What is HCM Software?

Human Capital Management Software or HCM Software is a system that helps in the efficient administration of the employees of an organization. It provides human resources and related departments with enhanced tools that automate numerous HR functions such as payroll processing, absence management, time-tracking, workforce planning, recruitment, and others.

HCM Software Guide

What is Human Capital Management?

Human Capital Management (HCM) refers to the set of HR functions undertaken by an organization to enhance its employee management efforts. An effective human capital management strategy provides the company with talented staff who stay with the business for longer and actively participate in the business undertaking as they remain engaged with their organization, enhancing HR service delivery and HR processes.

Elements of Human Capital Management Software

Various elements of HCM software ensure the correct functioning of all modules of the HCM system. These HR software elements support the human capital management efforts of the organization as they provide the HR professionals with several tools that ensure the smooth operation of the various departments in the company.

The most significant elements of HCM software are:

1. Core HR

Core HR refers to the must-have features of human capital management software, which include:

▸ Strategic HR

Strategic HR includes various human resources activities such as the development of engagement strategies, goal-setting, job structure creation, performance reviews, attrition prediction, managing employees, time and attendance management, and others.

▸ Compliance Management

With active compliance management, HRs can rest easy knowing that their human capital management software is actively monitoring for security lapses and reporting them to the concerned department.

▸ Employee Engagement

HCM solutions also include modules dedicated to improving engagement, such as employee welfare planning, survey creation and sharing, employer branding, employee self-service, work culture development, and other activities.

2. Talent Management


Talent management refers to the various strategies and global HR operations related to hiring and retaining human capital, such as:

▸ Talent Acquisition

It deals with creating jobs, designations, and salary structures, and sharing the same for recruiting talented candidates, creating an engaging candidate experience.

▸ Succession Management

Succession management evaluates the existing employees for leadership qualities and helps the HR develop plans for effective succession of leadership positions.

▸ Performance Management

Performance management refers to the steps the HR takes to ensure the employees maintain their performance to attain the organizational objectives. It includes the numerous KRAs and KPIs set for the employee to ensure adequate performance levels.

▸ Training

With training management, the HR department can develop various training programs and undertake them successfully. With this module, they can also schedule training sessions and quizzes and certify the employees.

3. Workforce Management


Workforce Management refers to the administration of the workforce using the software, including:

▸ Employee Compensation

It involves analysis, budgeting, administration, calculation, processing, and disbursal of employee compensation for their work. It is a demanding task, requiring dedicated software for efficient processing.

▸ Workforce Rewards

Recognizing and rewarding your employees go a long way in making them feel that they are part of a family. You can automate performance tracking with workforce rewards and easily reward the best performers.

▸ Staff Benefits

Staff benefits include the additional benefits employees enjoy on top of their compensation. It includes various benefits administration such as creches, unlimited snacks, and others.

Human Capital Management (HCM) Challenges

Manual human capital management has significant challenges, which include the following:

Efficient Administration

Administrative tasks such as business strategy planning become ineffective with the lack of the right tools. Additionally, it requires coordination among various departments, which is impossible with manual methods.

Data Privacy

Data security and integrity become a concern with manual database management. There are multiple chances of data manipulation and errors with manual updates.

Compliance Automation

Staying current with the numerous employment and business-related regulations is challenging with manual human capital management. Non-compliance can also lead to hefty penalties, which should be avoided.

Employee User Experience

With manual employee record entries, it becomes cumbersome for the employee to manually submit the data with their HR team and verify the authenticity, making for a terrible employee experience.

Big Data

Analysing larger quantities of employee data is next to impossible with manual data ledgers. Maintaining it proves to be an incredibly arduous process.


Manual acquisition methods have become outdated since everyone uses modern digital strategies and the internet to attain maximum reach and find the best candidates.

System-wide Integration

Integration with other HR systems makes human capital management software efficient. With manual human capital management, there is no option for integration, making the processes tedious for the HR departments.

Key Benefits of an HCM Software

Deploying human capital management software provides multiple benefits, such as:

▸ Data-backed Decisions

Human capital management software or HCM software provides the HR team with relevant data through predictive analytics that can help them make better decisions for the company.

▸ Improved Profitability​

Automation in workflows helps reduce errors and streamlines various HR tasks, making it cost-effective and providing significant savings in time and effort.

▸ Enhanced Growth

human capital management software adapts to the company’s growth and can be scaled as and when required to ensure compatibility with the business data.

▸ Automated Compliance

Since HCM software, especially those deployed on the cloud, stays updated with the latest rules, it automates regulatory compliance, further simplifying HR processes.

▸ Secure Database

HCM Software provides additional security to the database, ensuring the safety of employee and business data. Additionally, it offers different user access for different users.

▸ Interactive Reporting

With interactive reporting, HRs can gather the exact data for any specific period and interpret meaningful inferences. It proves helpful in making data-backed decisions.

▸ Integrated Systems

HCM software can be integrated with other systems to enhance its functionalities. It helps the HR team further improve their business processes.

How to choose a Human Capital Management System?

Choosing the right Human Capital Management software is an overwhelming task. Hence, let us break down the process for you:

1. Develop a ‘Software Requirement List’ after discussing the details with the head of individual departments. Simultaneously, develop a list of the significant challenges to ensure that the requirements can resolve the same.

2. Develop a ‘Plan of Action’ for establishing the project scope, allocating budgets and resources, and a timeline for the project.

3. Identify the ‘Major Stakeholders’ of the project and develop methods to keep them in the loop regarding its progress.

4. Identify the other systems interacting with the HCM software and find ways to integrate them with the developing solution.

5. Deploy the human capital management software and refine it based on employee feedback. The feedback should help you refine it for better agility and enhanced usability.


The main objective of human capital management software is to provide the company with strategic business growth opportunities by empowering employees and connecting people with daily operations and workflows. HCM software supports workforce optimization and related hr efforts.

Since the employees are the most valuable asset, there are several steps involved in developing work-life solutions for an organization, suc
1. Hiring the best talent who are great team workers and have an excellent aptitude
2. Monitoring employee lifecycle and providing performance reviews periodically
3. Providing regular training and upskilling session.
4. Engaging the staff with innovative rewards, distinct work culture and competitive salaries to avoid workforce attrition.

There are several advantages to choosing a cloud-based human capital management software, such as:

  • Cost-efficient Processing
  • Improved Data Security
  • Easy Accessibility
  • Enhanced Collaboration
  • Automatic Software Updates
  • Self Service
  • Increased Mobility
  • Flexible Processes
  • Advanced-Data Insights
  • Increased Scalability

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