A Comprehensive Guide to the ERP HR Module

People are almost always the most essential resource in any business — and, in many cases, among the most expensive. Labor costs, which include not only wages and benefits but also recruitment, retention, training and more, can account for as much as 70% of overall expenses in some industries.

Because of both the impact of employees on business performance and the size of the investment that companies make in them, effective and efficient human resource management is critical for companies of all sizes across all industries. Equally important is having the right tools for the job, which can encompass a wide array of processes, including managing working hours and time off, administering benefits and payroll, managing employee development and performance and ensuring compliance with federal and state regulations. An enterprise resource planning (ERP) system’s HR module provides core capabilities across common HR processes, advanced analytics and reporting capabilities and integration with other financial and operational modules — all of which can help companies streamline processes and improve performance across a number of key HR metrics.

What Is an ERP HR Module?

An ERP system is software that’s used to perform and automate various business processes across a company. The HR component of an ERP system, often referred to as an HR module, handles a full range of HR tasks and processes, such as recruiting and hiring, onboarding and training, payroll processing and compensation management, regulatory compliance, attendance and time tracking and talent management.

Because the HR software is part of a broader ERP solution, it automatically integrates with all other components of the enterprise system, such as finance and accounting and customer relationship management (CRM), so that users across the company can take advantage of the same data and insight. Because HR, payroll and financial data are linked, for example, a company can better understand how its labor costs and workforce performance impact its financials.

What Is an HRMS (Human Resources Management System)?

Human capital management (HCM) — the ways a company hires, develops and optimizes its workforce — has emerged as a crucial capability for any organization that manages people. HCM practices and processes run the gamut from administrative tasks to long-term strategy, with the goal of aligning business needs with workforce capabilities.

While HCM is all about people, technology can play a key role. In fact, an overwhelming majority (93%) of business leaders said that using technology to improve work outcomes and team performance is important to their organization’s success, according to a 2023 Deloitte survey. A human resources management system (HRMS) is one such piece of technology. An HRMS suite of applications offers a range of capabilities to streamline, automate and improve HR processes across the employee life cycle, better understand and manage the workforce and maintain compliance with evolving labor regulations and tax laws.

The market for HRMS products is broad and highly fragmented. Some companies may opt for a stand-alone HRMS solution. That means that if they want to integrate the tool with other business software, such as supply chain management or accounting, they’ll likely have to invest time and money to connect the disparate systems. Another option is to implement an ERP system equipped with an HR module that has HRMS capabilities. This approach provides the benefits of centralizing all business-critical data within a single system and enabling different modules within the system to easily share data and insight. Investing in a single ERP solution with function-specific components also offers a unified user experience.

Key Takeaways

• A company’s workforce is one of its most important resources and biggest investments.
• An ERP HR module helps a business optimize performance of its core HR functions and its employees.
• An HR module streamlines and automates HR processes and produces data-driven insight for more strategic decision-making.
• Because an HR module can be part of a larger ERP system, it uses centralized, accurate and up-to-date business data and easily integrates with other modules, such as finance and accounting.

ERP HR Module Explained

HR organizations are under tremendous pressure to help their companies get the most value from their workforce while operating within their own function’s capacity and budget constraints. In fact, finding ways to reduce costs and improve efficiency was one of the top five priorities for HR in 2023, according to the SHRM State of the Workplace survey, coming in behind maintaining employee morale and engagement, retaining top talent and recruiting necessary skills. It’s no surprise, then, that these HR professionals also pointed to lack of budget and limited time as key barriers to success in their organizations in 2023.

An ERP HR module is like a digital Swiss army knife. It provides a broad set of capabilities to manage HR tasks, payroll, compliance and benefits in a single tool, streamlining the delivery of employee services and freeing up HR professionals to focus on higher-level tasks and decision-making. HR teams make up the primary user group. They rely on the HR module to collect employee-related data and run the day-to-day tasks of workforce management and operations, including applicant tracking and hiring; onboarding and training; payroll and benefits administration; and compliance with labor, health and safety and tax laws.

But HR teams aren’t the only beneficiaries of an HR module. Company leaders can use the software to generate data and analytics on key workforce trends to aid in decision-making. Finance teams can use tools within the HR module to run reports on tax compliance, project future labor costs and analyze payroll and benefits expenditures. Line managers will use the module to administer and monitor training, evaluate and develop their team members and build employee schedules. Employees themselves may tap into self-service capabilities within the HR module for issues related to payroll, time off and benefits, for example.

Because HR touches so many other functions — and HR software functionality is important to such a broad range of business users — opting for an HR module as part of a broader ERP system has clear benefits. For one, there are no third-party integrations or data-sharing concerns to address. And having the same user interface as other enterprise modules makes for a better experience.

Core Functions of an ERP HR Module

An ERP HR module offers a mix of capabilities to manage, optimize and automate processes across the complete employee life cycle, from hiring to offboarding, and everything in between. It offers core functionality in three key areas: employee management, time and attendance management and payroll processing.

Employee Management

An ERP HR module encompasses cradle-to-grave employee management processes. These include the following functions:

• Employee onboarding and offboarding: An HR module includes functionality to manage both onboarding (the actions a company takes to better acclimate a new hire to the organization and equip them for success) and offboarding (the actions a company takes when an employee leaves). Managing these processes using an ERP HR module ensures that all necessary steps are followed and keeps those involved at either end of the employee life cycle on the same page.
• Employee data management: Companies collect volumes of data on their employees, from basic contact information and personal details to personnel records, performance evaluations and career development plans. Collecting and updating this information in a single place, such as an ERP HR module, ensures that companies have accurate and up-to-date information on all employees and enables companies to analyze this data to improve HR and business performance. Such data can also feed into a talent management dashboard to drill down into key measures, such as diversity ratios, revenue-per-employee metrics or employee satisfaction scores.
• Performance tracking and evaluation: An ERP HR module offers performance tracking and evaluation capabilities that can be applied at the individual, team, function or enterprise level. The HR module serves as a central repository for data and insight so that everyone — from managers and business unit leaders to HR team members and executives — can track and analyze the state of talent, performance and skills in order to make better decisions. The HR module can also empower company leaders and HR executives to measure and analyze talent management key performance indicators (KPIs), such as employee turnover, retention, mobility and training spend.

Time and Attendance Management

Tracking time and attendance of a company’s workforce, whether hourly staff or full-time employees, is essential to determining time worked, compensation due and usage of benefits, such as vacation or sick days. HR modules offer practical workforce management tools that may be offered as self-service capabilities for managers and employees, including:

• Timesheet management: Digital timesheets enable the entry and tracking of time that employees or contractors spend on a job, project or task. This data can be used for straightforward payroll calculation and monitoring, as well as employee or project performance analysis.
• Leave and absence tracking: Keeping track of time off for an entire workforce with different allocations for paid time off and sick leave can be a daunting task. The leave and absence tracking capabilities within an HR module can do the heavy lifting. Employees or managers can enter their time-off and leave requests, and the system continually calculates balances and accruals.
• Overtime calculation: Workers entitled to overtime pay can earn additional compensation (at a rate of 1.5 times their normal wages, for example). An HR module can automatically determine when a worker is entitled to this overtime compensation and do the math. At the end of a given pay period, the system will calculate overtime based on the company’s particular calculation method.

Payroll Processing

An HR module provides payroll-processing capabilities that help HR organizations manage payroll and benefits and maintain compliance with applicable tax laws and reporting requirements. It may also incorporate some employee self-service functions and help-desk capabilities. Among the capabilities provided are:

• Salary computation and disbursement: One of the primary functions of an HR module’s payroll-processing capabilities is to calculate salaries and wages, withholding the necessary deductions and taxes. The module also delivers pay to employees, whether through printed checks or direct deposit.
• Benefits administration: Most companies provide an array of financial, health and lifestyle benefits to their employees. These may be presented as icing on the compensation cake, but they become part of employment contracts, making the proper administration of these perks mandatory. Benefits administration enables HR and other business leaders to not only manage the distribution and use of these benefits by employees, but also analyze the data to make decisions about their benefits program. Additionally, streamlining benefits administration ensures regulatory and legal compliance and can boost employee satisfaction.
• Tax compliance and reporting: Companies are obliged to pay their employees and ensure that appropriate taxes are being paid to the government. Performing these tasks within an HR module provides companies with accurate data with which to maintain payroll tax compliance and meet any reporting requirements, avoiding financial penalties or other sanctions and maintaining employee satisfaction.

Benefits of Using an ERP HR Module

While human resources was once seen as a back-office, administrative function, the realization that a company’s talent management has a significant impact on its overall performance has elevated HR’s role. But in order for HR leaders and their teams to take on more strategic tasks, they need the right technology. Administrative tools that automate and off-load time-intensive, menial tasks and deliver self-service capabilities to employees liberate HR teams to focus on higher-level work. Accurate data collection, coupled with advanced analytics, can equip HR to contribute greater insight to business decision-making. Moreover, effective and streamlined employee-facing capabilities can raise employee satisfaction, engagement and performance. An HRMS can offer help on all fronts. And electing to implement these capabilities within an ERP HR module offers even more benefits, such as:

Centralized Data Management

Much of the value of an ERP solution lies in the fact that it stores data and business intelligence from all corners of a company in one place. Working within an ERP HR module eliminates the time-consuming and costly effort otherwise required to gather data to perform critical HR tasks. It also gives the HR team access to reliable employee and payroll data to underpin stronger cost controls, compliance, reporting and advanced analytics. Having an HRMS incorporated into an HR module as part of a larger ERP system also makes it easier for HR to make its data and insights accessible to appropriate decision-makers across the business.

Streamlined Processes

The ability to streamline and automate key HR processes can have a profound impact on the HR function’s efficiency and productivity. Creating standardized workflows and integrating best practices can relieve concerns about missed steps or mistakes and also create space for the HR team to perform more value-added work, such as strategic workforce planning, employee development and performance management and feedback. This is particularly important as HR leaders are being asked to contribute to the business at a more strategic level while tightly managing their own budgets and resources. But they’re not the only beneficiaries of streamlined processes. Managers and employees can also take advantage of HR self-service functionality, which makes processes more transparent and user-friendly, improving the overall HR experience.

Improved Data Accuracy

Because an ERP HR module centralizes data collection, it addresses issues related to data access, standards, duplication and inaccuracies that otherwise might occur when using stand-alone HR software or manual processes. Automating payroll, for example, reduces mistakes and the time it takes to correct them so that HR personnel can focus on other work. It also ensures accurate tax withholding, thereby avoiding penalties.

Enhanced Compliance and Risk Management

Today’s HR organizations are responsible for their companies’ compliance with a host of labor and tax laws, as well as for protecting employee data from the risk of cybersecurity breaches. Centralizing HR data and automating processes in accordance with best practices pays off in improved compliance and risk management. Most ERP systems are built to support common regulatory requirements and standards and offer customizable reporting tools. Because an HR module gathers and tracks all relevant information, it also streamlines the auditing process. Just as importantly, an ERP HR module centrally addresses issues of data security and privacy, with role-based access and other rules programmed into the system to control access to sensitive employee data.

Better Decision-Making

The analytics and reporting capabilities offered by an ERP HR module can empower HR and its key stakeholders to make more informed decisions, identify trends before they become problems and make improvements to business processes. This insight can come in the form of preconfigured or customized reports, visualizations or dashboards. Decision-makers can have confidence in the intelligence because they know it’s based on accurate and timely data. For the HR organization specifically, an ERP HR module can take much of the time-consuming busy work off their plates so that they can invest their time in more valuable activities, including employee engagement, culture building and education.

Cost Reduction

An HR management system within an ERP solution can drive greater cost control on a number of fronts. First, there’s the cost of labor itself. Keeping compensation and benefits costs under control, particularly in times of economic uncertainty and talent scarcity, is a top priority for HR organizations. HR leaders can dig into the data to uncover ways to save on costs without compromising employee experience and retention. They may find, for example, opportunities to negotiate lower rates with health insurance providers or incorporate wellness programs to unlock discounts on premiums. Similarly, business unit leaders can use the HR module’s timesheet reporting data to better understand and address what’s slowing down an important project. An HR module also increases productivity within the HR organization itself, driving down administrative and operational costs associated with manual data entry or duplicative processes. Because an ERP HR module can have a positive impact on cost and efficiency in many different areas, it often delivers a return on investment quite quickly.

Employee Self-Service

The more employees can find and do what they need to on their own, the happier everyone is. Self-service functionality eliminates the need for HR staff or business managers to get involved and reduces frustration for employees. Most ERP HR modules offer a variety of self-service capabilities, often via a self-service portal. Common tasks that employees can complete for themselves include updating personal information, filling out time sheets, reviewing pay stubs, selecting and managing benefits and getting answers to frequently asked questions.

Enhanced Reporting and Analytics

Better HR cost management, risk management and employee engagement all start with good data, reporting and analytics. Today’s HR function is increasingly becoming one of the more analytics-focused functions within a company. In addition to standard reporting in common areas, ERP HR modules offer businesses the ability to perform advanced reporting and analytics to make better decisions. HR leaders might drill down into specific data to determine workforce plans to meet future business needs, proactively address turnover or analyze metrics, such as time- or cost-to-hire, to rein in recruiting costs. The executive team might use the HR module to explore the correlation between aspects of workforce performance and financial performance, compare results among specific business groups or track critical HR KPIs in real time.

Integration With Other Modules

One of the most valuable features of an ERP system is the interoperability of all of its modules. Unlike a stand-alone HRMS, an ERP HR module automatically integrates with other modules, such as finance and accounting, inventory management and marketing and sales, enabling seamless data sharing across functions, teams and departments. An integrated HR module also reduces the need to enter employee data into multiple systems.

Support for Remote Work and Global Operations

Remote and distributed work models are here to stay. In fact, more than two-thirds of employees said they would look for a new job if their employer required them to return to the office full-time, according to a 2022 survey by the ADP Research Institute. An ERP HR module makes it easier for HR departments to manage their workforces, wherever they are, thanks to the digitization of key processes, from timesheet management to payroll.

Scalability

One of the upsides of a cloud-based ERP system is its ability to scale up or down easily based on changing business needs. An on-premises HRMS requires a company to invest in its own technology infrastructure and management and make significant changes to infrastructure as the company grows or contracts. An HR module hosted by a cloud-based ERP provider, on the other hand, is more elastic, capable of scaling up or down without the business having to make infrastructure changes or investments. In addition, companies can add functionality as needed once they’ve implemented the core HR module.

Enhanced Employee Experience

An increase in turnover isn’t the only red flag that HR and business leaders need to keep an eye on; a stable workforce that isn’t actively engaged can have an equally negative impact on performance. And the news about employee engagement in recent years hasn’t exactly been encouraging. Just 32% of employees said they’re engaged at work, according to a 2022 Gallup Poll, representing a second year of declining numbers. Furthermore, another 18% were actively disengaged. There’s never been a more important time to invest in improving the employee experience, and some of the tools found in an ERP HR module can help. First, an ERP HR module gathers all employee information in one place to enable a more effective and personalized HR experience for employees, from onboarding, to payroll and benefits, to career development. In addition, the HR software can be used to measure and track employee sentiment on a regular basis, outline goals for improving the employee experience and analyze the impact of efforts to boost employee satisfaction.

Steps to Integrate the ERP HR Module

Achieving benefits from an ERP HR module begins with understanding what problems a particular organization seeks to solve with the software and then selecting and implementing a solution that meets those needs. While a business can get a cloud-based ERP solution and HR module up and running fairly quickly, it’s important to take time to determine the most suitable software for the specific organization and develop a plan for implementation, change management, optimization and beyond. After all, without broad adoption for the new HR module and associated business processes, the technology investment may offer disappointing returns. Key requirements for effective implementation of an ERP HR module include:

1. Needs Assessment and Planning

Functional fit is an important consideration when deciding on an HR solution. One of the biggest mistakes companies make when it comes to technology adoption is to begin with the tool rather than the business case. That’s a recipe for missed opportunities and disappointing results. The more rigorous a company is in documenting its existing internal processes and opportunities for improvement, the better armed it will be when evaluating and selecting an ERP HR module. Involving those who work in HR, as well as representatives from key stakeholder groups (line-of-business managers, executive teams), in needs assessment is helpful. With a clearer understanding of existing capabilities, business decision-makers can identify processes plagued by time-consuming manual tasks or areas that would benefit from better data and greater insight. Then they can select an ERP HR module that aligns with their business requirements.

2. Technical Considerations

Being able to collect, analyze and act on HR data is a key benefit of implementing an ERP HR module. So, it’s important to explore the module’s technical capabilities and requirements. Decision-makers should pay special attention to whether the solution they choose will work with their existing technology infrastructure and understand any work the company will need to do in order to use the module most effectively. At this stage, it’s also important to think about any ERP HR module customizations or integrations with third-party applications or services the business may require.

3. Organizational Change Management

Functional and technical requirements are essential to choosing the right ERP HR module, but when it comes to achieving full adoption, it’s all about people. Any ERP implementation will necessitate significant changes in a company’s technologies, processes and culture, and that can be hard on those impacted. Because an HR module implementation affects everyone, investing in organizational change management is crucial to helping all employees adapt. Taking a systematic approach to guiding departments, teams and individuals through the human side of change and ensuring that they have what they need to use the new HR module effectively will facilitate greater adoption of the technology.

4. Implementation

Once a business is clear on its functional and technical HR requirements and has a plan for change management, it’s time to roll out the new ERP HR module. Having a schedule for this implementation and a plan for how it will proceed over time is beneficial. Some companies may choose to start with a specific function, team or user group to learn what works best before rolling it out to the broader population. Any implementation plan should include training and change-management schedules, task owners, service and support options and metrics for success. It’s also important to consider how the HR team will perform its tasks in the midst of the HR module rollout.

5. Evaluation and Optimization

Companies that want to get the full value of their HR systems don’t rest on their laurels post-implementation. They proactively assess how well the company is adopting and adapting to the new ERP HR module and explore opportunities for improvement. This starts with evaluating the extent to which the company is achieving its desired business outcomes by collecting data on the impact of the ERP HR module and then analyzing it with an eye toward identifying gaps between expected and actual outcomes and areas for improvement. The HR organization may discover that more training is needed in some aspects of the HR system, for example, or that a certain functionality of the module is too difficult to use and should be reconfigured. Then the HR team can make necessary adjustments and continue to monitor the impact over time. As the HR organization’s goals or needs change, it should also review and refine its objectives for the ERP HR module.

6. Compliance and Security

The HR space is a dynamic one. Laws, rules and policies frequently change, so having an ERP HR module designed to keep up with changing compliance requirements around labor, health and safety and tax laws is invaluable. The cyberthreat landscape is another major risk area that’s constantly evolving. Proper cybersecurity controls are essential because an HR module contains volumes of sensitive employee data and personnel records. Having all that information in one place is a huge benefit but also makes ERP systems a high-value target for cybercriminals. Companies must be diligent in ensuring that the necessary cybersecurity measures are in place to protect that valuable data, keep up with the evolving threat landscape and address vulnerabilities in a timely manner. In addition to selecting an ERP vendor that offers layered cybersecurity protections and round-the-clock monitoring of its operational data center, companies can implement strong encryption, robust password policies and role-based access controls.

7. Future-Proofing

It’s essential that an ERP HR module not only meet a business’s HR needs today, but also be able to adapt to business changes over time. Decision-makers should consider future plans when selecting and implementing a system, ensuring that the ERP HR module has the flexibility and scalability to support the company as it grows or changes. It’s also important to reassess the ERP HR module on a regular basis to determine how well it continues to meet the needs of the business.

8. System Documentation

Finally, documenting everything is key. This should begin with the requirements, objectives and technical and functional specifications laid out above. This exercise ensures that the ERP HR module implementation is aligned with HR strategy. Documentation also keeps the project plan on track (and avoids scope creep), communicates the vision and value to key stakeholders and maintains a record of why and how certain choices were made. Project leaders should also document the design and configuration of the system, noting any special integrations or customizations. This will help during rollout and serve as a reference point when future enhancements or changes are made. Finally, documenting all training and support materials, capabilities and objectives will help drive system adoption and also come in handy when users need ongoing assistance. Recording all of this information also ensures the sustainability of the system after those who worked on the ERP HR module rollout have moved on to other roles or jobs.

Centralize all Employee Information With NetSuite ERP

For companies looking to enhance their human capital management, NetSuite ERP provides a solution that consolidates all relevant HR data for better recordkeeping and reporting and serves as a foundation for analytics to streamline the HR function and optimize workforce performance. NetSuite ERP’s HR module incorporates a full suite of capabilities, including HR administration, payroll services, workforce planning, performance management and employee engagement solutions. Self-service capabilities for managers and employees help boost HR productivity and employee satisfaction. The HR module’s integration with other financial and operational modules within the ERP system unlocks a host of opportunities to improve overall enterprise performance. For example, the combination of functionality provided in the HR module and the planning and budgeting module provides opportunities for business leaders to model future workforce needs using payroll, expense and headcount data and create more effective budgets and hiring plans.

There’s no question that HR is one of a company’s most important and strategic functions contributing to improving overall business performance. An ERP HR module consolidates multiple HR processes and tools into a single system, offering a host of benefits, including increased efficiency, better data accuracy and improved delivery of HR services. Because the HR module exists within an ERP system that serves as a single source of truth for all operational and financial data, it’s easier to share data and insights with relevant stakeholders outside of HR and to integrate financial and operational data to optimize talent management and define workforce strategies for the future.

ERP HR Module FAQs

What is an HR module in ERP?

An HR module is the HR component of an enterprise resource planning (ERP) system, designed to digitize or automate a full range of HR tasks across the employee management life cycle, such as applicant tracking, payroll processing, benefits management, tax and regulatory compliance and talent management. Because the HR software is built into an ERP system, it’s integrated with all other components of the enterprise system, including financial management, accounting and customer relationship management (CRM), so that users across the company can work from the same data and insights.

How is ERP used in HR?

An enterprise resource planning (ERP) HR module offers companies an array of capabilities for managing, optimizing and automating employee management processes across the entire employee life cycle — from application to exit, and everything in between. It offers core functionality in three key areas: employee management, time and attendance management and payroll processing. Today’s leading cloud-based ERP HR modules also offer the ability to provide advanced analytics and reporting to proactively address emerging HR issues, optimize labor costs and performance and plan for the future.

What is HRIS vs. HCM vs. ERP?

A lot of acronyms get thrown around in the realm of HR management, including HCM, HRIS and ERP. HCM, or human capital management, refers to the processes an organization uses to recruit, train, retain and optimize its workforce. This includes everything from payroll processing and benefits administration to employee performance evaluations. HRIS, or human resources information system, is one type of software that can be used to collect and store employee information and perform basic HR tasks. A human resource management system (HRMS) is another tool used by HR organizations, but it typically offers more advanced functionality than an HRIS to streamline, automate and improve workforce management processes. HRMS and HRIS tools are available as stand-alone systems or as HR modules within a larger enterprise resource planning (ERP) solution.

What are the benefits of an ERP HR module?

An enterprise resource planning (ERP) HR module can offer a variety of tactical and strategic benefits to an HR organization and the larger enterprise. Automation of time-intensive tasks, for example, can free up HR professionals to focus on more important work, while advanced analytics can provide greater insights to business decision-makers. Some key benefits of an ERP HR module include cost savings, centralized data management, streamlined processes, improved data accuracy, better regulatory compliance, improved decision-making, enhanced reporting and analytics, better support for remote and distributed workforces and integration with other ERP modules.

What is another name for an HR system?

An HR system can be referred to by many names. Some generic terms include human resource information system and human resource management system. When a company opts to digitize and optimize its HR processes within its ERP system, that integrated solution is referred to as an ERP HR module.