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Does a small business need HR software for successful management?

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Does a small business need HR software? The short answer is yes. While a small business primarily focuses on driving immediate ROIs, getting the right HR software sets a foundation to support the management of their recruitment and talent pool with a plan for growth and longevity.

In this article, we’ll discuss the reasons why an HR system is essential for the successful management of a small business. These are the topics we’ll cover:

  1. 7 reasons your small business need HR software
  2. What HR software features do you need for your small business?
  3. What are some examples of HR software for a small business?

With the new trends emerging in the industry, businesses of any size see the need for leveraging their hiring practices and talent management. This is especially vital for small businesses as they created 63% of new jobs from 2009 to 2012 according to Score. Furthermore, 50% of employees in the US are employed in a small business. However, many of them don’t have an HR specialist and tool to help handle the job.

An ADP study showed 70% of small businesses handle their HR tasks as a side job by the owner or employee with primary responsibilities. This consumes 25 to 35% of a small business owner’s time. HR tasks take small business owners away from their most important responsibility: running the business.

This results in them to wasting more than 4 billion hours on admin each year. Alarmingly, 41% of owners reveal it takes away their energy of managing and running their business as per FOX Business.

Survey on small business HR trends. (Source: Score)

HR software programs, also called HRMS (Human Resources Management Systems or HRIS (Human Resources Information Systems), are designed to streamline, automate, and optimize your organization’s HR processes from a single database.

There’s a wide variety of types to choose from. For instance, integrated systems versus best-of-breed platforms, major categories (HR administration, talent management systems, and learning systems), and packages (core HR, strategic HR, and integrated HR suites). And that’s just the start. You may read this in-depth what is HR software guide here to know more about its types, features, benefits, and leading examples.

7 Reasons Your Small Business Needs HR Software

Zoho People lets you see the progress of meeting your goals.

Does a small business need HR software? Yes, as it handles one of your company’s most important resources—your people—regardless of its size. Many small business owners think it’s unnecessary to have an HR tool because they’re “too small” or only have a few employees. However, this impacts their workflow and even growth. Here’s why your small business needs an HR software:

1. The recruitment process is crucial.

Hiring the right candidates who are qualified for their jobs means less time spent on training and supervision. These tasks are expensive for a company, especially a small business, in two aspects: financial and time. Of course, it goes to say that developing your team’s skills is essential. However, training an employee about the basics of their role incurs high initial costs for your business.

An HR software can carefully sift through and sort applications and resumes to pick qualified candidates. It also leverages the use of social media networking, tracks and manage candidates, and reach multiple job boards, among others. With an efficient recruitment and applicant management, you can attract the right talent for the right position at the right time.

2. An HR system helps you oversee your talent pool.

Since your team is small, you want to ensure each member is right for and skilled at their job.Employees who are equipped with the experience and expertise in their role can handle the responsibilities and challenges that come their way. That translates to a more efficient team with members that contribute the best practices to their role. Furthermore, consistently providing a high quality of service is crucial for earning your customer’s trust and loyalty.

An HR tool can help by elevating the quality of communication between your team members. It also lets you track performance reviews and appraisals to engage your employees, build relationships with them, and clearly outline transparency in expectations from both sides. After all, a healthy corporate culture is vital for meeting your goals, attracting and retaining talent, and enhancing your brand identity.

3. A small business still needs to comply with legislation.

HR regulatory requirements set by the government vary from one country to another. In most cases, small businesses are exempt from certain legal requirements. However, there are still employment legislation you must comply with regardless if you have one or 1,000 staff members. Labor laws, taxation, healthcare, and insurance are only some of the documents you needed in place. Companies with 20 employees and less also have up to 60% higher compliance costs.

HR teams spend 75% of their time on admin tasks.

4. Automation improves productivity and efficiency.

An HR tool automates tasks that are otherwise time-consuming and redundant, such as entering and copying data on spreadsheets, reconciling employee’s payroll, handling tax, remittances, ROEs, and manual T4s, and scheduling and approving employee time-off requests. Automation also replaces the error-prone method of manually accomplishing admin tasks through spreadsheets, files, and folders. For instance, self-service tools enable employees to be proactive in scheduling their shifts and updating their employee records with access permissions.

5. You can establish a good foundation from a clean slate.

As they always say, prevention is better than cure. Absence and leave management may not be a problem when you only have four people in your team. You may even think that implementing policies is not yet a requirement with a ‘this is just how we do it here’ mindset. But with the growth of your team, these small matters can bubble into the surface. Having an HR software for small business from the offset can help you establish and communicate policies and practices clearly to save you from conflicts in the future.

6. HR systems are now more affordable.

Years ago, the only HR software in town was HRIS (Human Resource Information System) that was jarringly expensive. Today’s systems, especially with cloud technology, no longer cost an arm and leg. HR vendors offer packages for small businesses with subscription-based payment models that are paid on a monthly or yearly basis. This means you don’t have to spend thousands of dollars upfront to set up the system or hire more consultants to explore, implement, and train for the product’s deployment.

7. Insights from HR tools improve decision-making.

When you work with spreadsheets, you have to extract and analyze data from it manually. Using this method leaves potential factors to be missed. With an HR software, it generates data and identifies patterns and trends. Retrieving for key content and information is quick using dashboards and reporting tools.

What HR software features do you need for your small business?

BambooHR has a dashboard that shows an overview of all recent employee updates.

Now that we’ve already answered the question “Does a small business need HR software?” we can now start on considering what features you actually need. As a small business, you don’t need every feature offered by HR solutions. This means choosing the essentials over the nice-to-haves.

A comprehensive business evaluation is crucial to know the pain points that your business encounters and the features to address them. The following are only some of the features you need:

  1. Employee self-service. Enable employees to log on and perform actions like updating details and requesting time-offs.
  2. Recruitment. Manage the recruitment process and keep track of job applicants.
  3. Performance reviews. Monitor your employees’ performance yearly and set goals and objectives.
  4. Reporting. Create custom reports on employee attendance, performance, and turnover, among others and analyze data.
  5. Benefits administration. Assist employees in enrolling for benefits.
  6. Employee record-keeping. Store important employee records.
  7. Mobile access. Allow employees to use their smartphone for remote access.

What are some examples of HR software for a small business?

Freshteam shows a talent pool suggestion from qualified candidates in your company.

There’s a wide variety of HR software programs available today. They come in various types (core HR or strategic HR) and different implementation models (cloud-based or on-premise), for a start.

For these examples, we looked at examples that are suitable for small businesses. The factors we considered include affordability and ease of use. Additionally, we checked that these solutions are simple and intuitive enough not to take you away from what matters most to you—running and growing your business.

  1. BambooHR. It’s a popular HRIS that ensures a smooth transition from spreadsheets to its online software. Since it’s a small company, it understands your needs as a small business for a user-friendly system. The app’s main features are applicant tracking, time-off tracking, HR reporting, employee self-onboarding, custom workflows, and employee database and records. To ensure the solution fits your workflow, it offers packages with varying included features. It’s essential to test drive the app’s features first to see if it matches your requirements. To do so, you can sign up for the BambooHR free trial here.
  2. Zoho People. If you’re looking for a tool that simplifies your HR tasks and processes, this is a good solution. It has various solutions ranging from onboarding, payslip generation, leave management, employee self-service, and benefits administration, among others. Its plans are affordable: it has a free plan while it’s paid plans start from $0.83/employee/month. To check the software’s capabilities, you can sign up for the Zoho People free trial here.
  3. Freshteam. A product by Freshworks, it specializes in recruitment as an applicant tracking system. As we mentioned a while ago, recruiting the right employees is crucial. Hence, this software provides you with tools for your hiring process—from a candidate database to a collaborative hiring model. It also has a free plan for up to 50 employees. Meanwhile, it’s plan built for small teams start from $50/month for 50 employees. It’s vital to test drive the functionality and features of the app first. You can sign up for the Freshteam free trial here.
  4. Gusto HR. It’s an online HR service with a mission of simplifying and personalizing complicated HR tasks. Its key features include payroll, integrated benefits, compliance, HR, accounting and time tracking. Its plans are scalable starting from its Core plan priced for $6/employee plus $39/month. Customizing plans is also available for adding benefits (FSAs and 401(k)s). Sign up for the Gusto HR free trial here to check out the software first.
  5. OnPay. This is a payroll software that handles basic HR tasks. If you want to focus on running payroll and taking care of employment taxes for your small business, this tool is for you as it also has HR solutions such as an online HR library, leave accruals, and documents. Its pricing scheme is simple. You pay a one low, base fee per month ($36/month) plus $4/month for each employee. You can sign up for the OnPay free trial here to test out its features.
  6. VidCruiter. This platform is worth checking if you’re looking to digitize recruitment processes and narrow down your applicant pool with video interviews. VidCruiter features video interview functionalities with structured processes to ensure fair assessment for all applicants. Aside from eliminating the need for office-based interviews, the platform also gives you total control over the recruitment process, allowing you to effortlessly modify the software to suit specific scenarios. It also comes equipped with skills testing, automated scheduling, and applicant tracking, thus effectively centralizing all your records.
  7. Zimyo HRMS. A cloud-based software, Zimyo HRMS comes equipped with the core functionalities needed for managing human resource. It is a user-friendly platform that features real-time tracking for accurate time logs and attendance sheets, leave management with an online portal for easy inputting of leave requests and indicating approvals, employee scheduling  for optimized shift adjustments, and more. Essentially, Zimyo HRMS allows you to effectively manage the entire employee lifecycle, from entry to resignation. It is easily scalable to suit your increasing requirements as your business expands.
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