Home > HR Pro Shop > HR Software for Small or Midsize Businesses: Do I Need it?

Whether you own or manage a business, are part of an HR team, or are an executive looking to boost employee morale, you may have wondered whether you need HR software to streamline your human resources processes.

HR software can be a valuable tool for business owners, HR teams, and the entire organization, helping to automate tasks, improve efficiency, and ensure compliance with employment laws. 

With our 37+ years of experience in human resources, we’ll give you an honest explanation of the reasons why HR software may be beneficial for businesses. On top of that, we’ll provide expert recommendations to assist you in choosing the appropriate HR software options for your business needs.

What is HR software for businesses?

HR software for businesses, also commonly referred to as Human Capital Management Systems, is a versatile tool designed to streamline core HR processes and seamlessly manage employee data. This software incorporates a wide range of core features and benefits that can automate multiple HR tasks, ultimately optimizing efficiency and productivity within organizations.

One of the primary purposes of HR software is to automate repetitive tasks such as data entry and generating reports, allowing HR professionals to focus on strategic initiatives. It also offers comprehensive employee data management, enabling businesses to store and access essential information easily.

Furthermore, HR software facilitates seamless workflows by integrating various functionalities. It encompasses recruitment and onboarding tools, enabling businesses to attract and hire top talent efficiently. Additionally, it encompasses payroll management, ensuring accurate and timely payment for employees.

Employee self-service is another crucial feature of HR software, providing a portal for employees to access and manage their own information, significantly reducing administrative burdens for HR departments.

HR software is available as cloud-based solutions, accessible through desktop applications or mobile apps, providing convenience and accessibility for businesses. With customizable plans and scalable solutions, HR software caters to businesses of all sizes, from small and midsize enterprises to larger organizations.

Long story short, HR software for businesses offers a range of features and benefits that automate tasks, manage employee data, streamline workflows, and even can support expense management. With user-friendly interfaces and comprehensive functionalities, the right core HR software revolutionizes HR management, improving overall efficiency and productivity.

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Knowing when your business needs a human resource management software solution comes down to many things. Here are a few questions to help guide your decision:

  • Are you struggling with task management, lengthy task lists, or working through repetitive and low-impact administration tasks?
  • Are you managing multiple complex spreadsheets?
  • Are you having a hard time with talent management?
  • Are you lacking team productivity and team collaboration?
  • Are core HR functions taking you away from more important business activities?

The list goes on, but if you answered yes to three or more of these, you may want to consider your options as it relates to HR software. Let’s narrow this down further:

Business Sizes

One of the first things to consider is the size of your business. If you have a small team with only a few employees, you may be able to manage HR tasks manually or with basic tools like spreadsheets.

However, as your business grows and the number of employees increases, it becomes more challenging to handle core HR functions efficiently without specialized software. A human resource management software solution can help you streamline tasks such as employee onboarding, time and attendance tracking, payroll management, and benefits administration.african american professional surrounded by paperwork

As a business grows, so do its HR needs. The manual tasks and complex spreadsheets that once sufficed for managing information in an employee database and administrative tasks become time-consuming and error-prone. This is a good indicator as to when a business needs an HR software solution.

Another indicator is the growth stage of the business. As the number of employees and HR responsibilities increases, it becomes essential to have a streamlined system in place.

HR software provides the necessary structure and automation to handle tasks such as employee onboarding, attendance tracking, and benefits administration efficiently.

Another factor is the need for effective HR leadership. When HR professionals are bogged down with day-to-day HR tasks, they often lack the time to focus on strategic initiatives that can drive employee engagement and business activities. HR software alleviates this burden by automating repetitive and low-impact administration tasks, allowing HR professionals to have the time and tools they need to make a difference.

Implementing HR software not only saves time and money but also extends these benefits to the rest of the business. By automating manual tasks, businesses can operate more efficiently, freeing up employees to focus on driving progress and innovation.

In summary, if your business is experiencing growth, struggling with manual tasks, and needs HR professionals to have the time and tools to make a difference, it’s time to consider implementing HR software. With its ability to save time and money, HR software empowers businesses to streamline their core HR functions and allows employees to concentrate on what truly matters – driving more impactful business activities.

Why small businesses may want HR software

Small businesses can greatly benefit from implementing a human resource software solution. One of the key advantages is the ability to streamline administrative and manual tasks, allowing employees to focus on other important business activities. With HR software, small businesses can automate tasks such as time and attendance tracking, leave management, and storing critical data in an employee database, reducing the time spent on manual tasks and data entry.

In addition to streamlining administrative tasks, HR software can also lead to improved communication and employee feedback within the organization. With self-service features or a self-service portal and mobile apps, employees can easily access and update their own information, eliminating the need for constant back-and-forth communication with HR personnel.

Furthermore, HR software can enhance employee engagement. By providing a user-friendly platform for employees to access information, participate in company-wide discussions, and provide feedback, human resource management software fosters a culture of transparency and collaboration.

Lastly, a human resource software solution can contribute to successful recruiting efforts. With tools like applicant tracking systems and job posting capabilities, small businesses can efficiently attract, screen, and hire top talent. The streamlined recruitment process not only saves time and resources but also ensures that the right candidates are identified and onboarded effectively.

It’s easy to see how implementing HR software in small businesses can be crucial for streamlining administrative and manual tasks, improving communication, enhancing employee engagement, and achieving successful recruiting outcomes.

Why midsize businesses may want HR software

Midsize businesses may want HR software for a variety of reasons. Midsize businesses are prone to growth. As you grow, you often face more complex HR processes and a larger workforce to manage. Implementing HR software can help you handle these challenges more efficiently and effectively.

One key reason midsize businesses may want HR software or a human capital management system is to automate HR processes. With complex automation and management workflows, such as automated notifications and reminders for important HR tasks, companies can ensure that core HR functions are not overlooked or delayed. This not only saves time but also reduces the risk of errors and compliance issues.

Additionally, HR software can accommodate the growing workforce of medium-sized businesses, as well as a remote team. As the number of employees increases, managing personnel data, tracking time and attendance, and handling benefits administration become more challenging. HR software provides robust workforce management tools that can streamline these processes, making them easier to handle and reducing the administrative burden on HR professionals.

Enhanced reporting is another important feature for medium-sized businesses. By having access to comprehensive HR analytics and reporting capabilities, companies can gain valuable insights into their workforce trends, employee performance, and HR metrics. This information can help them make data-driven decisions to optimize their HR strategies and drive business growth.

Furthermore, HR software with an internal applicant tracking system (ATS), learning management, or recruitment support can greatly benefit medium-sized businesses. These tools assist in managing the end-to-end recruitment process, from creating job postings to screening applications and scheduling interviews. By centralizing and automating these tasks, HR departments can save time and ensure a more efficient and effective hiring process.

Assessing your business' HR needs

Understanding your business’s HR needs is crucial in selecting the right HR software. Here are a few areas to start assessing your business’s HR needs:

1. Evaluate Your Current HR Infrastructure: Start by reviewing your current human resources management system (HRMS), if you have one, your HR processes, and HR policies. Assess their effectiveness, efficiency, and alignment with your business goals. Identify any gaps or areas for improvement that need to be addressed.

2. Identify Business Objectives: Determine your company’s short-term and long-term goals. Understand the skills, knowledge, and competencies required to achieve these goals. This will help you identify the HR functions and resources needed to support these objectives.

3. Conduct a Workforce Analysis: Analyze your current workforce and its capabilities. Identify any skills gaps or shortages that may hinder your business activities and growth. Consider factors such as employee turnover, succession planning, and talent management This analysis will help you determine the HR strategies needed to attract, develop, and retain talented employees.

4. Review Legal and Regulatory Compliance: Ensure that your HR practices are compliant with relevant employment laws and regulations. Stay updated on any changes in labor laws, employee benefits, or workplace safety requirements. Conduct internal audits to identify any potential compliance issues and take necessary corrective actions.

5. Assess Employee Engagement and Satisfaction: Employee engagement and satisfaction are crucial for productivity and retention. Conduct surveys, interviews, or focus groups to gather employee feedback. Identify areas where improvements can be made, such as learning management, work-life balance, or employee recognition programs.

6. Consider Technology and Automation: Evaluate your human capital management system and tools. Determine if they are meeting your business needs and if there are any opportunities for automation or streamlining processes. Implementing a better human capital management system or platform can help enhance efficiency, data management, and reporting capabilities.

7. Seek Professional HR Support: If you lack HR expertise internally, consider outsourcing HR functions or consulting with HR professionals. They can provide guidance on best practices, compliance, and strategic HR initiatives.

8. Develop an HR Plan: Based on your assessment, create an HR plan that outlines specific actions, timelines, and responsibilities. Prioritize the areas that require immediate attention and allocate resources accordingly. Continuously review and update your HR plan as your business evolves.


Remember, assessing your business’ HR needs is an ongoing process. Regularly monitor and evaluate your HR strategies and initiatives to ensure they align with your business objectives and adapt to changing market conditions. By investing in a human resource software solution, you can create a positive work environment, attract top talent, and drive organizational success.

Do you need payroll with your HR software?

Having payroll integrated with your HR software solution is essential for businesses of all sizes. Payroll software streamlines the entire payroll process, making it faster, more accurate, and more efficient.

By automating payroll processing, HR software eliminates the need for manual calculations, saving valuable time and reducing the risk of errors. With built-in tax filing and calculation capabilities, businesses can ensure accurate deductions and withholdings, avoiding costly fines and penalties.

Payroll software also simplifies employee benefit and compensation management. It allows for easy tracking of hours worked, overtime, and time off, ensuring accurate and timely payments. Additionally, it facilitates the management of employee benefits, such as healthcare plans and retirement contributions, as everything is consolidated in a single platform.

The benefits of using payroll software extend beyond payroll processing. It can also help streamline employee onboarding by automating the setup of direct deposit and tax forms, reducing paperwork and administrative tasks.

To summarize, integrating payroll with your HR software provides numerous advantages, including time savings, error reduction, compliance with tax regulations, and simplified employee payment and benefit management. Investing in payroll software is a wise decision for businesses looking to streamline their HR processes and improve overall efficiency.

When it comes to finding the right business HR software, there are several key factors to consider. By carefully analyzing your current and future needs, aligning HR features with key elements of your business, and considering budget constraints, you can select the most suitable HR software solution.

First and foremost, it’s crucial to thoroughly analyze your organization’s HR needs and align these HR features with the key elements of your business. Think about the size of your company, the specific industry requirements, and any unique HR processes you have in place. You need HR software that can adapt to your specific needs and scale with your business.

By analyzing your needs, aligning features with your business, and considering budget constraints, you can ensure that you find the right business HR software solution for your organization. Taking these factors into account will help you select HR software that not only meets your current requirements but also has the potential to support your future growth and success.

Core Features to Consider When Choosing Business HR Software

When choosing HR software for your business, there are several core features that you should consider. These features can help streamline your HR processes and improve the overall efficiency of your organization.

Quick Note: There are a lot of terms you’ll see during your search for the perfect human resource software solution. Human resource management software, human resource software solution, human resources information system, human resources management system, the list goes on. But to be clear, these all pretty much mean the same thing.

One important feature to look for is applicant tracking. This allows you to easily manage and track the entire recruitment process, from posting job openings to selecting candidates for interviews. With applicant tracking, you can save time and ensure that you are hiring the best talent for your company.african american woman standing looking at moile device

Benefits administration is another core feature to consider. This enables you to efficiently manage and track employee benefits, such as health insurance, retirement plans, and paid time off. By automating these processes, you can reduce paperwork and ensure accurate and timely benefits administration.

Position management is also a core feature for businesses that rely on shift work or flexible schedules. This core feature helps you to effectively manage employee schedules, assign shifts, and track attendance. It can also assist in optimizing labor costs and ensuring proper coverage for all shifts.

Performance management is another core feature to consider. This allows you to set goals, track performance, and provide feedback to your employees. Performance management tools enable you to align individual goals with organizational objectives and foster a culture of continuous improvement.

Lastly, online learning is an increasingly valuable feature for businesses. It allows you to provide training and development opportunities to your employees through digital platforms. This can be particularly useful for remote teams or businesses with geographically dispersed employees.

By considering these key features, such as applicant tracking, benefits administration, scheduling and shift planning, performance management, and online learning, you can choose HR software that aligns with your business needs and enhances your overall HR processes.

When it comes to the best human resources software companies, there are several top contenders that consistently receive high recommendations, positive reviews, and impressive average ratings from users.

Comparing the Options

To help you even further, we’ve compiled a comparison of five popular payroll software providers, based on our research and the insights from our friends at G2.




Paychex Flex


UKG Ready

Overall Score






Ease of Setup






Ease of Use






Good Partner in Doing Business






Summer 2023 Leader Badge





*Note: The data in the above chart is subject to change based on G2 reviews.

*Chart Sources: G2 Comparison

*Note: The data in the above chart is subject to change based on G2 reviews.

Related:  A Comprehensive Guide for Finding the Best Human Resources Software Solution

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