Ten steps to making a wise Purchase or Hosted HR software Decision

This HR Information Systems (HRIS) or Human Resources Management System (HRMS) selection advice is based directly on my more than fifteen years of experience as a Human Resources Software value added reseller. I, and others who work for my firm combined, have sold, implemented and supported hundreds of software application installs. Over those years, I have seen people do a great job of selecting an application and I have seen the result when a poor decision is made. If you follow the steps I laid out, I won’t guarantee a successful Employee tracking software purchase decision, of course, but I assure you it will help tremendously. At the very least, you now have a game plan. 

For many of the steps associated with the process of selecting Human Resource software, I directly suggest using compareHRIS.com for assistance. We created the web site with these ten steps in mind. Most of the functionality of our site won’t be found anywhere else. That, of course, is why we created this site in the first place.

The Ten Steps to making a wise HR Information System or HRMS purchasing Decision

1. Improve your Software IQ
2. Determine your Software Needs
3. Create a detailed requirements spreadsheet
4. Determine your budget
5. Pick four or five vendors to review
6. Evaluate the HR systems
7. Research each software company
8. Set Implementation Expectations & Price
9. Make your Purchase Decision
10. Getting management approval for your new Software

1. Improve your HR Software IQ

Before you are able to determine what your needs are for a system, you need to know what type of capabilities HR applications provide. Allow me to save you a great deal of time with this step. Go to our HRIS Selector Tool and run through the questions. These questions are based on perhaps the most comprehensive list of options and features available for today’s applications. Under many of the questions we have included subsets of questions, as well.  So make sure to look at all of them when doing your research. We initially created a comprehensive list for options and features based on what prospects indicated to us were most important to fill their system needs. After adding the numerous software vendors to our site, we asked those vendors to review our questions and add additional questions related to features and options that were unique to their systems. Run through the survey and, I assure you, that you will be far more knowledgeable about the options available than you are now.  If you want to see a short list of features and options that are available, access our HR Software Comparison Tool and you will see a list of core features we have identified by which users may filter these products. Below, we provide additional basic detail on options that are available and what system capabilities they typically contain.

 Common Human Resource Software Features and Options

• Employee Database – An employee database, or HR database, is the one common feature with all HR software applications. They may differ on options and features they provide but all have some type of base employee database from which to start. The employee database will likely contain fields for most of the information you have in an employee file. However, with that data being contained within a database, you will have the ability to report and manipulate the data.

• Payroll – Many of today’s HR applications offer payroll as an option. The companies who offer a payroll system can pitch the benefits of a fully integrated package. The largest benefit of this option is that all of both the HR and Payroll data is contained in a single system. Therefore, double input or the transfer of data does not exist. The software packages that don’t offer payroll usually offer a variety of interfaces to provide the capability of importing or exporting data to a third party payroll option. If you don’t plan on changing out your payroll application, this might be the best bet. Make sure the vendor you select either offers a payroll option or is able to provide an interface to your existing payroll application.

• Attendance –  Attendance Tracking and accruals with a manual process is a wasteful, time consuming process for those HR departments who don’t have the advantages of an automated software solution. Attendance systems will typically track accruals and provide automatic increases to accrual rates based on seniority. If you don’t have an integrated payroll application and/or an integrated time collection system, you may not be able to track accrual rates if the levels are based on hours worked as opposed to time of service.

• Time Collection – In the past, most of the HRMS software vendors did not offer time collection systems. They usually worked with 3rd parties and interfaces to import data into their system. Over the last few years, a number of software companies have started to create their own integrated applications for tracking time records for payroll. There are a variety of ways time data can be collected. The easiest is a simple online employee time sheet. The employee simply inputs the hours they worked and submits the information. Some web based hr systems act the same as a time clock where employees log in, clock in for the day, out for lunch and so on. The third option may involve the actual use of physical time clocks which integrate to a software application and to your HR and Payroll applications. 

Training Management – Most, if not all, HR software applications provide the ability to track basic training data such as when someone took a class and when they are due to take it again. Certain industries are responsible for tracking far more training than others. Those that are in health care and manufacturing, for example, typically not only have to track when an employee got trained and must be retrained but also how many CEU’s or credits they need to achieve certification or program requirements. They may also have to track training required by Job Title. A few systems on the market will integrate training management system options with an Employee Self Service (ESS) system. In this case, employees may be able to view training details or enroll in classes online.

• Recruiting – Recruiting solutions have come a long way. Many of the online recruiting software options offer the ability to link data to your web site. With this option, prospective applicants can apply for positions directly on your company web site. The advantage is that all of this data is contained in a database that can be searched to determine who the most qualified candidate is. A few systems take the process a step further by offering Applicant self service where the applicant can setup a profile and actually monitor their stage in the hiring process.

• ESSEmployee Self Service systems provide employees or managers with the ability to access and, if approved, change data related to themselves or their employees online or through a company intranet. The advantages of these systems are obvious. Managers, and employees, have the ability to look up important details on their employees, or themselves, without having to contact HR. This data may include simple demographic detail or include more inclusive, time collection, training, attendance, performance management, succession management and/or payroll information. Most systems will provide for some type of automated work flow. When an employee makes a change to data, the information may change automatically or it may go through an approval process, where a manager may approve or deny the request before HR makes the change final.

• Manager Self Service – A key element, and sometimes a more important element, of Employee Self Service is manager self service which was touched upon above. This capability gives managers the ability to view data and, if allowed, change data on their direct and indirect employees. As mentioned above, managers who use an ESS product with manager self service, may have the ability to change or approve changes to employee data including demographics, time sheets, time collection, attendance, performance management, succession planning and payroll information.

• Email Alerts – Most Employee Management Software products now offer some type of email alert function. Here’s how these systems work. You have a large number of dates you as an HR professional are required to track on your employees. These items might include birthdays, anniversary dates, review due dates, certification dates, training due dates and more. With these alerts products, you are able to set up automatic emails based on these dates. For example, when a review comes up, you want to send an email to both manager and employee of the pending date.

Benefits Administration – Most, if not all, HR solutions provide some capability of tracking employee benefit data.  With this data, HR departments are able to report on which employees have certain benefit options and what the costs are to employees and the employer for those plans. The systems I examined are somewhat similar on this capability. Where they differ is the ease and the capability of setting up and adding benefit plans. Make sure the system you select can directly handle the calculations associated with your benefit plans.

• Benefit Open Enrollment – Benefits Open Enrollment products are some times included with ESS applications or sold separate. In either case, they provide the basic capabilities. An HR system administrator is able to setup a wizard which guides employees through the process of enrolling for benefits. Employees will have the ability to see which benefits they are eligible for and what the cost is for each plan. With most of these systems being online, it’s a function that can be addressed while the employee is not at work.

• Carrier Connect – This is an HRIS feature that has become popular in just the last few years. With this option, HR personnel have the ability to directly transfer benefit related data directly to your benefits provider. This capability is obtained with the use of interfaces. If the HR software vendor has not worked with your particular benefits vendor, they will likely have to custom make the interface application which can be both expensive and time consuming. If you are considering this option, it’s important to see if the vendor already has interfaces to your providers. And if not, what the time and cost is to offer the option.

• Position Control – HR Systems typically track employee related data by employee. Thus, data related to training, pay, employee development, salary grade, job title and more are associated directly to the employee file. Position control systems differ in that they associate all of this data, and data related to open requisitions, to the position. For reporting capabilities, this is an important difference. Typically, the health care industry, government and government contractors are required to track position control data.

• Performance Review Management and Compensation – This is becoming a more and more popular HR system option. There are few processes that are more time consuming or more difficult to standardize than the review process. Several of the vendors that advertise on our site offer this option. Basically, these systems automate the process and reduce the paperwork associated with reviews. Managers will score employees based on a number of user determined competencies. Based on the score, the body text under the competency can be automated as well. During the year, goals can be established for each employee. Then, employees and managers can track the success and progress of each goal before, during and after the review process.

• Succession Planning – With these options, managers are able to define career paths for each employee and include and track the requirements for reaching those paths. These systems may integrate directly with performance review software or with training management systems to further define the requirements for career paths.

• E Forms – This capability allows forms to be created and have the fields for those forms automatically populated from data contained in your HR database. Between Microsoft Word or Excel and any database using the mail merge capabilities, the same thing is possible.  However, many vendors have automated the process.

• Government Compliance – HR personnel typically track government compliance items which include COBRA, OSHA, FMLA, Vet’s 100 and Affirmative Action reporting. Again most, if not all, of the HRIS systems on the market offer reports for these requirements. If you require capabilities outside of this list, it would be important to determine those when creating your needs analysis for a system.

• Report Generation – Any software application you look at is going to offer some type of report writer and will include a large number of standard reports you can use to track information within your chosen system. The complexity, user friendliness, and capabilities of these report writers vary tremendously. A fair amount of time should be spent taking a close look at any report writer for a software application you are going to consider. In order to find the best match, you need to determine the technical savvy of your HR staff and you need to determine how complex your reporting requirements are.

• Customization – At minimal, systems will offer user defined fields to track data not already tracked. Most Human Resource systems will also include custom screen development. Others, which offer a very open architecture, may provide the opportunity to program customization add-on applications or automatic processes that occur based on certain actions taken in the system.

• Hosted Software vs Purchase - With Human Resource software you will likely be presented with one of two purchase options: hosted, a.k.a. ASP, or outright purchase. Hosted software systems host your data on the internet and provide you with remote access to it. The advantage is that you need little if any IT support, upgrades are performed automatically and, in case of a local emergency, your data is housed elsewhere. This last advantage is becoming an important issue for companies who lie in the path of hurricanes. These hosted software systems, because the cost is charged per employee per month with little up front cost, sometimes present for easier budget approvals than buying a system outright. The disadvantage of hosted software solutions is you pay for the benefits outlined above. Over time, usually after a few years, you will pay more for a hosted solution than if you had directly purchased an application and housed it locally.

2. Define your software needs

Anything you read on selecting any software application, including HR Management Systems, is going to tell you to define your needs first; but I am going to define what this means and why it is important. You need to be highly detailed with defining your needs. The more detail you put into, what I consider the most important step of the process of selecting an HR software application, the more likely you will make the right decision in the end. 

For example, a typical company might determine their needs for a software application to include the following:

• Windows based
• Integrated Payroll
• Training Management
• Turnover Reports
• Salary Grades
• Job and Pay History
• Attendance and Accrual tracking
• Report Writing
• Ease of use

This is a start but not nearly enough detail. According to my research, there are over 60 companies offering HRIS products in North America. If you take this list to all of those software vendors, more than half are going to meet your software “needs.” If you remove payroll from the list above, almost all of these vendors will meet your needs. Your short software needs list has not narrowed down your search much, that’s for sure.

When I undertook the task of creating compareHRIS.com, I believed I had a firm grasp on the overall capabilities of HRIS applications. After 15 years of experience in the HR Software industry, I was even surprised at how similar the various systems were at first glance. This was actually a huge issue as we were creating our site. At first, we were not detailed enough with our HRIS Selection tool or our core product page filters to show the differences between the various systems. The result was that all, or most, of the software applications showed the same capabilities. Our comparison screens showed far more checks than N/A’s. A web site for HR systems that says all the systems on the market do the same thing is not going to provide any benefit to HR vendors or to HR professionals seeking a software solution. We had to offer more detail to differentiate the various HRIS applications. You will have to do the same.

In order to resolve the issue, we asked our participating vendors to assist us with showing the unique features of their systems. On our products page, we expanded our core feature list and on our compare pages, added the term third party for those vendors who did not meet a certain feature with their core product. For the selection tool, we asked participating vendors for questions and categories that would show the unique capabilities of their systems.  After all of these efforts, we were able to provide a free service to HR professionals that showcased the unique capabilities of each participating vendor and provided HR professionals with an application that assisted with their software selection needs.

If you want to create a more detailed software needs assessment, ask questions on each of the above items to determine the detail you need from a Human Resources application. Also, make sure to ask others who will be using the application. If you involve your training, payroll, or risk management departments, you will likely find they may have specific needs to assist you with this task. Make sure to ask those who will be approving the purchase if there are features and options of an HR solution that could benefit them in their jobs. Ask, as well, what business objectives with which they are looking HR to assist. This will become important later when you ask for the approval. The more people you involve with your software needs analysis and selection process, the more likely you will be to find a system that meets the entire organization’s needs.

An example of a better needs assessment might include the following:

Windows based

  • Does application need to be SQL?
  • Is Application Vista compliant and will it work with our current network applications?
  • Do you need a hosted solution or will you purchase HR software and install on your existing network?

Integrated Payroll

  • Do you have any special payroll requirements?
  • Do you need to import time records from a current time collection system or do you want to select a time system that integrates to the new payroll application?
  • Will you need to export payroll data to a General Ledger (GL) application?
  • How will you want to handle tax filing requirements?
  • Do you have any difficult to handle garnishment or levy issues and does that vendor handle these items?

Training Management

  • Do I need to simply track training as to when an employee took a class and perhaps when they have to get retrained or do I need to track CEU’s and credits for those needing a certain number to meet the requirements for a certification? 

Turnover Reports

  •  Are these reports standard or do they have to be custom written and how easy or hard and comprehensive is the process.

Job and Pay History

  • How much detail do you need to track?
  • Are you looking for unlimited history?
  • How will you report on this information? 

Attendance and Accrual tracking

  • How will this data be input?
  • Will system work with our attendance plans?

Report Writing

  • Exactly what type of reports do you need?
  • Create a list

Ease of use

  • Setup time and Support

If you find an HR product that answers all of the example needs presented above, you will have made a better informed decision than if you simply went with the original list of needs. Again, our HRIS Selector Tool can be enormously beneficial at this stage because you see a comprehensive list of available software features from which you can determine most closely meet your needs. Once you complete the questions, you will be presented with a ranked list of the products meeting your needs.

As a final note on determining your needs, allow me to suggest adding to your needs list interfaces or integration you may want for tying your existing systems to your new HR software application. Let’s say, for example, you are looking for an integrated HR Payroll software application. If that’s the case, you may want to transfer data from the payroll system to your GL application or you may want to import time records from a time collection system. If you are going to tie your HR software application to an existing payroll application, add at least an interface to your needs list between the two systems. You will also want some capability for populating your data base from whatever source you can provide for the data. The alternative is manual entry.

I hope that the amount of detail I provided on the subject of establishing your software needs list, stresses how important this step is in the process. Whether you make a good decision or a poor one, in selecting an HR solution, that result will largely rest on how good a job you did with determining your needs.

3. Create a detailed requirements spreadsheet

Now that you have a highly detailed HR information system needs list, the next thing to create is an Excel spreadsheet with these needs which you will use during your evaluation process. List the needs down the left side and across the top you will add the various vendors as you determine which you will look at. You might want to add rows for the price, purchase options, and implementation time lines and costs to further aid with keeping all the systems separate. As you evaluate each system, simply check off which meets each of your needs. At the end of the evaluation process, you won’t have to struggle to remember which product did what.  Again, take a look at our HRIS selection tool as a starting guide of the features and options that are available.

You may want to do as we have done on the product page comparisons and show which products meet a certain need using third party applications in addition to the core system. You may have to work with third parties to meet all your needs or you may select to work with only companies that provide your requirements with their base systems. The issue with meeting needs using third party applications is how tight the integration is between the systems. If the systems are not integrated, you may have to work with interfaces or double input data into each application. If a vendor offers a third party product to meet a requirement, make sure to ask how the two applications will speak to each other.

Here’s a Requirements Spreadsheet example:

          HRIS Requirements Spreadsheet 

4. Determine your Budget

Before you waste your time searching for an Human Resource application, you need to determine how much you will be able to spend on a system. Over the years, I have performed close to a thousand demos of HR software applications. Of those, maybe at most 30% ended up getting the approval for a system. The other 70% were often, and incorrectly, seen as a cost center by management unworthy of a large investment needed to make HR run smoother.

If you involve other departments such as risk management, training, and accounting in your software selection process and list of needs, it may be possible that their budgets can add to the amount you will be able to spend for an software application. At the very least, involving other departments will showcase how an HRIS application will meet more organizational goals.

When you determine how much you will be able to spend, include a total as well as a monthly amount. Management may be more inclined to purchase an application if the payment for such is not made all at the front end of the project. There are a number of software solutions that offer hosted options. You pay so much per month per employee and they host the application on the web. I have seen the prices from the $2 to $10 per employee per month and above. If hosting is not an option, you can always lease the software for up to five years. In this case, you spread the initial payment over that time frame and at the end of the lease term only owe on annual support.

5. Pick four or five Vendors to review

Now that you have defined your needs, requirements, and budget, you are ready to select the short list of software vendors to evaluate. You only need to evaluate those products you have the budget for and that meet your needs and requirements. This is not an easy task. As I mentioned before, I have personally found there are over 60 HRIS vendors just in North America. Now that’s just companies offering HRIS. If you want to add all HR software, outsourcing companies and companies offering add-ons, multiply the above number by 100. There are a few ways you could go about picking these companies. You can start the time consuming process of searching the web, ask fellow HR personnel, speak with fellow SHRM members, or post for recommendations on various HR message boards, forums, or blogs.

 The Easy way

We have an easier way and it’s why we created this site. We provide visitors with a free service for assisting with this exact process. You have two options with our site, go to either the HCM Quick Search and filter the various products we have listed by common features and options or access the HRIS Selector Tool and run through a detailed needs analysis to arrive at a short list of products to evaluate in additional detail. 

6. Time to View Demos

You will want to setup either online or on-site demos with each software vendor you plan on evaluating. Have your needs spreadsheet in hand and score each product on how well they meet your needs. Each vendor is going to show you where their software is the strongest. Where their strengths lie may, or may not, match up to your needs. Make sure that, in the demo, you are seeing exactly the capabilities you need or require. You might want to create a brief set of questions, for which the vendor may provide answers, to further assist you with completing your spreadsheet; since it is unlikely you will be able to cover all of the needs you have identified.

7. Research each Software company

At this point, you should have arrived at a shorter list of software applications meeting your needs and requirements. If you started out viewing four or five systems, you will likely have it narrowed down to two or three at this point. Price will certainly be a determining factor in your final decision but there are other questions you should ask before considering the price.

  • How long have they been in business?
  • How many installs do they have?

I have included the answer to both of these questions on our Products Page for each of our participating vendors. The answer to these questions goes a long way toward establishing the stability of the vendor and the product. I would never recommend purchasing any business software application from any organization with a small number of years in business and a small number of installs. You don’t know if that company will be in business a year from now or if they have actually had their product on the market long enough to have worked out the bugs. When you visit our Products Page, you will notice that we don’t offer any products that have been in business for less than five years or have fewer than 250 active installs.


Ask around at your local SHRM chapter or via on-line forums, message boards or blogs if anyone is using the product and has an opinion. You can always ask the vendor for references but they will, of course, only be supplying you with customers who have agreed to speak with you and are pleased with the application. If you are going to seek references and plan to contact them, realize that the reference was hand picked.

8. Software Implementation Expectations & Price

When you decide on an application, you will want to know what it’s going to cost you. The cost for software and support are all going to be fixed costs. You will know exactly what you are paying and those amounts won’t change. The only variable cost associated with an HRIS system install is going to be the implementation costs. Some vendors may provide fixed cost project costing but even these projects can run over budget if the scope of the project was not fully defined.  It is extremely important that you define the scope of the project in as much detail as possible.

9. Make your decision

At this point, you have become an expert in selecting an HR software solution. You defined your needs, you selected the vendors meeting those needs and continued to shorten your list based on price, capabilities and company strength. Now it is time to make the final decision. Based on everything you have done up to this point, and added, with your handy spreadsheet this is the easy part.

Let me give you a tip. Those who don’t ask for HR Software discounts don’t get HR Software discounts.

10. Getting management approval for your Software

Just when you thought the whole process was over, the next step can be the toughest for many. I hope getting management approval ends up being your easy task. If it’s not, see if the advice below helps with the process.

Involving others in the process

I mentioned earlier that you should involve as many people as possible in the software selection process and needs assessment. When you go seeking approval, you can make a stronger case for an HRIS if it’s benefiting more than only the human resource department. A product that benefits two or three departments, and current employees, offers greater value than a system that only benefits an HR department that, sadly, by many companies is still seen as a cost department. If the application benefits the training department, risk management, accounting and HR departments and offers greater service to managers and employees, it has more benefit to the company on the whole. It may also be possible to have those other departments chip in budget dollars for the project.

Cost justifying

There are many articles on the web relating to cost justifying a software application. I have yet to find any that do a good job with the difficult process of cost justifying an HR application. There are certain HR options that are easier to cost justify than others. Online recruiting options, for example, may directly reduce the need to use outside recruiters or temp services. This product can offer a direct hard cost savings. Payroll is the same way. If you are paying X dollars for your existing payroll only outsourced option, and you bring it in for less and offer an HR application, there is a direct savings that can be shown.

With an HR employee database, it is far more difficult to show hard cost savings. Yes, it will save Human Resources tremendous amounts of time but does that savings of time equate to hard cost savings? Yes, an ESS product will provide greater service to managers and employees but again does it provide direct hard cost savings? It’s easy to understand the difficulty of creating an ROI statement for an HR application.

What is the value add or your HR Software?

Since we have shown it is difficult to prove hard cost savings with the implementation of a Human Resource application, it is important instead to focus on the value add of the application.

This approach requires your HR department to think about business objectives, issues and problems and show how an HR application will help the overall organization provide solutions to these objectives, issues and problems. "How will a system assist the organization with doing a better job of reaching critical business objectives" is the question that needs to be answered. The degree of success you have with this answer will likely determine your success or failure in gaining the approval you seek.

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About the Author:
Clay Scroggin worked in the Human Resource and Payroll Software Industry for more than 15 years. During that time, he assisted hundreds of HR professionals with their HR and Payroll software needs. In 2007, Clay founded compareHRIS.com, dedicated to assisting HR professionals with their search, selection, implementation and use of HR systems.