HCM software vs. payroll and HR software: What’s the difference?

Different companies of different sizes and industries have different needs, so if you’re considering a new human capital management solution, you want to make sure it does exactly what you need it to.

HR software is your company’s system of record. It contains employee data and makes it available to the business processes and other systems that require it. For example, it may interact with your payroll software to provide the banking details for direct deposit.

Payroll software takes gross pay and raw time data from another system, or manually keyed data, and calculates net pay from it, applying deductions and appropriate taxes.

When HR and payroll software is combined with other functions like recruiting, talent management, scheduling, and time and attendance, the industry calls it human capital management (HCM) software.

Evaluating which HCM software is right for your business? Get a free Buyer’s Guide here

Human Capital Management covers all the touchpoints between employee and employer:

• Recruiting and onboarding an employee
• Being the HR system of record
• Tracking time and attendance
• Budgeting for and forecasting labor needs
• Paying employees accurately and on time
• Managing benefits
• Facilitating performance and compensation management

Businesses considering upgrading their payroll or HR software should evaluate HCM solutions. Many vendors bundle the best payroll software as part of an HCM software suite. Or they have built a single application for HCM that has all the functionality of great payroll software.

Either way, you should determine if the additional functionality and end-to-end integration of HCM software warrants the extra investment.

What are the benefits of modern HCM software?

There are many benefits to HCM software, including the ability to:

• Calculate zero-to-net pay immediately as time is recorded
• Gain visibility into your entire payroll results at any time during a pay cycle
• Share data between time, pay, benefits, and HR instantly
• Report on time, pay, benefits, and HR data together
• Eliminate double data entry in time, pay, HR, and benefits applications

Learn what questions to ask and criteria to evaluate to ensure the software you buy gives your business these abilities in the HCM Software Buyer’s Guide.

How important is real-time payroll processing?

Many HCM solutions offer real-time payroll processing functionality, while best-of-breed HR and payroll software may rely on imports, exports, and batch processing. Also known as predictive payroll, HCM software with this functionality means you can:

• View your payroll at any time, even in the middle of a pay cycle
• Immediately see the results of changes to schedules or time and attendance reflected in your payroll
• Run payroll without waiting for an import, export, or slow batch process
• Review benefit costs at any time, not just after payroll is run

What does one codebase mean?

A great question that’s probably not on the top of your list to ask: how many codebases are in the software? This can get a bit technical, but it’s important. The “codebase” points to whether the software was built as a cohesive whole or whether different solutions were patched together. Does the software contain third-party code the vendor purchased to fill a gap in theirs? Does that complicate who supports the software? What about software updates? Does the solution contain old code no longer updated by the vendor or its third-party partners?

What if I have complex payroll needs?

Getting your people paid accurately and on time, while staying compliant in the legislation jurisdictions where you operate, is simply the most important work HCM software does. Software that performs other HCM functions well, but struggles with the complex needs of your business is going to be seen as a failure.

Determining whether the HCM software can handle your unique payroll and compliance needs should be top of mind during the review of RFPs and product demonstrations.

Our HCM Evaluation Guide can help with specific evaluation criteria to consider.