Employees are the lifeblood of every organization. The better they are, the better qualified, trained, and managed, the more effective and profitable your organization will be. Human Capital Management (HCM) software can be divided into two main areas of functionality – Payroll Software and Human Resources software. HCM solutions have seen widespread acceptance by the market in the Cloud and these solutions can be implemented in both an On-Premises and Cloud model. This section provides an overview of the capabilities of Human Capital Management software and functionality you should be aware of as you evaluate HCM software systems.
Payroll Software Features
The following lists some of the major functionality available in payroll software.
- Pay Types. Payroll software offers the ability to accommodate an unlimited number of pay types, labor classes and shift premiums based on a flat amount or percentage. In complex payroll environments (i.e. unionized rules, public sector pay grades, step increases, pay for performance, etc.), payroll software offers rules-based payroll in order to trigger pay rate types based on events or activity codes. An example of an event trigger could be an automatic pay raise to the next step after a 90-day probationary period, or premium pay based on activity code (i.e. hazardous duty, equipment operation, night shift, overtime, etc.).
- Time Clocks. These devices gather time information and interface directly with the payroll system. Some examples include time clocks, badge readers, biometric devices that function as timekeepers (these utilize fingerprint or eye scanning technology), security access authorizers, and attendance recorders. Some companies use Kiosks or internet based timekeeping, which allow the employee to enter time at a Kiosk set up on the floor, or from their computer, tablet, or smartphone at a distributed location.
- Timesheets. Electronic timesheet entry is an area where technology provides tremendous advantages. Timesheets can be entered over the Internet via a Web browser. Secure online routing of timesheets and approvals through workflow capabilities have made the process of approving timesheets a real-time activity.
- Leave Tracking. Leave tracking allows you to track vacation, illness, disability, maternity, parental leave and other employee absences. For unique requirements, custom absence codes can also be created. Trends and patterns can be identified through reporting tools and government reports can also be created (e.g. Family and Medical Leave Act (FMLA) reporting). Absence tracking allows you to maintain a running balance of various types of leave by employee including vacation, sick, personal holiday, unpaid leave and others. HCM software also offers the ability to input online leave and vacation requests through a self-service module or forms templates with automatic approval routing.
- Pay Runs. Payroll can be run on standard, daily, weekly, monthly, and even off-cycle pay runs. This feature includes the ability to run trial payrolls to review payroll budgets, benefits costs, guaranteed net pay, or other factors before posting a payroll and printing checks. These trial payrolls provide the ability to analyze different payroll groups including department, company, individual, or other pay groups. Adjustments can then be made before posting the final pay run. This is particularly useful after bargaining agreements are negotiated with unions to ensure the pay rules and pay table adjustments are implemented at the appropriate intervals.
- Payroll Processing. Payroll software provides unlimited pay groups, earnings types, deductions, work locations, benefits, departments, and tax tables to manage the payroll calculation process. You can set up standard checks or deposit directly to individual employees checking, savings or other types of accounts. Employees can also specify disbursements by a fixed amount, percentage, or interval that suits their needs (e.g. disbursements to retirement accounts from every paycheck or once per month). Quarterly tax reporting and year end government form information is maintained and reported on.
- Deductions. The ability to handle flexible deductions can be a very important capability of payroll software. This includes garnishments, child support, student loan repayment, retirement plans, monthly parking fees, union dues and other benefits. As mentioned above, you can also schedule these deductions.
- Expense Management. Payroll software has the ability to process online employee expense forms. These expenses can be routed to appropriate personnel, approved online, and linked to accounts payable or paid through the payroll system. Travel management capabilities include premium and expense tracking, travel advances, cash receipts, and multi-currency functionality. This streamlined expense reimbursement process reduces the cost of managing employee expenses, while at the same time provides faster reimbursements to employees.
Human Resources Software Features
The following are some of the key capabilities of human resources software:
- Recruitment. Human resources software can streamline and organize many aspects of the recruitment process. Recruiters and other HR professionals can manage the process from when an application is received, through correspondence and interviews with the applicant, to meetings with relevant hiring managers, to making an offer or rejecting the candidate’s application. Recruitment also tracks advertising, and applicant testing. Finally, successful candidate information can automatically be converted to a permanent employee record.
- Resume Tracking & Management. Another feature of recruitment is resume tracking and management. HR software allows you to manage job descriptions, and attach scanned resumes to candidate records. Key word searches enable the ability to quickly scan resumes for experience or skills that are most important to the position that is available. The system searches for the items of most importance, and flags the resumes that are most important for that job, allowing you to focus on applicants that are most qualified.
- Succession Planning. Succession planning software allows HR professionals to track the positions that will need to be filled in the future (e.g. due to illness or projected retirement) and the relative costs of filling those positions. HR systems also allow supervisors to examine the skill set of employees within the company for possible internal recruitment. Succession planning is helpful in environments with high turnover or an aging workforce with a high volume of planned retirements.
- Position Budgeting & Tracking. Position budgeting and tracking is the ability to budget for position types, employee equivalents, (i.e. Full Time Equivalent) or other factors used to facilitate hiring decisions. It also allows managers to model pay increases and the impact of hiring or transferring new employees to a department. Organizational charts can be created and quickly modified by dragging and dropping personnel into or out of a department or company. At the same time, a history file is maintained to allow the tracking of the changes. This information can then be rolled into the corporate budget.
- Training/Certification Tracking. Employee training and development is a very important way to improve the capabilities of your work force. Training tracking provides the ability to develop a training program for target groups or individuals; identify courses, course location, and instructor; and manage classroom scheduling. It also includes instructor notification and waiting list creation. Employees have the ability to register, download course overviews, and receive course certificates through an online portal. HR department personnel can run reports to see which courses are in demand and which are not.
- Skill Set Tracking. Skill set tracking matches people to skills, jobs, or roles. For example, the tracking of an employee’s experience with operating equipment, such as a forklift, allows a manager to look at the list of substitutions in the event that there is an emergency need for a skill set. It also helps facilitate new hire promotions from within the company, and the sharing of skilled workers between departments to improve operating efficiencies. Qualification codes include educational credentials, training/educational certificates and professional certifications.
- Employee Health & Safety. Human resources systems assist in accumulating data needed for Workers Compensation, Occupation Safety and Health Administration (OSHA) or other regulatory agencies. Components of employee health and safety include incident tracking, mandatory OSHA training and compliance requirements, employee licensing and certifications, injury claims, long and short-term disability, and other related factors. Standard reports can be run for regulatory requirements and custom reports can be generated for internal tracking and analysis.
- Employee Self Service. Employee self-service (ESS) functionality is one of the most valuable features of a human resources system. It allows the employee to view and make changes to their personal information including their name, address and benefits plan without the need to call the HR department. This is frequently done through online portals that provide secure access to information such as benefit statements, employee handbooks, pay stubs, company newsletters and events. The employee can also access his/her records to adjust his/her HR information for online benefit enrollment, benefit election changes, online leave requests and approval routing to appropriate supervisors, and employee status changes (such as dependent enrollment, emergency contacts and address changes).
- Manager Self Service. Manager self-service (MSS) functionality allows managers to view their HR information via a secure online manager Web portal. These portals offer visibility to their direct reports’ records, attendance, online performance reviews and skill sets. It has online approvals for employee requests such as vacation, training, or employee requisition forms. What used to be a very paper intensive process that took weeks to approve can now be done in just a few minutes in a paperless environment.
- Performance Management. This tracks employee performance reviews and ratings, and can be configured to trigger alerts when the next performance review is due. It can track employee scoring based on categories such as attendance, skills, test results, certifications and other factors. It is also a useful management tool for determining bonuses, promotions, pay increases and learning plans.
- Grievance Tracking. Grievance tracking provides the ability to track employee issues such as harassment, supervisory problems, accusations, or other incidents, which may require corrective action. Templates are available for recording grievances and attaching them electronically to employee records. Extensive notes fields are also available in the employee record to track other important employee information. In today’s employment environment, it is critical to accurately maintain this information and human resources software facilitates this tracking.
- Employee Asset Tracking. Employee asset tracking maintains a record of assets issued to employees. Assets could include laptops, pagers, uniforms, cell phones, key cards, etc. Information in the employee asset record includes the asset type, number, potential replacement value, serial number and date of issuance to employees. This list also becomes a checklist for assets to be turned in before the final separation paycheck is issued.
- Organizational Charts. Organizational charts provide a graphical view of the setup of a company and allow a complete view of all of the personnel and their positions in the company. Changes to the organization can be done on the fly and are reflected immediately in the organization chart. A history record can be maintained for future reference of organizational changes.
- Health Benefits. Human resources software tracks dental, vision, long-term disability, short-term disability and other medical benefits. This includes creating deductions, tracking participant contributions, supporting enrollment, disbursements and reports to plan administrators. It also includes the ability to tie benefit plans to specific employee groups, union members, or positions.
- Mandated Benefits. Mandated benefits are those mandated by federal, state and local laws. Social Security and unemployment insurance are funded through a tax paid by the employer based on the employee’s compensation. Workers Compensation exists in all states. Under the Family and Medical Leave Act (FMLA), employers must offer unpaid leaves to employees with certain medical or family conditions. Other mandated benefits are available through Medicare, which provides health care for those age 65 and older funded through an employer tax. Consolidated Omnibus Budget Reconciliation Act (COBRA) is the extension of benefits for a certain defined period of months to employees that leave the company. Human resources software offers the ability to automatically enroll personnel at termination, and generation of COBRA notices via electronic mail or regular mail. This also includes a link to accounts receivable for in-house receiving of payments for invoicing, payment tracking, etc. COBRA benefits can be tracked for internally administered benefits, as well as benefits administered by an outside provider.
- Allowances. Employee allowances can be defined as either taxable or non-taxable, and need to be tracked within the HCM application. Deductions and allowances can be specified with a dollar limit or cap so that the system automatically stops the allowance when it reaches a limit (e.g. a training allowance cap of $1,500 per year). HCM systems can also provide other pay types for employee allowances, reimbursements and bonuses, and track them for tax purposes. To facilitate this, the system flags certain items to roll into payroll tax calculations, while other non-taxable items are directed for reimbursement through accounts payable. This is a rules-based system with integration to financial applications. Taxable allowances are considered a form of compensation. They include salary deferrals, incentive prizes and awards, personal or living expenses, personal use of company automobiles, and amounts forgiven on an employee debt. Non-taxable allowances include moving expenses for new hires, allowances for uniforms or special clothing, subsidized meal costs, work-related use of employee’s personal automobile, and others.
- Flexible Spending Accounts. Flexible spending accounts can include deferred compensation, retirement plans, benefits cafeteria plans, and Medical Savings Accounts (MSA). Premium-only plans include pre-tax contributions to Individual Retirement Account’s, savings accounts, etc. Human resources applications enable plan administrators to identify before and after tax impacts. Self-service applications through online portals make it easy for employees to choose their benefits, process their enrollment, get status information and manage their portfolio of benefits. These systems also perform audit functions, including tracking employee election changes, claims entries, and account balances. Participant records (employee and dependents) are maintained for multiple years.
- Pension Processing & Administration. This includes the maintenance of rules, eligibility and deductions. Rules-based benefits calculations make the system flexible, powerful, and able to be tailored to specific employee groups or types. They can be based on seniority, job title and other rules. They can do historical calculations, and maintain a complete online history of employee and employer contributions. If an employee is eligible for pensions from two different employers governed under the same plan, the software can net the pension benefit plans. In sophisticated environments, pension administration systems handle multiple pension types within a single plan (e.g. regular retirement, early retirement, pre- and post-retirement death benefits, etc.).
If you have any questions, or would like more ideas regarding your HCM software evaluation project, please contact us at (425) 216-4030.