What is HR technology?
HR technology (human resources technology) is an umbrella term for software and associated hardware for automating the human resources function in organizations. It includes employee payroll and compensation, talent acquisition and management, workforce analytics, performance management, and benefits administration.
HR technology, often referred to as 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 and SAP, 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 SaaS. Meanwhile, small and midsized employers are also moving in large numbers to digitize their human resource functions, commonly turning to SaaS platforms or cloud-based HR technology outsourcing vendors.
What is human capital management?
Human capital management (HCM) is a bucket term for a variety of business functions that treat employees as assets that can be managed objectively just as companies view and manage other assets, such as money and capital equipment.
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 also specialize in dedicated systems for specific aspects of HCM such as talent acquisition. Electronic job boards or marketplaces in which prospective employees and employers find each other are an example.
HCM vs. HRIS and HRMS
Core HR technology systems have long been marketed under the labels HRIS (human resources information system) and HRMS (human resource management system), but HCM has begun to displace both terms in recent years
Although there are few differentiators among the three labels, HRIS tend to provide technology for storing employee data and automating core HR functions while HRMS vendors add HCM feature, including talent management.
Examples of how HR technology is used
While some HR technology 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.
Also, cloud-based HR technology 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 tax withholding across multiple U.S. jurisdictions such as states and counties, and 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 its own niche as well, a class of HR software designed to determine the best pay rates for attracting and retaining employees and rewarding performance. It is 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 which are often administered by HR.
Talent management is the process of recruiting, developing, evaluating and compensating employees. It is 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 forms of 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 itself.
Some popular talent management and acquisition technologies include:
- 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 e-mail. Other features may include automated resume ranking, pre-screening questions and response tracking, and multilingual capabilities.
- candidate relationship management, which allows recruiters to maintain a pool of passive candidates that can be brought in for consideration on short notice.
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, and 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.
As employers have automated other previously manual HR functions, they 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 also sometimes 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.
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.
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, both online, on-premises and app-based, and using technology in conjunction with human wellness coaches.
Many HR technology vendors are selling specialized software systems that incentivize workers for participating 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.
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 (LMS) software that can customize training programs, track whether employees have completed them, and assess student performance. An LMS may also provide students with the ability to use interactive features such as threaded discussions, video conferencing, and discussion forums.