What is Enterprise Resource Planning in HR? Is It Even a Viable HR Solution?
Technology has fundamentally transformed the basics of running a business. It has taken over chores once unimaginable without human intervention. Enterprise Resource Planning (ERP) technology forms an essential aspect of such advancement.
ERP has revolutionised the way businesses function. It does everything from planning and budgeting to generating financial reports, accounting and project management. It integrates the system in a way that works in a planned and complementing manner.
Nowadays, some companies opt for ERP instead of implementing a fully integrated HRMS. That said, ERP in HR usually only addresses core HR functions. Let’s look at some key ERP features that indirectly affect HR to gain a better understanding.
Primary Features of ERP
- Shared database
- People, technology, and process integration
- Data analysis for actionable insights
- Automation of repetitive tasks
- Seamless workflow across departments
What is ERP in HR?
Besides providing automation in business processes, ERP also accommodates some key data elements of human resources. ERP HR specifically targets HR processes like staff training, payroll management, or gauging and keeping track of the performance of employees, among others. It dramatically reduces the time and effort invested by an HR professional.
At times, ERP systems also offer additional HR features by adding an HRMS module. These modules help with people-centric functions like hiring and administration. They speed up internal processes by automating administrative tasks. While ERP lacks all the features of a fully integrated HRMS, it does accommodate a significant few.
ERP Modules and Submodules in HR
- Personnel Administration: Helps manage the regulation and coordination of employees. It is a part of database management and essentially helps store and manage the personal data of an organisation’s workforce.
- Organisational Management: It assists in planning, controlling, organising and leading resources within an organisational structure. It aims to help each resource achieve set goals. Employee planning is a part of organisational management.
- Payroll Management: It assists in administering an organisation’s financial records and analyses employees’ salaries, bonuses, and deductions. It also suggests imminent adjustments.
- Report Generation: ERP in HR helps generate reports of individual employees across departments and KPI reports for an organisation for better decision-making.
- E-Recruitment: This feature aids in the selection processes like analysing the need for profiles, creating and publishing job offers, etc. Assessing, recruiting and onboarding of selected candidates is another aspect of ERP.
- Time Management: ERP in HR also helps in keeping track of employee time, attendance and leave records.
Is ERP an HRMS Solution?
While ERP increases your company’s efficiency and productivity and has features to help manage HR, some consider it to be an inefficient HRMS solution. There are two primary reasons why.
1. Implementation challenges: Since it incorporates a central database, the software is usually modular. This means access to only role-specific functions. For a company to add an existing feature, such as managing leave records, they need to pay additional costs.
This makes ERP a costly affair. They are also difficult to implement and often result in total implementation failure. This is because it affects business processes across all departments.
In order to reap the benefits of the new system, employees need to modify the way they operate. Implementing ERP means replacing longstanding processes that employees are accustomed to.
2. Important HRMS features missing: While ERP does accommodate some primary HR features, they’re just not enough. An integrated ERP solution for HR needs to address other aspects like growth tracking, integrated employee engagement, multi-channel job advertisement integration, automated candidate communications, and customisable job descriptions and profiles.
ERP as a system is an excellent way for any organisation to increase employee efficiency and productivity. What’s more, it can help cut costs by reducing headcount. Its central database helps improve collaboration, simplify compliance and risk management, resource management, and enables you to run your business without worrying about minute details. This is why some companies utilise ERP as an HRMS solution.
However, ERP as an HRMS solution has its drawbacks. Besides the initial high cost, it lacks some critical features. Also, adding extra modules means extra costs and often leads to total implementation failure.
A complete, end-to-end HRMS is essential to make your organisation’s vision a reality.
For that reason, it makes total sense to invest in a full-scale HRMS like BetterPlace HRMS which automates hiring, employee background verification, onboarding, attendance and payroll management, and employee upskilling, while lower overheads and improving employee retention.
1. What does ERP stand for?
ERP stands for Enterprise Resource Planning.
2. What does HRMS stand for?
HRMS stands for Human Resource Management System.
3. Are ERP and HRMS the same?
No, ERP and HRMS are not the same. While ERP is designed for business management, HRMS specifically addresses Human Resource needs. ERP modules in HR usually address only core HR functions.
4. What are the primary modules in ERP in HR?
Personal administration, organisational management, payroll management, report generation, E-recruitment and time management are the primary modules of ERP in HR.
5. What is the main issue with using ERP as an HRMS solution?
There are two significant issues with using ERP as an HRMS solution – it is difficult to implement as it is modular and has high additional costs and implementing ERP means replacing longstanding processes that employees are accustomed to. The second issue is it lacks some important HRMS features.
6. Is it necessary for an organisation to implement an HRMS?
While there are companies that function without an HRMS, it is always a good idea to have one to ensure your organisation’s efficiency, productivity and growth. Investing in HRMS majorly helps the quicker achievement of long-term goals.
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