Many companies still rely on a mix of spreadsheets, outdated Human Resource (HR) systems, and paper forms to manage their employees. As such, the lack of proper organization and compliance support hinders their growth by allowing space for manual errors and miscalculations.
This is where Human Capital Management (HCM) comes in. These platforms offer dedicated support to HR teams, managing all information, data, and resources related to employees, hence the name ‘Human Capital’. They have become an indispensable part of HR workflows, but what exactly are they and how do they work? Find out here!
HCM software can be defined as a specialized set of applications and features that businesses use to manage and optimize everything related to their workforce. They operate by treating employees as human capital, assets whose value can be maximized through proper investment and management.
Such a platform works by centralizing all crucial HR functions, from administration and payroll to talent acquisition and performance management, into a single, unified, and often cloud-based system. This centralization breaks down the data silos that traditionally separate different HR functions, providing managers and executives with a comprehensive, real-time view of their workforce.
The right HCM solution can help a business optimize its output in many ways, some of which have been elaborated below.
HR Compliance
HCM software automates the most time-consuming administrative tasks, such as managing benefits, processing payroll, time-tracking, and tracking leave requests. By reducing manual data entry and human error by default, it drastically improves operational efficiency.
Strategic Talent Management
These solutions make it easy for HR teams to shift their focus away from administration tasks and pay more attention to strategy. By providing tools for performance management, goal setting, and succession planning, HCM helps identify and address skill gaps. Managers can ensure that every employee’s goals are aligned with broader objectives.
Enhanced Employee Experience
A unified HCM platform empowers employees through dedicated self-service capabilities. Employees can manage their own benefits, update personal information, request time off, and access training materials at any time, from any location. This autonomy boosts engagement and satisfaction.
For instance, a mobile-enabled HCM system allows a remote employee to easily check their pay stub or sign a document, eliminating the need to contact HR for routine tasks.
Data-Driven Decision Making
The centralized nature of HCM means that all employee data is stored and available in one location. This allows for detailed analytics and reporting. HR and finance leaders can generate detailed reports on workforce metrics, such as cost-per-hire, turnover rates by department, and training effectiveness.
Different HCM platforms offer different features that shape their functionality. Some of these include:
Talent And Onboarding
Most HCM systems offer Applicant Tracking Systems (ATS) that allow managers to handle job postings across multiple channels, screen resumes and applicants using AI tools and manage candidate communication. This automates new hire paperwork, compliance forms, benefits enrollment, and task assignments, ensuring new employees are productive from day one.
Core HR And Administration
These solutions come with a centralized database for all employee records, job history, and personal data, allowing for better personnel management and team divisions. With better data, payroll can be more accurate. Furthermore, these platforms allow for automated processing of employee wages, tax deductions, and direct deposits, often integrated with a general ledger.
Benefits Administration
HCM software comes with tools to manage and track complex health, retirement, and insurance benefits, keeping track of both enrollments and eligibility. This allows managers to keep track of who gets what, and when.
Time And Attendance
Managers can leverage digital tracking of employee work hours, absences, and leave requests, integrating directly with payroll for accuracy. This allows for better wage calculations, always backed up by data, for audit or compliance purposes.
Performance Management And Development
Another major field of service for HCM tools is performance management, as it facilitates continuous feedback, goal setting, performance reviews, and 360-degree feedback loops. Managers can use this to identify where the team or individuals are lacking.
Learning Management System (LMS)
Many HCM tools also provide tools for creating, delivering, and tracking employee training, compliance courses, and professional development to fill in skill gaps and better equip teams. These systems can be used for compliance training, HR policy guidance, or any other kind of training that might be needed.
Succession Planning
Managers can identify key roles, assess high-potential employees, and develop clear pipelines for future leadership. This allows organizations to prepare for workforce changes as well as meet scaling demands internally.
The cost of HCM software varies greatly, depending upon the range of features required by each client as well as the number of employees using the system. Typically, HCM software offers pricing in a Per Employee Per Month (PEPM) model, with costs ranging between $8 to $99/employee/month. However, some platforms might offer flat per-month or annual pricing, as well as customized or enterprise level plans for larger companies.
HCM software offers managers and HR administrators a unified set of tools that they need to manage workforces and pay employees, with minimal human work. There can be a disparity in features, but look for highlighted functionalities, and you should be able to identify an HCM solution that is ideal for your needs.