Software Needs Cycle for HR: 9 Types of HR Systems to Adopt as You Start, Grow & Optimize Your Business

As businesses grow and change, so do their HR system needs. Spreadsheets, paper files and emails will suffice to stay on top of most processes when you have 10 employees. 10,000 though? Good luck.

Figuring out when to make the transition from manual methods to dedicated software is crucial:

  • Adopt too early and you’re looking at a substantial investment in a system that doesn’t provide its full return.
  • Adopt too late and you face a massive missed opportunity while your competitors streamline and get ahead.

That’s why we’re analyzing proprietary Software Advice data to bring you our Needs Cycle for HR Software.

In this helpful tool for software buyers, we’re looking at nine types of HR systems from our HR software market page and listing them in order by those you need when you start, when you grow and later as you optimize your business.


needs cycle for hr graphic

Methodology: To create this Needs Cycle, we looked at a random sample of 200 Software Advice interactions with HR software buyers from the past year for nine different business sizes (determined by number of employees). From these interactions, we calculated the percentage of each size range that requested different HR software systems in order to determine the size range at which they reach peak adoption.

2 HR Systems You Need to Start

This section is for businesses who are just starting out or those with a relatively small number of employees (one to 100).

1. Payroll

What it does: Payroll software helps businesses keep track of employee wage and salary rates and automate payroll runs.

Once set up and and integrated with a payroll processor, payroll software can calculate total compensation, debit the company bank account for the correct amount and transfer funds to workers with the click of a button. Users can also use payroll software to do their taxes and run reports to track payroll cost over time.

Learn more about payroll software in our Buyer’s Guide.

Why you need it to start: Payroll software shouldn’t just be the first HR system every new business purchases; it should be their first system purchase period. This is because no matter how many employees you have—one or 100—your employee needs to be paid accurately and on-time.

Failing to do so will not only result in compliance headaches and an angry call from the EEOC, but will also push workers with zero tolerance for late paychecks or being underpaid to quit and find work elsewhere (with the U.S. job market the way it is right now, job seekers have more power than ever).

Payroll software is also vital to help alleviate one of the most significant administrative burdens for small businesses: payroll taxes. According to the National Small Business Association, nearly half of all small businesses spend 40 hours or more a year preparing their filing.

Software also helps alleviate costly filing errors, which resulted in $6 billion in total penalties for all U.S. businesses last year.

When to adopt: Looking at our data, we see that payroll software adoption peaks early on in a company’s lifecycle when they have just one to 24 employees, suggesting this is the best size range to make this critical purchase.

Buyers Requesting Payroll Software, by Number of Employees
Chart showing percentage of HR software buyers looking for payroll functionality by size of business.

Key considerations:

  • Payroll software vendors are well aware that even the tiniest businesses need their products, so don’t be afraid that new software will break your budget. Depending on your size, you can spend as little as $5 or $10 a month on payroll software.
  • Having the flexibility to be able to run payroll on your smartphone while you’re out and about is crucial, so make sure to prioritize mobile ease-of-use when researching different systems. Some vendors even offer dedicated apps.

Head here to begin your payroll software search.

2. Time & Attendance

What it does: If you’re still using spreadsheets to track employee hours, schedule shifts or stay on top of everyone’s allotted vacation days, it’s time to invest in time and attendance software.

Besides storing time information and generating reports, time and attendance systems also have employee self-service (ESS) functionality that empowers workers to clock in and out of shifts, view schedules and request time off themselves without needing to bug their manager or HR.

Learn more about time and attendance software in our Buyer’s Guide.

Why you need it to start: If your business is in a predominantly shift-based industry like retail or food and beverage, time and attendance software optimizes schedules based on availability and needs. It then automatically communicate them to workers via email or text, which is crucial to minimizing missed shifts that cost U.S. businesses $7,500 annually on average.

Even if your workforce is largely composed of “9-to-5″ employees, time and attendance systems can still be extremely beneficial if you’re a small business. Implementing system rules that only let workers clock in at certain times or require workers to ID themselves can help prevent rampant time theft and buddy punching.

Integrating time and attendance software with your payroll system also allows worker hours to be ported over to calculate payroll automatically, saving valuable time.

When to adopt: We recommend investing in time and attendance software when you have between 25 and 50 employees, as this is the size range where adoption peaks according to our data. After 50 employees, it becomes a significant administrative burden to track time and attendance manually.

Buyers Requesting Time & Attendance Software, by Number of Employees
Chart showing percentage of HR software buyers looking for time and attendance functionality by size of business.

Key considerations:

  • It’s well within your legal right as a business to track employee hours and attendance, but if you want to take it a step further and monitor things like worker location or computer activity, there are certain caveats you should be aware of before implementation.

Head here to begin your time and attendance software search.

4 HR Systems You Need to Grow

This section is for businesses experiencing rapid growth or those with a more substantial headcount (anywhere from 101 to 1,000 employees).

3. Personnel Tracking

What it does: Every employee in your organization comes with a significant amount of data you need to track, from their name and address to their job title and boss and even their work history and certifications. Personnel tracking software allows you to log all of this information in a secure, easily manageable database along with handy resources like a company org chart and employee handbook.

Learn more about personnel tracking software in our Buyer’s Guide.

Why you need it to grow: Entering or updating just one piece of information for 100 employees in a spreadsheet can be time consuming and prone to errors. As your business hits its growth spurt these problems will only be exacerbated, which is why it’s wise to invest in a dedicated system with preset fields for all of the information you need to track with your workforce early on.

This migration to dedicated personnel tracking software also offers your organization a great opportunity to get out of “startup mode” and formalize department structures and hierarchy before you start hiring like crazy.

As you grow, it’ll get harder to harder to determine who is whose boss and who’s in what department. Personnel tracking software can provide a centralized place for employees to look up this information with ease.

When to adopt: Personnel tracking is core functionality within a lot of HR systems, which is why adoption is so high across business sizes. That being said, we do see interest in this software peak at 101 to 250 employees, suggesting this is the best time to buy.

Buyers Requesting Personnel Tracking Software, by Number of Employees
Chart showing percentage of HR software buyers looking for personnel tracking functionality by size of business.

Key considerations:

  • Because workers will be using these systems often to update their own information or look up company policies, be sure some of them actually demo platforms you’re considering. If workers hate using a system, they’ll just revert back to bugging HR to look up information for them.
  • Integration is also key with personnel tracking systems as many other applications and systems will rely on up-to-date employee data to operate efficiently. Ask vendors about partnerships they have with other software systems or their API capabilities.

Head here to begin your personnel tracking software search.

4. Applicant Tracking

What it does: Applicant tracking systems (ATSs) provide a centralized platform where companies can manage all of their recruiting and hiring efforts.

With an ATS, recruiters can post job openings to job boards and social media, store job applications and resumes, track applicants through their hiring funnel, grade and rank candidates and, ultimately, extend a job offer.

Learn more about ATS software in our Buyer’s Guide.

Why you need it to grow: When you grow, you need to hire a lot of people. And when you’re hiring a lot of people, you need all the help you can get to stay on top of a growing pile of job requisitions, resumes and candidates.

Besides providing a digital space to manage all these things, ATSs are also a valuable weapon in the war for talent. These systems can blast your job postings to as wide an audience as possible and increase the likelihood for a curious visitor to become an applicant through an improved online candidate experience.

Embedded analytics also allow you and your team to decipher where talent is turning off from your company and why.

Lastly, ATSs are vital as you grow because they can do a lot of the dirty work for you. When you’re doing a big hiring push, you’ll be wading through a lot of poor applicants to find the diamonds in the rough. The more criteria you can input to your ATS to eliminate obvious no-hires early on, the more time your team will have to assess the best candidates that are left.

When to adopt: According to our data, applicant tracking software is the most requested HR application for businesses with anywhere from 251 to 5,001+ employees. When you choose to adopt is going to depend entirely on your hiring needs, but we recommend getting in early before you hit the 250 employee mark.

Buyers Requesting Applicant Tracking Software, by Number of Employees
Chart showing percentage of HR software buyers looking for applicant tracking functionality by size of business.

Key considerations:

  • Whether you’re a restaurant or a hospital, it’s critical that you adopt an applicant tracking system whose strengths best fit your hiring priorities and volume. We offer tips for how to do that here.
  • If you’re an external recruiter working for client businesses or run a staffing agency, there are applicant tracking software systems designed to meet your specific needs.

Head here to begin your applicant tracking software search.

5. Performance Management

What it does: Performance management software helps take the stress out of performance reviews. These HR systems allow companies to establish individual goals and track employee performance, while also automating tasks related to collecting feedback, storing documents and reporting important performance metrics to stakeholders.

Learn more about performance management software in our Buyer’s Guide.

Why you need it to grow: From improving productivity and retaining high performers to boosting sales, profit and engagement, data-driven performance management provides almost too many benefits for growing businesses to count. And in order to become a data-driven performance organization, you need the right system to manage vast amounts of employee data and track important trends over time.

These systems aren’t just for managing dreaded annual performance reviews either; in fact, they allow businesses to evolve from this archaic practice altogether.

More and more vendors are making systems that allow for more meaningful continuous feedback on a regular basis to let workers know where they stand in relation to their goals more often. Once weaknesses are identified, you can use the software to set individual plans in place for important skills development.

When to adopt: Though we see adoptions of performance management software peak in the 251 to 500 employee range, you may want to invest in these systems earlier if employee development is a priority in your organization.

Buyers Requesting Performance Management Software, by Number of Employees
Chart showing percentage of HR software buyers looking for performance management functionality by size of business.

Key considerations:

  • No HR system needs more company buy-in than the performance management system. To make sure everyone’s on board, an ideal software purchase should align with your organization’s top-level goals and objectives (instead of disrupting them) and not require a ton of training for managers and employees.
  • Being able to dive into your metrics to pull out valuable insights for improvement is vital, so make sure any options you consider have in-depth performance analytics capabilities.

Head here to begin your performance management software search.

6. Benefits Administration

What it does: Enrolling workers in benefits such as health insurance or a 401(k) and managing any changes thereafter have historically been painstaking processes for employers and employees alike. Benefits administration software helps streamline these processes and tracks data for cost and compliance purposes.

Learn more about benefits administration software in our Buyer’s Guide.

Why you need it to grow: As you grow, you’ll finally have the leverage with insurance carriers to offer more comprehensive and varied benefits options. With 57 percent of workers reporting that benefits and perks are a major factor in whether they accept a job offer or not, expanding your coverage options can be a big win in the war for talent.

At the same time, this also means that you can no longer get away with explaining your attractive benefits package in a paper pamphlet. The volume of information about different plans can easily confuse workers, which leads to a lot of questions, which in turn takes up a lot of HR time to provide answers. That’s the last thing you want to deal with during a hiring boom.

Benefits administration software provides a centralized solution where employees can not only enroll in benefits or change options themselves (instead of filling out a form for HR to enter into their system manually), but also troubleshoot questions on their own. Being able to closely monitor benefits costs will also be critical to maximize ROI.

When to adopt: Similar to performance management software (see above), benefits administration software sees peak purchases at the 251 to 500 employee size range.

Buyers Requesting Benefits Administration Software, by Number of Employees
Chart showing percentage of HR software buyers looking for benefits administration functionality by size of business.

Key considerations:

  • Because changes to government regulations such as COBRA, the ACA and the FMLA occur often, easy-to-use compliance management functionality should be a top priority when vetting systems.
  • If you offer more niche perks for things like commuting or gym memberships, there are benefits administration systems out there that can handle these needs too. Avoid splitting up your benefits options between platforms and focus on finding a vendor that can do it all.

Head here to begin your benefits administration software search.

3 HR Systems You Need to Optimize

This section is for firmly established businesses looking to optimize their HR operations or those with a very large number of employees (1,000 or more).

7. Onboarding

What it does: Onboarding software walks new hires through all the necessary steps to become full-fledged employees, from digitally signing important paperwork to completing new hire training tasks. These platforms also give newbies an early chance to interact with their manager and coworkers to be more comfortable and productive from day one.

Learn more about onboarding software in our Buyer’s Guide.

Why you need it to optimize: According to a 2016 report, it can take up to eight months for new hires to become fully productive employees. That’s an agonizing period of time to not be at full capacity, especially for a large company hiring fresh faces every week.

Onboarding software can cut this time down by automating tedious paperwork so workers can dive into the nitty gritty of their positions sooner—possibly even before their first day through an online portal.

Combined with functionality to support early camaraderie and familiarity with company policies and processes, software can help your organization optimize its onboarding process to improve new hire retention by 82 percent and productivity by over 70 percent.

When to adopt: If functionality for onboarding isn’t already available in your existing HR or recruiting suite by the time you reach 1,000 employees, it’s time to invest in this functionality according to our data.

Buyers Requesting Onboarding Software, by Number of Employees
Chart showing percentage of HR software buyers looking for onboarding functionality by size of business.

Key considerations:

  • Onboarding functionality bridges the gap between applicant tracking and personnel tracking (see above). Integrating these capabilities makes the administrative hassle of transitioning someone from applicant to new hire to employee much more seamless, so make sure onboarding platforms work well with existing systems.
  • Onboarding processes are going to differ vastly between an intern and a C-level executive. Look for systems that allow you to customize onboarding workflows based on roles and departments.

Head here to begin your onboarding software search.

8. Compensation Management

What it does: When you factor in everything—years of experience, performance, the going wage rate in your area—are you paying your workers the right amount? Is your compensation plan flexible enough to be sustainable in times of hardship?

Compensation management software allows you to answer these important questions by diving deeper into internal factors (e.g., company revenue, comp budgets) as well as external ones (e.g., local job markets, currency fluctuations).

Learn more about compensation management software in our Buyer’s Guide.

Why you need it to optimize: At this point in your company’s trajectory, every little improvement counts. If you’re compensating workers with an extra dollar or stock option that isn’t boosting talent attraction, performance or retention, that’s money going down the drain.

Compensation management software can help you cut the fat in a number of ways. On an individual employee level, these platforms can pull performance grades from your performance management system to recommend bonus payouts based on desired outcomes.

On a macro level, this software can calculate compensation budgets for your entire global workforce and suggest payouts based on different scenarios of company performance to ensure you stay afloat during the good times and the bad.

When to adopt: These systems definitely fall into the “nice to have” rather than the “need to have” category of software, as illustrated by the low percentage of buyers requesting this application below. Inquiries peak after the 5,000 employee mark.

Buyers Requesting Compensation Management Software, by Number of Employees
Chart showing percentage of HR software buyers looking for compensation management functionality by size of business.

Key considerations:

  • Compensation management systems with job market pricing can help you determine the right pay for unique roles in your organization that don’t exist anywhere else.
  • At a time when the gender pay gap and compensation transparency are under more scrutiny than ever, a compensation management system can prove to be hugely beneficial in giving clarity and data support to a historically murky process.

Head here to begin your compensation management software search.

9. Learning Management

What it does: If you’re still largely relying on classrooms and slideshows to train employees, learning management systems (LMSs) can help you bring employee training into a more flexible and engaging online environment.

With an LMS, trainers can create training courses merging different multimedia formats, administer courses to workers, test them on the knowledge they’ve retained and analyze training effectiveness over time.

Learn more about learning management systems in our Buyer’s Guide.

Why you need it to optimize: Ongoing training is vital if you want to develop workers to progress up the career ladder at your company while also retaining top talent.

This is easier said than done, especially with a large, global workforce: Materials have to be updated as necessary, lagging workers need to be identified and brought up-to-speed and training courses have to somehow not be completely boring and tedious.

A learning management system (LMS) can help you tackle all of these problems head-on. As employee development takes on a higher priority in your organization, an LMS will become vital to staying on top of the sheer scale of your training operation while also providing insights for how to improve courses.

When to adopt: We categorize learning management software as its own market at Software Advice, separate from our other HR software applications. Because 100 percent of buyers in this market are seeking learning management, a different approach to slicing this data is needed.

Breaking down all businesses looking for learning management software by workforce size, we see 19 percent have between 1,000 and 2,499 employees. At the same time, we also see 10 percent of buyers have more than 10,000 employees—the highest concentration at this large size of any application in our Needs Cycle.

Buyers Requesting Learning Management Software, by Number of Employees
Chart showing buyers of learning management system (LMS) software broken down by number of employees.

Key considerations:

  • Unlike other HR applications that are typically priced based on the number of employees in your organization, LMSs are often priced based on the number of users or learners. Keep this in mind when budgeting for a system.
  • Don’t panic thinking you have to create every training course from scratch. You can purchase third-party courses from vendors for less company-specific topics or, even better, leverage user-generated content from workers in your courses to save money.

Head here to begin your learning management system search.

Conclusion: There Is No One-Size-Fits-All Timeline

You may choose to purchase best-of-breed versions of these applications one after the other and piecemeal them together. You may decide to lump them all into one giant integrated suite that you upgrade over time. You could even go completely out of order from what we’ve recommended here.

Whatever your company decides, knowing when to purchase these HR systems is just one factor in adopting platforms that best fit your needs.

Here are some recommended next steps to continue your HR software search:

  • Head to our HR software page. There you can filter systems not only by required applications and how many employees you have, but a number of other criteria as well, such as budget and user ratings.
  • Call 855-998-8505. Our HR software advisors will ask you a few questions about your business and actually recommend best-fit products based on your needs. It only takes a few minutes, and it’s a completely free service.

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