What are the benefits of an HR management system?

Written by diane chinn
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What are the benefits of an HR management system?
An HRMS captures complex employee-related data and automates it to support HR management activities in an organisation. (Network connection image by Fantasista from Fotolia.com)

Human resources (HR) management is an essential, complex and information-intensive function in every business. It is also closely regulated by federal and state agencies. Consequently, information technology is a vital tool in effective human resources management. A human resources management system (HRMS) uses the power of information technology to capture, store, analyse and report on all aspects of an organisation's most important resource -- its people. An HRMS is also called a human resources information system (HRIS), human capital management system (HCMS) and human resources information technology (HRIT).

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Automate and Improve Basic Processes

These systems automate the crucial human resources management functions -- employee information, payroll, benefits and decision support. An HRMS integrates a set of related databases with functional processing units, such as hiring, time and wage management, benefits and pensions, employee management and learning. For example, employees' work time is entered in the system and used to pay the workers, calculate and accrue benefits, pay taxes, measure productivity and capture HR operating costs.

When implementing an HRMS, businesses examine their existing processes and improve them to make the best use of the information system. An HRMS, combined with streamlined workflow processes, improves organizational performance, reduces costs and allows HR staff to focus on employee management issues and project work.

Support Decision Making and Strategic Planning

An HRMS simplifies reporting and management decision support activities because data stored in the system can be used in multiple ways. Standard HR reports, such as hours worked, terminations and payroll summaries, can be used to manage the business and plan for the future. In addition, the HRMS users can develop special reports to identify trends and measure operational effectiveness. This helps management with decision making and strategic planning.

Support Compliance

HR management systems generate the reports required by federal and state agencies. These reports can be electronically transmitted to the appropriate agencies, saving time and money. For example, a business must submit the Equal Employment Opportunity Commission EEO-1 Employer Detail and Summary Report and the Department of Labor's Illness and Injury Report on a regular basis.

An HRMS can help a business manage a trade union agreement by tracking employee seniority for promotions, pay raises and layoffs. It also helps the business monitor employee performance issues and grievances.

Facilitate Employee Communications

Using an intranet -- a secure private computer network owned and operated by a company -- the human resources department can use the HRMS to share information and communicate with people throughout an organisation. This intranet link is the fastest-growing area of HR systems because it encourages employee self-service. Employees can enter their hours worked, register for continuing education courses, enrol in benefit programs, update their personal information and look up their accumulated vacation and sick leave without having to call or e-mail the HR department.

Links to Other Information Systems

An HR management system allows for data sharing and integration with other essential business systems, such as accounting, finance and supply chain management. It also supports data transfer with third-party systems, such as health insurance companies and retirement fund administrators, to share employee information. These links streamline work flow and reduce operating costs.

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