Small and growing businesses can scale faster and grow strategically with the help of an HR system. The right HR system can help small businesses increase employee engagement, improve team operations, and make data-based decisions that support change management.
But, how do you choose the best HR system for your small business? And how big should your company be before you get one? Use this guide to learn more about the different HR systems available for small businesses, the various benefits, and how to find the right platform for your growing company.
What is an HR system?
A human resources (HR) system helps HR professionals manage and automate their core functions within an organization. It typically includes features and capabilities including managing team member data, processing payroll, administering benefits, and tracking performance management efforts.
There are various HR systems available for organizations. For example, an HRIS (human resource information system) focuses on storing and managing people data, while an HRMS (human resource management system) offers more advanced tracking and performance management tools. An HCM system (human capital management) provides even more tools for developing a high-level HR strategy and long-term plans.
A successful HR system streamlines HR processes to reduce manual paperwork and ensure consistency and compliance across an organization—even during rapid growth. By choosing an HR system in tune with your organization’s needs, you can improve workforce data integrity, make your people data more accessible, and reduce the size of your tech stack.
Do small businesses need an HR system?
As small businesses scale and roles become more complex, they may consider tools to manage HR operations. Instead of relying on spreadsheets, small businesses can use HR software for tasks like onboarding, managing payroll, tracking time off, and performance reviews.
For example, an HR system can automate data management, streamline compliance reporting, and centralize team information. Adopting this software helps businesses handle expansion without adding unnecessary headcount, keeping processes smooth and efficient.
Key features of HR systems for small businesses
Successful HR systems for small businesses include the following features:
- Time and attendance tracking and absence management
- Payroll processing
- Benefits administration
- Employee database management
- Recruitment and hiring
- Employee onboarding tools
- Performance management
- Learning and development
- Compliance management
- Employee self-service portal
- Employee engagement opportunities
Instead of combining capabilities from different software, try an all-in-one, scalable solution to deliver all critical HR functions. With all your tools in one place and a flexible structure to grow alongside your business, you’ll have the freedom to expand without worrying about system fatigue.
Benefits of having an HR system for your small business
Many small businesses store HR data in spreadsheets or project management platforms—but that only works for so long. Quick growth can lead to manual errors, inefficiencies, and compliance risks–making automation a must have.
You can prepare for expansion with an accurate and scalable HR system for your small business.
Centralizes data and minimizes errors
HR systems compile your data into one place, reducing the risk of data loss and manual errors. When you consolidate your tech stack into a single platform, HR teams and managers can strategically improve compliance, support smooth transitions, and plan for the future.
Automates tedious workflows
Grow your team’s capabilities without having to rely on headcount. HR systems automate time-consuming manual processes like employee change requests, payroll processing, or time-off approvals. Even if you’re a multi-site team, you can take your processes, workflows, and documents and localize them as necessary—never having to start from scratch again.
Creates a positive workplace
Use HR software to organize and promote wellbeing, culture, and diversity initiatives. Build a positive and diverse workplace, embedding your goals and initiatives into every step of the team member journey.
For example, your HR system can help you create and execute an employee onboarding process that brings new joiners up to speed while introducing them to your company’s values, culture, and diversity efforts from day one. This ensures new people feel welcomed, aligned with the company’s mission, and supported during their transition.
You can also use your HR system to give kudos, celebrate birthdays, and create clubs to encourage a culture of support. The system can also help you organize team-building events and provide a virtual space for team members across departments to connect through forums or group discussions.
Track the impact of your culture-related global initiatives with tailored dashboards and advanced reporting. These insights help you fine-tune your programs and ensure that your culture-building efforts drive positive outcomes across the organization.
Reduces time and costs
As small businesses grow in size, location, and complexity, they may turn to time-saving tools that local teams can implement easily. Automate processes and localize documents and policies to reduce setup time and costs with each new location so you can scale efficiently without overwhelming your resources.
As HR teams simplify processes and optimize costs, they position themselves as strategic partners in achieving top organizational objectives, building an exciting future centered on growth and success.
Boosts productivity and engagement
An effective HR system boosts productivity and engagement throughout the organization. HR teams can use HR system’s analytics and reporting features also offer insights into team member behaviors so organizations can track engagement metrics and productivity trends. By identifying areas where their people are thriving or struggling, HR teams can tailor their strategies to better support their workforce–ultimately leading to a more motivated and productive team.
How to choose an HR system for your small business
Choosing the right HR system for your small business can transform your operations by enhancing efficiency and streamlining processes. Approach the selection process methodically, consider your specific needs and budget, and focus on the features that will deliver the most value to your organization.
1. Establish HR needs
Assess your current HR processes and identify where you need support. Meet with stakeholders throughout your organization to understand their key pain points and needs. HR staff, team managers, department heads, and IT personnel can all shed light to help select the best fit for your organization.
Whether automation, an intuitive user interface, or scalability are most important to your organization, use this list of needs to narrow down your HR software options.
2. Consider budget
With a list of must-haves in hand, clarify your budget for the new HR system. Balance budget needs with priorities for features to find a happy medium. Don’t forget that the right HR system can save your organization money over time through a simplified tech stack and greater operational efficiencies.
3. Review key features and integrations
Browse the available HR system options within your budget and review their key features and integrations. Once you’ve narrowed down your options, send out requests for proposals (RFPs) and speak with representatives to get answers to questions like:
- Which software does your system integrate with?
- What data security measures are in place?
- Can we customize the system to our specific needs?
- What level of customer support is included? Are there options for additional support?
Consider which options have an intuitive user interface (UI) so your organization can quickly adopt the system and bring its people up to speed on core functions. Review compatibility with your existing tech stack to improve ease of adoption and a smoother team member experience.
4. Prioritize scalability
Instead of setting yourself up to need another system overhaul in a few months or years, prioritize scalability so your team can grow and expand.
Consider whether each system will hit a breaking point and create increased manual oversight to update and maintain. Use the RFP and software demos to ask about integration capabilities, automation opportunities, feature flexibility, and how the software handles system updates.
Look for an all-in-one HR software designed for multi-site use, robust customer support, and a simple UI.
5. Get stakeholder buy-in
Once you’ve found an HR system for small businesses that meets your requirements for features and scalability, present it to your stakeholders. Gather in-depth feedback and questions to review before you make a final decision.
With wholehearted buy-in from each stakeholder, you can ensure a smooth implementation and ideal ongoing use.
HR system challenges for small businesses
The right HR system offers small businesses many benefits, but the process still comes with some challenges.
- Difficulty integrating with existing tech stack: Include your existing system’s details when you send RFPs and prioritize HR systems that can integrate with your existing tech stack. Poor integration with your existing tools, such as accounting software or absence management systems, can lead to a slow, complex implementation or costly errors.
- Friction in the adoption process: Small businesses often run a lean operation and taking the time to learn and adopt a new system can feel like a big ask. Frame the ongoing benefits of your new HR system carefully to promote buy-in from department leaders and team members across your organization. Set aside time for essential training and choose a system that’s easy to implement and use.
- Concerns around data security and compliance: Organizations may encounter pushback or anxiety around migrating HR data. Fortunately, moving to a reliable HR system will improve the security of all data and make it easier to fulfill compliance requirements.
- Budget constraints: Budget constraints can pose a challenge for small businesses seeking a comprehensive HR system. Approach this hurdle with a long-term view and choose a system you can use for the indefinite future. Consider the ROI of the system–not just initial costs–to determine your budget.
Learn more about HR systems for small businesses
Get answers to common questions about HR systems for small businesses.
Does a small business need HR software?
Small businesses often have limited HR staff, which can make it challenging to manage a growing list of operational tasks like payroll, employee records, and benefits. Smart HR software for small businesses can transform tedious data entry tasks into efficient, optimized workflows. The right system enhances operational efficiency, reduces time and costs to complete manual processes, and partners with your organization to scale and meet business objectives.
Ditch the spreadsheets and growing tech stack so you can start trusting your workforce data to drive strategic, forward-thinking decisions.
Which is the best HR software for startups?
In most cases, startups need intuitive, flexible, and global HR software. These traits allow for easy adoption, smooth growth, and straightforward integration across locations.
HiBob offers an all-in-one HR solution that checks all of these boxes—while removing manual processes, improving workforce data integrity and access, and reducing your tech stack.
How do I choose the right HR system?
To choose the right HR system, act like the company you’re trying to become. Don’t settle for complex and highly manual processes. Look for a system you can rely on to protect the security of your HR data while also allowing you to scale freely in the coming months and years.
Outline your organization’s goals and HR needs, then send RFPs to leading providers so you can compare their features with your list of must-haves.
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How do you implement HR systems in a small business?
Start by creating an implementation plan outlining exactly who will carry out each step of integrating the new software into your business. Once you configure and install the new system, run thorough tests and troubleshoot any concerns or issues.
From there, it’s time to train your team members and complete the roll-out. Gather feedback directly after launch and on an ongoing basis so you can make needed changes.
Choose the best HR system for your small business
Tired of software overwhelm and living in data silos? Ready to take your workforce data seriously? It’s time to integrate an all-in-one HR system to meet the needs of your small business as you grow.
With the right HR software, you can save time, improve operational efficiency, and free up your team so they can focus on more strategic, data-driven initiatives.
