HRMS vs. Traditional HR Processes: Which Is More Efficient?

When it comes to managing employees, businesses have two main options: using a traditional HR process or implementing a Human Resource Management System (HRMS). But which is the better choice?

If you’re still relying on spreadsheets, paperwork, and manual tracking, you might be wondering if it’s time to switch to an HRMS.

What Is Traditional HR?

Traditional HR processes are primarily manual and often rely on paper-based systems or outdated software. HR teams following this model handle various tasks manually or with minimal technology, including recruitment, onboarding, payroll, performance management, and record-keeping.

Some of the main characteristics of traditional HR processes include:

• Recruitment and Onboarding: In traditional HR, recruitment often involves posting job ads, reviewing resumes manually, conducting interviews, and handling paperwork such as employment contracts by hand.
• Payroll and Benefits: These processes are typically managed through spreadsheets or with the help of basic software, requiring HR teams to manually calculate wages, taxes, and benefits.
• Employee Performance: Performance management is handled manually by HR personnel, who set goals, conduct reviews, and maintain records of employee performance using paper-based or simple digital systems.
• Employee Records: Personal records, performance appraisals, and other relevant information are often stored in filing cabinets or in a fragmented digital system, making it difficult to retrieve important information promptly.

What Is HRMS?

A Human Resource Management System (HRMS), is an integrated software solution designed to automate and streamline HR functions, from recruitment to retirement. An HRMS helps businesses manage a range of tasks efficiently and accurately, including payroll, performance tracking, recruitment, employee self-service, and record-keeping. Key features of an HRMS often include:

• Recruitment and Onboarding: Automated candidate tracking systems, job postings, applicant assessments, and digital onboarding processes.
• Payroll and Benefits: Payroll automation that integrates with tax laws and benefit systems to calculate pay, taxes, deductions, and manage employee benefits efficiently.
• Performance Management: Automated performance appraisals, feedback loops, and goal-setting capabilities that are seamlessly integrated into the platform.
• Employee Records: Centralized, cloud-based storage of employee information that can be accessed quickly and securely by authorized personnel.

How Do They Compare in Efficiency?

Now, let’s break down the main differences between traditional HR processes and HRMS in terms of efficiency.

1. Time-Saving

• Traditional HR: When HR tasks are done manually, it can take a lot of time. For instance, manually entering payroll data or sorting through resumes can be incredibly time-consuming, leaving little room for HR professionals to focus on more strategic tasks. You might find HR team members bogged down with paperwork or struggling to keep up with repetitive tasks.
• HRMS: HRMS automates many of these tasks, making them faster and more efficient. For example, payroll calculations, tax filings, and even performance reviews can be automated. This saves a huge amount of time and allows HR teams to focus on more important things, like employee development and improving company culture.

2. Accuracy

• Traditional HR: Manual data entry is prone to errors. From miscalculating payroll to losing track of employee benefits or performance reviews, mistakes can happen easily. These errors might not only affect your employees but can also lead to compliance issues and financial problems.
• HRMS: Automation significantly reduces the risk of human error. With an HRMS, payroll is automatically calculated, taxes are up to date, and employee records are maintained in a single system. This leads to much more accurate data management and ensures fewer costly mistakes.

3. Cost-Effectiveness

• Traditional HR: At first glance, traditional HR might seem less expensive. After all, you’re relying on your existing staff and manual processes. But in reality, it often costs more in the long run. The time spent on manual tasks, the risk of errors, and the additional HR staff needed to manage all of these processes add up. Plus, things like paper costs, storage, and the need for manual updates take a financial toll.
• HRMS: Sure, there’s an upfront cost for purchasing and implementing an HRMS, but in the long term, it’s a far more cost-effective solution. With automation, you reduce the need for extra staff, avoid errors that could lead to costly mistakes, and save on resources like paper and filing systems. The time saved can be reinvested into more valuable projects, ultimately making HRMS a worthwhile investment.

4. Scalability

• Traditional HR: As your company grows, traditional HR processes become harder to manage. If you’re still using paper files or spreadsheets, it becomes increasingly difficult to keep up with the growing number of employees, which means you’ll need to hire more HR staff to stay on top of things.
• HRMS: An HRMS is scalable, meaning it can grow with your business. Whether you’re managing 10 or 10,000 employees, the system can handle the workload without requiring additional HR staff. It automates the processes, making them easier to manage and allowing your HR team to stay on top of everything, no matter how much the company grows.

5. Employee Experience

• Traditional HR: In a traditional HR setup, employees might face delays in accessing their information or receiving answers to their HR-related questions. For instance, if they need to update their benefits or access a pay stub, they might have to go through HR staff manually, leading to frustration and a slower process.
• HRMS: With an HRMS, employees have access to self-service portals where they can view their pay stubs, request time off, update personal information, and even track their performance. This not only makes the process faster for them but also provides a much better overall experience.

6. Compliance and Reporting

• Traditional HR: Staying compliant with tax laws, labor regulations, and other legal requirements can be a huge challenge when everything is done manually. HR staff needs to stay on top of changing rules and regulations, which can be time-consuming and leave room for costly mistakes.
• HRMS: An HRMS typically has built-in compliance features that are automatically updated to reflect the latest regulations. Whether it’s calculating payroll taxes correctly or generating reports that meet legal requirements, an HRMS makes it easier for businesses to stay compliant without worrying about missing any important deadlines.

Who Should Use HRMS?

• Growing businesses that need to scale HR processes without hiring more staff.
• Companies handling large amounts of HR data that require accuracy and efficiency.
• Businesses aiming to improve employee experience with self-service portals and digital HR services.
• Enterprises with remote teams that require cloud-based access to HR functions.
• Organisations focused on compliance that need real-time tracking of regulations and labour laws.

The Hidden Costs of Traditional HR

Many businesses stick with traditional HR methods because they believe switching to an HRMS is too expensive. However, manual HR processes come with hidden costs, such as:

• Increased labour costs: HR staff spend hours on tasks that could be automated.
• Potential compliance fines: Manual tracking of labour laws can lead to costly mistakes.
• Higher turnover rates: Employees may feel frustrated with slow HR processes, affecting retention.
• Lost productivity: Time spent on administrative work could be used for strategic initiatives.

Final Verdict

While traditional HR methods may still work for small businesses with minimal HR needs, an HRMS offers greater efficiency, accuracy, and ease of management. If your company is struggling with time-consuming HR tasks, frequent errors, or compliance challenges, switching to an HRMS can be a game-changer.

The right HRMS can help your company not only manage employees more effectively but also improve overall workplace satisfaction. The question is no longer whether HRMS is better, but rather how soon you can make the switch.

Jason Obrien

Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.