Human Resources Software Buyer Report – 2015

by:
on June 2, 2015

Every year, thousands of buyers contact Software Advice in search of new human resources (HR) software for their organization. Interacting with these prospective buyers yields unparalleled insight into their needs.

We analyzed a random sample of these interactions from the past year to better understand these needs and reasons for seeking new HR software. This revealed the top HR software buyer trends of 2015, which can help other buyers make more informed decisions.

Key Findings

  1. Nearly half (48 percent) of buyers currently use manual methods, such as pen and paper or spreadsheets, to handle their HR needs, while 32 percent use dedicated HR software.
  2. Buyers relying on manual methods are seeking a new system to improve organization (44 percent) and automation (22 percent), while current software users want more functionality (35 percent).
  3. The most commonly requested functionality among buyers in our sample are core personnel tracking capabilities (45 percent) and recruiting functionality (30 percent).


Introduction

To say HR staff must wear multiple hats in the modern workplace is a bit of an understatement. They manage the needs of their current workforce, making sure all employees are fully and accurately compensated in the form of salary, vacation and any other benefits they are entitled to. They also manage employee disputes, develop ongoing training, maintain company culture and more.

At the same time, HR staff must look externally to find and recruit the right people to fill personnel and skills gaps. Clearly, HR departments have more than enough on their plate. And now more than ever, they must remain agile to fulfill all of the responsibilities involved with a rapidly changing workforce—one that is becoming younger, more diverse and has differing wants and needs than its predecessors.

Luckily, software is available to help in this endeavor, with systems available across a range of prices and that offer a wide variety of desired functionalities. However, the vastness of the market can make the purchase decision quite complex. To aid in the decision-making process, this report highlights which systems HR software buyers who contact Software Advice currently use, the top reasons they seek new software and their most desired functionalities.

Nearly Half of Buyers Rely Solely On Manual Methods

Among our sample, nearly half (48 percent) of buyers currently rely exclusively on manual methods, including pen and paper or general-purpose software such as Microsoft Excel, for their HR needs. Only 32 percent currently use specific HR software.

Prospective Buyers’ Current Methods

Prospective Buyers’ Current Methods

With only a few employees, manually entering data for everyday tasks, such as onboarding new workers, tracking attendance and processing payroll, is doable.

But as companies grow and add more employees, it becomes more time-consuming and cumbersome for HR departments to enter this data by hand. It becomes even more resource-exhaustive if departments are also manually tracking their recruiting efforts.

These issues don’t stop there. Using spreadsheets to calculate time and attendance or run payroll can lead to a lot of costly errors. The American Payroll Association estimates that errors from manual methods cost companies 1 to 8 percent of total payroll.

Security is also an issue: Excel spreadsheets can be password-protected, but there are a number of tools and resources online that anyone can use to crack them, leaving sensitive employee data vulnerable to tampering.

As users reported in Software Advice’s 2014 HR UserView, having dedicated HR software can automate these manual processes, freeing up time for HR staff, as well as provide greater accuracy and security.

Manual Method Users Want Efficiency

What buyers want in a new HR software system varies based on whether the buyer is currently using manual methods or is already using some other form of software. Looking first at those using manual methods, the biggest pain points are improving efficiency and organization (44 percent) and automating HR processes (22 percent).

Manual Method Users: Top Reasons for Evaluating HR Software

Manual Method Users: Top Reasons for Evaluating HR Software

These results make sense: Professional online community HR World estimates that up to 80 percent of an HR department’s time is spent on administration and paperwork alone, so implementing software to streamline and automate some or all of these tasks can have significant time- and cost-saving benefits.

How much? According to the Society for Human Resource Management (SHRM) Foundation, a small construction company with just two employees in HR saved 10 to 15 hours a week by implementing software-enabled manager self-service (MSS) capabilities, where managers are given the ability to perform necessary HR tasks themselves.

Recruiters can benefit as well: The same report showed reductions in recruitment costs of up to $8,000 per hire after implementation of software.

Looking at the buyers who already have some form of HR, accounting or other software in place, however, their pain points differ considerably. These buyers primarily want more functionality (35 percent), or are looking to consolidate or centralize their HR applications (19 percent).

Business Software Users: Top Reasons for Evaluating HR Software

Business Software Users: Top Reasons for Evaluating HR Software

One buyer in this category notes that their current system is “too basic,” and they want a solution “that would link payroll with core human resources functions.”

Many buyers share this sentiment. This points to a common trend of buyers seeking core HR suites that house all applications necessary to manage current employees—including personnel tracking, payroll, benefits administration and time and attendance—instead of separate, best-of-breed solutions. This can help eliminate the double-entry that often comes with using disparate systems, while providing a single database to hold all necessary documents and information.

Buyers Want Personnel Tracking/Recruiting Functionality

The functionality desired by buyers varies, but most often, they are looking for personnel tracking (45 percent) and recruiting (30 percent) in their new HR system.

Top-Requested HR Software Functionality

Top-Requested HR Software Functionality

Personnel tracking functionality allows HR departments to create a profile for each employee to easily keep track of and search for relevant information, as well as attach any necessary documents, such as resumes or W-2 tax forms.

Digging deeper, we also asked buyers who request personnel tracking functionality what employee information they want to keep track of. The majority want to keep track of contact details (69 percent), paid time off (PTO; 65 percent) and absences or sick leave (49 percent).

Employee Information Buyers Want Personnel Tracking Functionality For

Employee Information Buyers Want Personnel Tracking Functionality For

Almost all companies offer PTO, either because they are required to by government regulations (such as in the U.K. and Australia), or to keep employees happy (U.S. companies aren’t required to offer PTO, but 98 percent of employers do anyway).

The benefits of offering vacation to employees are significant, but so are the costs. The SHRM Foundation found in a recent report that the total direct and indirect cost of PTO, as a percentage of payroll, ranges from 22 percent in the United States to 34 percent in Australia to up to 38 percent in Europe.

With so much money and employee satisfaction on the line, companies are eager to track allotted vacation accurately.

Thirty percent of buyers also seek recruiting functionality. Digging deeper, all buyers interested in software to help with recruiting want applicant tracking functionality, while job posting (45 percent) and the ability to attach resumes or CVs (44 percent) are other frequently requested capabilities.

Top-Requested Recruiting Functionality

Top-Requested Recruiting Functionality

In addition to employee profiles, HR departments seek to create applicant profiles. These serve as a one-stop shop where hiring managers and recruiters can view important information, including the applicant’s:

  • Contact details
  • Resume or CV
  • Step they’re at in the hiring process
  • Notes on past interactions
  • Any feedback/scores other users have assigned to them

Taken together, this information makes it easy to create a talent shortlist and to make an ultimate hiring decision.

Conclusions

What have we learned? For one, nearly half of the buyers in our sample rely entirely on manual methods for their HR processes, meaning many are unchartered territory when it comes to purchasing HR software for the first time.

One-third of buyers have HR software already, but are looking to replace or add on to it. These buyers can learn from their previous purchases, taking the time to find a system that will not only meet current, but future needs. This can spare them from having to purchase a new system every few years to meet greater functionality or employee growth.

We also learned that buyers have a variety of needs when it comes to what HR tasks they want to perform and/or manage in their new system, and the type of information they want to track.

Whether it’s core HR needs, such as personnel tracking and payroll, or more strategic needs, such as learning management and performance reviews, comprehensive HR suites can provide a solution to handle all of these tasks and information in one place.

Demographics

Looking at size, prospective HR software buyers typically come from small or midsize companies. In fact, more than half of buyers (60 percent) come from organizations with 250 employees or less.

Prospective Buyer Size by Number of Employees

Prospective Buyer Size by Number of Employees

Once typically reserved for large enterprises, the affordability and sheer variety of options in HR software available now has made it possible for even the smallest companies to consider adopting a system of their own.

HR software buyers come from a wide variety of segments (it makes sense, every business has employees), with organizations in software and health care chief among them. Additionally, 60 percent of buyers’ organizations make $1 to $25 million dollars in annual revenue.

Prospective Buyers by Segment
Prospective Buyer Size by Annual Revenue

The detailed methodology for this report can be found here.

If you have comments or would like to obtain access to any of the charts above, please contact brianwestfall@softwareadvice.com.

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