HRM vs. HCM – A Complete Guide

What is the definition of HRM?

HRM is the acronym for Human Resource Management. HRM involves hiring people who are right for your business, managing them and attaining maximum productivity from them. The HRM software typically includes the following features of the Human Resources department in a company:

  • Payroll Management
  • Timings and attendance of employees
  • Talent Management
  • Recruitment 
  • Administration of Benefits

What is the definition of HCM?

HCM is the acronym for Human Capital Management. In contrast with HRM, HCM has a broader meaning. HCM involves the HRM features focusing on methods to optimize productivity and achieve long-term returns on human resource investment. HCM software in the company uses data from the HRM, streamlining it for business owners assisting them with decision making through a trusted source. With the help of good HCM software, business owners become capable of meeting challenges such as:

  • Team-based work structures
  • The growing number of contract-based employees
  • Evolving workforce demographics
  • Employee performances

What are the similarities between HRM and HCM?

In many ways, HRM and HCM are pretty similar. Here are a few similarities that both share:

  • Both HRM and HCM use modern automation tools and software to streamline the data that helps businesses in well-informed decision making. However, some of the work related to labor may be partially or fully automated with a little involvement of human review in these systems such as payroll management and timekeeping of employees to ensure targets are successfully met.
  • Both HRM and HCM give employees the ease of self-service. For example, employees may check-in or check out, apply for leaves, manage their benefits and perform other tasks without interacting with the HR department personally, making the processing time and money-saving.
  • When core HR processes are integrated, it enhances the data improving the flow of information in the software.
  • Both HRM and HCM use artificial intelligence where chatbots and other AI tools make the information more error-free.

What is the difference between HRM and HCM?

HRM provides the core HR requirements for small and mid-sized businesses. It is mostly limited to day-to-day employee tasks, activities and monitoring administration while HCM provides a broader range of information about employees, their performance cycles and advanced employee analysis.  HCM enables businesses to forecast and their payroll requirements and create strategies to increase return on human resource investments.

You may also read – HR Admin Roles and Responsibilities in UAE

How does a company choose between HRM and HCM?

Choosing between HRM and HCM entirely depends upon the examination of existing challenges in your business and the market. However, the following factors assist businesses to decide about choosing the right HR solution for their business.

Identifying the problems – The existing HR software of your company may have outdated features making it more complex, less effective and non-compiled with the information you need. 

Exploring their solutions – There are many HCM solutions offered in the market with similar features but it is best to opt for those that give scalable technology, personalized employee experiences, global outreach and actionable data.

Building the requirements – All businesses have different needs but what is common between all businesses is to increase profitability, prevent security and confidentiality issues, support growth strategically, attract and retain quality talent resources.

Validating the selection – the last thing that you need to do before considering which software to have for your company is to gather and list down all the HCM requirements and measure them against the provider’s capabilities.

Are you a startup that is looking for worthwhile HR Solutions in the Middle East?

Have you just started your company in the Middle East? We understand how challenging the first few years for a startup could be, which is why we at Payroll Middle East offer an excellent range of HR and payroll services to ease your burden. With our HR outsourcing services and payroll outsourcing, we guarantee you the best talents from the Middle East. Our services also include temporary staffing which may enable you to utilize the most qualified human resources without the hassle of bringing them on board by yourself. Our aim is to provide our clients with services that make their businesses prosper in the long run. Contact us and get a free quote today!