HRMS Software vs. Traditional HR Practices: Why Businesses Are Making the Switch

by Srikant Chellappa Jan 4,2025
Engagedly
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The way an organization employs its human resource processes has revolutionized the current business environment.

The global market for HR software was $16.43 billion in 2023 and is expected to grow at a CAGR of 12.2% between 2024 and 2030. This development is mainly due to automation, efficiency, and data-driven decision-making. 

Traditional HR practices are essential; however, depending solely on such practices can deteriorate speed and accuracy. Organizations need to fill the gap by incorporating modern HRMS software, which introduces automated solutions to serve organizations.

These solutions integrate critical matters such as payroll, employee management, recruitment, and performance tracking. A study reveals that 58% of organizations use cloud-based HRMS tools to streamline processes.

Hybrid work models are becoming increasingly common, with a growing focus on employee engagement in 2025. As a result, organizations are shifting from manual HR operations to HRM software to enhance efficiency and support this transition.

What Is Traditional HRM?

Traditional Human Resource Management involves manual and paper-based methods. These methods help manage recruitment, payroll, attendance, performance reviews, and other HR activities. They use spreadsheets, filing systems, manual reporting, and face-to-face communication.

Traditional HRM has existed for years. This system focuses on hierarchical workflows, personal relationships, time-consuming HR-related processes, and manual records. Though functional, traditional HRM can be inadequate in responding to today’s business needs, particularly in large and complex workplaces.

Why Traditional HRM Is Still Popular

Traditional HR practices work through direct communication, leading to personal relationships between human resource professionals and employees. Some advantages are:

  • Traditional HRM is good enough for smaller organizations since there are fewer employees to handle and less complexity.
  • Traditional HR practices require fewer technology investments. This means lower upfront costs for businesses.
  • Organizations can develop custom HR processes without depending on rigid software workflows.

Traditional HRM Disadvantages

The time-consuming process involves manual data entry, reduced self-help for employees, filling out paperwork, and approving processes. These mitigate the efficiency levels of employing traditional HRM processes. Here are some drawbacks:

  • Traditional HR practices often make human mistakes in payroll, attendance records, and record keeping.
  • Analytical tools are absent, which makes traditional HRM not provide actionable insights into strategic workforce planning.
  • The physical records are always hard to organize, and their access and maintenance bring compliance and audit issues.
  • When an organization grows, relying only on traditional HR processes can increase costs and workloads.

What Is HRMS Software?

HRMS software is a fully integrated digital solution that facilitates, streamlines, automates, and centralizes HR processes. It includes different HR functions such as payroll, recruitment, benefits management, performance tracking, and employee engagement.

Cloud-based technology, automated processes, artificial intelligence, and real-time analytics power these systems. HRMS software facilitates data-driven decisions in the organization that enhance the employees’ experience.

Benefits of Modern HRMS Software

  • It enables the automation of repetitive workloads, such as payroll processing, leave management, and onboarding.
  • It offers real-time analytics and reporting to facilitate better workforce planning and performance management.
  • Employee self-service allows employees to view their data, apply for leaves, track taxes, and also monitor performance.
  • HRMS applications can accommodate large volumes of data and also help with the expansion of an organization
  • HRMS tools support regulatory compliance for sensitive information related to employees using advanced encryption protocols.

Modern HRMS Solutions Trends

Today, 73% of modern organizations are implementing generative AI, which extends to all departments, including HR.

Here are some key trends:

  • AI and Machine Learning: According to a study 90% of employees improve their productivity with AI-empowered processes. AI and machine learning are increasingly being implanted into HRMS platforms so that repetitive tasks can be automated, decision-making facilitated, and predictive analytics can be provided to them.
  • Employee Support: HRMS software focuses on usability, self-service capabilities, and personalized content. This engages employees and enhances their experiences in the workplace.
  • Support for Remote and Hybrid Work Models: Remote work has been gaining traction, which makes HRMS solutions suited for distributed and dispersed teams. They facilitate activities like virtual onboarding, collaboration tools, and performance tracking systems that measure output rather than hours worked.
  • Focus on Diversity, Equity, and Inclusion: 91% of employees claim that they are more engaged in their jobs when they feel a sense of belongingness. 
  • Focus on eNPS: Research shows that companies with an eNPS greater than 50 are more likely to report using an all-in-one system for HR functions because they can better implement, oversee, and understand changes and experiences across the organization. 

Choosing the Right Solution for Your Business— HRMS Software vs Traditional HR Practices

Human Resource Management Systems software makes processes smarter, more efficient, and more productive.

Here are some key factors to consider when choosing the best HR solution:

1. Efficiency and Automation

Traditional HR practices are quite manual and paper-based, hence involving a lot of hours spent by HR professionals doing repetitive tasks. This would often lead to delays and mistakes from maintaining employee records to payroll processing.

On the contrary, HRMS software mechanizes key HR processes by which human intervention is at a minimum. For instance, using tools like Engagedly’s HRMS would auto-manage leave and payrolls, attendance, onboarding, etc. Automation saves a lot of time and also ensures accuracy.

2. Employee Data Management

In traditional HR practices, data is mostly dispersed or spread across spreadsheets, in physical files, or some isolated systems. Reconstructing and managing this information can be difficult and increases the possibility of a loss or duplication of data.

Proper HRMS software brings all employee details together in one place. It has all the information, profiles, performance history, and attendance records; everything goes easily. Modern HRMS sites provide real-time updates to maintain data accuracy.

3. Cost and Resource Allocation

Traditional HR practices can be very resource-intensive. Businesses need physical storage for regular HR functions, which drives up operational costs.

Investment in the best HRMS software reduces the cost because it minimizes paperwork, streamlines processes, and requires fewer HR personnel. 

4. Compliance Management

Maintaining labor laws and regulations is quite cumbersome in traditional HR settings. Missing deadlines or making mistakes would attract a huge amount of fines and related legal issues.

Compliance is easy with HRMS because it maintains records automatically, and handles tax filing and labor law updates. 

Ashley Donohue, Chief Compliance Officer at PrimePay, estimates “that employers spend up to 80 hours per year on their ERISA, COBRA, and POP requirements. Having software that helps you efficiently manage, track your hours, send out notices, and complete other tasks which otherwise take up a great deal of time is an incredibly valuable tool for employers.”

5. Interconnections with Other Tools

For the most part, siloed HR functions happen with little or no interface between departments.

Modern HRMS integrates well with payroll, project management tools, and communication platforms, which smoothen the flow of information. HRMS software helps to integrate with the present tools and creates a unified ecosystem for HR activities.

Key Functional Areas of Advanced HRMS Software

Here are some ways in which HRMS software eases the working of organizations:

1.  Payroll and Compensation Management

HRMS software manages salary calculation, tax deductions, and observance of local labor law. It helps in the following:

  • Keeping track of attendance, leaves, and overtime for precise payroll.
  • Providing timely salary transfers.
  • Adhering to taxes and other regulatory compliance standards.
  • Reducing payroll errors and ensuring tax compliance.

2.  Recruitment and Onboarding

36% of HR leaders claim that effective strategies are not used in recruitment processes. HRMS software helps streamline recruitment by managing job postings, applications, and interviews. It:

  • Scans and organizes candidate details for easy comparison
  • Automates onboarding processes such as document collection, training schedule, and other orientation activities
  • Cuts down hiring time and boosts candidate experience.

3. Performance Management

Using effective HRMS software, managers can define and assign employee goals and track them. It:

  • Incorporates feedback from peers, managers, and direct reports.
  • Streamlines the evaluation process and links performance to rewards.
  • Tracks individual and team performance against goals.
  • Enhances employee performance and creates a culture of continuous improvement.

4. Employee Self-Services

Employees can update personal information and access pay slips, tax forms, etc., using the modern HRMS software: It helps in the following:

  • Employees can manage their time-off requests.
  • It streamlines the submission and approval of expense claims.
  • Saves administrative overhead and gives more power to employees.

5. Learning and Development

HRMS software like Engagedly tracks and organizes employee training programs. It helps in:

  • Finding skill gaps and recommending appropriate courses.
  • Supporting online training modules and certifications.
  • Enhancing workforce skills and preparing employees for future roles.

6. Workforce Analytics and Reporting

Organizations benefit by getting real-time reports of HR metrics on attrition, productivity, and headcount. It:

  • Shows trends in the workforce, which could be utilized in decision-making
  • Enables leadership teams to receive views of KPIs and other key HR metrics
  • Helps in proper strategic HR decisions made with reliable data

7. Compliance and Document Management

HRMS software maintains compliance with local and international labor laws. It helps in the following:

  • Employees’ documents are stored securely in the cloud.
  • Tracks changes and updates to ensure transparency and accountability.
  • Minimizes legal risks, as well as secure document handling.

8. Employee Engagement and Communication

HRMS software incorporates and surveys employee engagement to measure satisfaction and facilitates announcements, messaging, and employee recognition. It:

  • Measures morale and identifies areas for improvement.
  • Maximizes employee satisfaction, improves work-life balance, and reduces turnover.

Combination of Traditional HR Solutions and Advanced HRMS Software

For organizations not ready to switch completely, a hybrid approach of employing traditional HR practices and modern HRMS software can be very effective. Organizations can retain personalized human interactions and leverage automation for administrative purposes.

For example:

  • HR professionals can deal with payroll and attendance using the HRMS tool, even while encouraging one-to-one interactions to improve employee engagement.
  • This type of gradual transition through the implementation of HRMS software prepares businesses to train and make the employees test the processes, ensuring their smooth integration.

Wrapping Up 

Organizations must remain efficient and satisfied concerning human resources. Businesses can no longer rely solely on traditional HR practices. Advanced HRMS software empowers any organization to automate processes with great data-driven insights to enhance the employee experience.

The HR landscape is changing at an unprecedented rate. The companies that don’t move forward with contemporary HR practices will lag. HRMS software such as Engagedly equips an organization to simplify its processes, enhance employee engagement, and make smarter data-driven decisions. 

Get ready to take your HR processes to the next level! See how Engagedly’s HRMS can revolutionize your business processes.

Book a demo with Engagedly today!

FAQs

What are the key reasons organizations must employ HRMS software and traditional HR resources?

By embracing a full-fledged HRMS, a business can save time and resources and encourage a culture of transparency, efficiency, and innovation.

How does HRMS software help in talent management and succession planning?

HRMS software lays out the growth opportunities for employees and detects and develops future leaders. It further identifies high-potential people and internal mobility, maintains business continuity, and develops a sound leadership pipeline.

How does HRMS software help employees with self-service?

HRMS software empowers employees with self-service portals. It enables them to access information about themselves, apply for leave, or view performance metrics without HR intervention. This boosts productivity and improves employee satisfaction.

Author
Srikant Chellappa
CEO & Co-Founder of Engagedly

Srikant Chellappa is the Co-Founder and CEO at Engagedly and is a passionate entrepreneur and people leader. He is an author, producer/director of 6 feature films, a music album with his band Manchester Underground, and is the host of The People Strategy Leaders Podcast. He is currently working on his next book, Ikigai at the Workplace, which is slated for release in the fall of 2024.

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