Justifying HR Software for the Small Business

A good number of smaller businesses (less than 250 employees) find it difficult to justify hiring a dedicated personnel or HR manager, or investing in HR software.

The result is that the function is bolted on to the role of a PA or senior secretary.Employee information is kept in paper files, alongside extracts of payroll reports with a few spreadsheets trying to keep a grip on the basic facts.

It’s not ideal scenario especially if the small business suddenly mushrooms becoming large enough to present administrative headaches. Added to that, there are the ever-increasing bureaucratic demands on businesses of all types and sizes to dispense information on diversity (especially when pitching for public sector work) or to submit an employee overview together with the statutory accounts.

Many smaller businesses are nervous of spending more money on an HR system, not only because the perception is that they are expensive, but because making a business case for it has been hazy. It hasn’t helped that some software houses fail to present their products in language that business people can understand.

So what are the benefits?

Of course, it is good to keep detailed employee information in one place, being able to refer to it quickly or run a report on a variety of reasons (absence, training spend and equal opportunities compliance), but where the current crop of applications really score is with triggered actions.

In broad terms, triggered actions are a series of events that the user sets up to react to particular changes in the data. A new starter entered on the system when a job offer is accepted (even before they actually start) will generate an emailed message to the switchboard / reception, IT people and facilities to ensure that everything is in place when they arrive, such as a telephone, system password and even a desk! (Anyone who has experienced a start at even the largest companies will find the experience of turning up and not having access to the IT system because an ID wasn’t set up will know exactly what I’m talking about.)

These triggers can also remind you, your personnel manager and supervisors of important events such as probation period ending, appraisals, eye tests, expiring licences /permits, impending retirements, long service awards - even employee birthdays if you want.

Suddenly all those manual reminders that get forgotten are a thing of the past.Not only are they time-savers, but they also mean that things don’t fall “between the cracks”, so in terms of reduction of errors and employee goodwill they are a worthwhile investment in themselves.

One system, or two?

A question I am often asked is if it is best to have an HR system integrated with the payroll. The straightforward answer is, ideally, yes. The reality is these integrated systems will raise the budget required, as they are more expensive to engineer. Having two disparate applications of HR and payroll can work if you can balance the cost of “double posting” against the overall cost of buying integrated software. Of course, if you are using a payroll bureau or other third-party supplier, you have a more interesting calculation to make.

Your main options would summarise as follows:

a) Integrated HR and payroll application

Pros: labour-saving, less prone to posting errors, extra features

Cons: relatively more costly to source and run.

b) Separate HR and Payroll software

Pros: relatively less costly

Cons: Everything posted twice, potentially expensive to develop interfaces, higher possibility of discrepancies between records.

c) HR software & third-party payroll

Pros: Less costly than a) but more expensive than c)

Cons: same as b)

Making the right choice

Like everything in business it comes down to the sums: costs versus effectiveness, and the will to do something about it. You want a piece of software that is an enhancement to your business, not a millstone that will become an industry to keep running. If you’re not sure about the way this might work for you, get an expert in; it won’t take them more than a day to tell you if it’s a worthwhile exercise.

In general, HR software has come a long way over the last decade, becoming more and more affordable as larger vendors and niche software houses take notice of small and medium-sized businesses with less than 500 employees.Coupled with these developments is the additional bonus of decreasing outlay being required to run and maintain these systems, as a growing number of them are accessible through a web browser and hosted by the vendors, or downloadable from the Internet to your PC or laptop and ready to set up and run.Download options

Setting up is becoming less and less of a chore with easy-to-follow instructions, which are pretty intuitive. ‘Plug and Play’ gets ever nearer – with the vision of HR software that you can download at lunchtime and have running by mid-afternoon close to being a reality.

There is a varying (and occasionally bewildering) array of charging models, the most common being an upfront purchase payment with a small annual maintenance fee, or a set-up fee followed by monthly subscription, this latter usually being decided by the number of employees.

Due to the simplified delivery methods of these systems, you don’t need to spend time travelling to and from exhibitions, or sit through long software demonstrations; you can download a demo version from the internet or by CD and trial it at your own pace using samples of your own records.