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Best Small Business HR software

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Small Business HR Software Guide

Table of Contents

What is Human Resource Software?

A Human Resource Management Software or HRM software system is a type of Information System that manages an organization’s computerized Human Resource processes including but not limited to: payroll, attendance management, employee record management and performance evaluation.

A firm can decide to implement a stand-alone human resource software for small businesses or integrate it with its Enterprise Resource Planning or ERP System. Most organizations choose to connect and integrate their HRM software with other processes such as time tracking, accounts, and admin.

HR Management System for Small Business

For a large-sized enterprise, the utility of an HR Management software is obvious. Large enterprises have an entirely separate department dedicated just to Human Resources, owing to their large workforce and the complexity of issues that arise from the same. But is the investment in a Human Resource Software for small business justifiable?

The fact remains that HR Management software will definitely make the work of any HR Manager easier and allow them to spend more time on core and strategic HR functions, rather than wasting their time on routine activities that can easily be automated.

In a small/medium enterprise with 10-50 employees, a number of people, including the HR Manager would be performing multiple roles because of the lack of people at the disposal of the company. It is very likely that an HR Manager would be handling bookkeeping or administrative duties along with her core HR responsibilities.

So using HR software for SMEs actually makes a lot of sense despite the costs. It would reduce the workload of the HR Manager and would also decrease the likelihood of errors. Due to the differences between large enterprises and SMEs in the level of resources available, the scope of operations and overall goals, the types of HR Software for small businesses would also differ from the ones used in big enterprises.

SMEs might want an HRMS with specific functionalities only as their scope of operations might not warrant a full-fledged HRMS with features that they might never even have to use. Therefore, smaller enterprises will be more selective in their choice of HR Management software.

Features of HR Management Software for Small Business

A small business HR Software must be equipped with the following modules:

1. Recruitment Module

A comprehensive recruitment management module in an HR Management system is vital to find the right person for the right job, and also to reduce the time taken to fill a vacancy. It will screen hundreds of applications in order to find the right fit for the company.

2. Time and Attendance + Absence and Leave Management

These are all highly interrelated functions within an HRMS. They are normally all interlinked within the HR management system. The time and attendance management module will keep track of the hours worked, late days, and billable hours. Similarly, absence and leave management module is used for requesting and approval of leaves. This will help in workforce management.

3. Performance Management System

A key feature of any Human Resource software, the performance management system module is what allows managers to track the efficiency of their employees. The progress and the growth of individual employees are ascertained by monitoring KPIs and KRAs through this module. This can be a game changer for small enterprises with productivity problems.

4. Training Module

For new as well as old employees, learning is constant. HRMS should have a training module to help employees broaden their knowledge about multiple subjects and to aid their personal development.

Benefits of HR Management Software for SMEs

It is a myth that small and medium enterprises do not need an HRMS. There are reasons small business software exist. Installing a human resource management software would confer a multitude of advantages to a small business, some of which are:

benefits of hr software for small business

1. Training

A common misgiving among employees of smaller firms is that they do not receive proper/good-quality training. HR Management software would solve this problem. It can help SMEs to plan curriculums, track attendance and evaluate progress for all the batches of employees in training.

2. Transparency

A Human Resource Management Software would ensure that transparency is maintained by the firm’s HR professional in every aspect. Employees can contact senior employees through a professional channel. Employers can track the progress of their employees without having to oversee each employee personally.

3. Talent Acquisition and Retention

For SMEs, employee turnover might be a huge issue. With the help of human resource software, small firms can actually recruit the right kind of employees who would be less likely to leave. With certain HRM systems such as HRM Recruitment software and application tracking systems, small companies can undergo recruitment in an efficient and successful manner. It would help them retain employees more suited to their firm.

4. Time and Attendance

This is an obvious one. Most HRM software either come with these features or can be easily integrated with employee time and attendance management software. This obviously helps a great deal in keeping track of employees and also in calculating hours worked for each employee.

5. Payroll and Compensation

HR software for small businesses will make payroll and compensation easier and more efficient. The employers will have complete visibility what proportion of their resources are going to which employees. The HRM software saves the administration precious time, especially when integrated with accounts, payroll, and compensation become seamless.

6. Employee Development

Like training, this is another facet where small enterprises suffer. SMEs should address their employee development needs also in order to improve their retention. HR Management software makes it easier for both the employees and the employers to participate in the process of development.

7. Evaluation and Analysis of Metrics

The data gathered through an HRMS is evaluated using various analytics tools. It is capable of providing useful insight into employee costs, turnover rates, and engagement. Such information can be utilized for improvement of business practices and processes, and for development of better business strategies.

The Big Question: Cloud or On-Premise HRMS?

Any business that is looking to invest in a Human Resource Management System faces this dilemma. Both of these categories of software have their individual pros and cons. Which one is more suitable for a small or medium enterprise can be evaluated on the basis of the following parameters:

1. Cost

SMEs would want to keep their costs low wherever possible. In such a scenario, cloud-based HRM system makes the most sense. In-house HRM software is generally costlier because of installation and maintenance charges. Cloud-based HRMS is a better option for SMEs because they have only an ongoing subscription cost.

2. Upgrades

An on-premise HRMS requires looking for new patches and installing updates manually. This can be time and cost consuming. Cloud-based HRMS providers would normally take care of installations, updates and maintenance without interrupting the workflow and at no extra cost.

3. Security

We live in the age of information. The importance of information security is at an all-time high. With on-premise HRMS, a firm would have to invest in additional security and data backup systems. Cloud HR for small business has an incredible level of security over multiple layers of penetration. Its robust security combined with affordability make it very suitable for small and medium enterprises.

4. Flexibility

Flexibility and scalability are very important for growing businesses. Cloud-based HRMS provides both, and if it doesn’t meet your needs anymore you can always switch over to another because you’re only paying a monthly subscription. With on-premise HRMS scaling up will require configuration and installation of additional software, which is a good idea only if the company is willing to spare a lot of time and money over these activities.

5. Internet Connectivity

If your SME is located at a remote location with limited internet connectivity, it would be better to invest in on-premise HRM software. Good internet connectivity is a prerequisite for running any Cloud-based human resource management software. If it is not available, investing in cloud-based HR solution is not recommended.

A small or medium enterprise must consider all aspects of its business, from operations to location, in order to evaluate the suitability of on-premise or cloud-based HRM software.

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Rinkesh AnandaniBy Rinkesh Anandani | Last Updated: October 20, 2020

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