What Are The Different Types Of Payroll & HR Solutions?

Choosing a payroll or HR solution isn’t always straightforward. Some businesses only need basic payroll software, while others need HR tools, employee record management, benefits support, or a fully outsourced payroll and HR service.

The right option depends on how much you want to manage yourself, how much support you need, and whether your business is looking for payroll software, HR software, or an outsourced HR partner.

Here’s a look at six common types of payroll and HR solutions, how they work, and what each one means for your business.

The 6 Types Of Payroll & HR Software

Traditional Payroll Software

Traditional payroll software helps businesses run payroll, calculate wages, withhold taxes, pay employees and contractors, and file payroll tax forms. Many platforms also include direct deposit, employee self-service, year-end tax forms, reporting, and basic HR tools.

Traditional payroll software can work for a wide range of businesses, but the right fit depends on the platform’s features. A small restaurant may need tip reporting and time tracking, while a larger business may need multistate payroll, benefits administration, HR support, and integrations.

Examples of traditional payroll software include Gusto, ADP, Paychex, QuickBooks Workforce, and similar payroll platforms.

PEO

A Professional Employer Organization, or PEO, is a company that provides outsourced payroll and HR services through a co-employment arrangement.

With a PEO, your business still manages day-to-day operations and employees’ work, but the PEO helps handle HR tasks such as payroll, payroll taxes, benefits administration, workers’ compensation, compliance support, and employee-related paperwork.

PEOs are not simply payroll software. They are service providers that use payroll and HR technology to manage outsourced HR functions for your business. Some payroll providers, including ADP and Paychex, also offer PEO services.

HRO

Human Resource Outsourcing, or HRO, lets businesses outsource some or all HR tasks to a third-party provider.

HRO services may include recruiting, onboarding, employee training, payroll support, compliance assistance, policy creation, benefits administration, or general HR management. Unlike a traditional PEO, an HRO typically does not involve a co-employment relationship.

HROs can be useful for businesses that need HR help but don’t want or need the full co-employment structure of a PEO.

HRM

Human Resource Management, or HRM, refers to the systems and processes businesses use to manage employees. This can include hiring, onboarding, benefits, policies, compliance, compensation, performance, and employee relations.

HRM software helps businesses manage these HR tasks digitally. Some HRM tools are standalone platforms, while others are built into payroll software as part of a broader payroll and HR solution.

HCM

Human Capital Management, or HCM, is a broader approach to managing employees across the full employee lifecycle. HCM tools often include payroll, HR, recruiting, onboarding, performance management, learning, workforce planning, compensation, analytics, and employee engagement features.

HCM software is usually a better fit for businesses that want more than basic HR recordkeeping. It can help employers understand hiring needs, track employee performance, plan compensation, manage career development, and analyze workforce trends.

HRIS

A Human Resource Information System, or HRIS, is software used to store and manage employee information.

HRIS platforms typically help businesses organize employee records, job details, tax forms, benefits information, compliance documents, time off, and other HR data. Some HRIS tools also include payroll, onboarding, reporting, and employee self-service features.

HRIS software is often included in broader payroll, HRM, or HCM platforms, but it can also be used as a standalone employee records system.

Which Payroll Or HR Solution Is Right For Your Business?

The right payroll or HR solution depends on how much support your business needs and how much you want to manage yourself.

A small business with straightforward payroll may only need traditional payroll software. A growing business that needs employee records, onboarding, benefits, and compliance tools may benefit from HRM, HRIS, or HCM software. A business that wants to outsource most payroll and HR tasks may be better suited for an HRO or PEO.

To choose the right payroll and HR solution, consider:

• Your business size
• Your payroll and HR budget
• How much payroll and HR work you want to handle in-house
• Whether you need benefits administration, compliance support, or employee management tools
• Whether you want software only or outsourced HR support

Learn more about how to choose the best payroll software for your business, or check out our top payroll software to compare your options.