What Are The Different Types Of Payroll & HR Software?

Choosing payroll and HR software isn’t as simple as it seems. With six different types of payroll and HR software to choose from, how do you know which option is best for your business?

There are different benefits of payroll software based on which option you choose. Whether you’re looking for straightforward payroll software that you can manage yourself, a full HRM software to manage your HR, or a way to fully outsource your payroll and HR management, there are different payroll and HR software types to fit your needs

Here’s a look at what the six different types of payroll software and HR systems are and what they mean for your business.

The 6 Types Of Payroll & HR Software

• Traditional payroll software
• PEOs
• HROs
• HRMs
• HCMs
• HRISs

Keep reading for an in-depth exploration of the four types of payroll software.

Traditional Payroll Software

Traditional payroll software is designed to help businesses of all different sizes and industries with basic payroll needs. Gusto and ADP are examples of traditional payroll software.

You can think of traditional payroll software as a kind of one-size-fits-all solution, as it tends to offer a wealth of features that can be used by all types of businesses.

For example, a small family-owned restaurant paying tipped workers could use the same traditional payroll software solution as an enterprise-sized business paying employees across multiple states.

The best payroll software takes customization and versatility to the next level by including support for third-party integrations, benefits administration, employee management features, basic HR support, and more.

PEO

A Professional Employer Organization, or PEO, is a human resources (HR) company that partners with businesses, allowing businesses to outsource HR, payroll, benefits administration, and other payroll-related tasks.

In a traditional PEO, the professional employer organizations enters into a contractual co-employment arrangement with another business. A co-employment agreement enables a PEO to manage a business’s HR tasks, including running payroll, payroll taxes, benefits administration, employee management, and hiring. Read our full explanation of what a PEO is for the full details of this arrangement.

Technically, PEO services are not payroll software. Instead, they utilize payroll software to help manage a business’s payroll. The PEO is responsible for confirming payroll data via payroll software.

That’s why the best PEO companies are often the same as the best payroll software providers. For example, ADP and Paychex offer excellent PEO services on top of their highly-rated payroll services.

HRO

Human Resource Outsourcing, or HRO, is similar to PEOs for payroll in that HROs allow business owners to outsource HR management, employee training, recruiting, onboarding, compliance, and policy creation and management.

An HRO is a third-party business that acts on behalf of a business to fulfill its HR management services.

HRM

Human Resource Management, or HRM, is the management of HR benefits, policies, compliance, employee compensation, and employee management. When you think of HR, you’re usually thinking of HRM.

While there are some stand-alone HRM software options, you’ll often find the best HR software options are rolled into payroll software to offer a full-package payroll and HR solution.

HCM

Human Capital Management, or HCM, is similar to HRMs in that they manage HR and employees. However, they take human resource management a step further by providing analysis of the full employee lifecycle and business value.

An HCM is a good choice for businesses that want answers to questions like: How much value do my employees bring? How do we hire employee talent or train existing employees to improve employee efficiency? How do we retain valuable employees? How do we create a career development plan?

Unlike HRMs that are often rolled into payroll software, an HCM is more likely to be a separate organization in order to offer your business specialized insights and advice, although some do offer a fully integrated software platform.

HRIS

Human Resource Information System, or HRIS, is software that allows you to manage and store employee information.

Similar to HRM software, HRIS software is often rolled into an existing payroll software. Paycor is a popular HRIS and payroll software option for businesses.

Which Payroll Software Is Right For Your Business?

Although you’ll have several payroll software options to choose from, the type of software that’s best for your business should meet all of your business’s unique payroll needs.

To decide which type of payroll and HR software is right for your business consider:

• Your business size
• The amount of time you currently spend on payroll & HR tasks
• The amount of time you want to be spending on payroll & HR tasks
• Your payroll budget

All of these factors will help make the right option more clear.

Learn more about how to choose the best payroll software for your business, and check out our top payroll software choices or our top HR software choices to get started on your hunt for the right payroll and HR solution.