user-friendly platform and a focus on streamlining processes, Knit People will keep your team engaged, happy, and satisfied in the long run.

Start the free trial today and begin your journey towards HR automation!