The Best HR Software for Startups

Starting a business is no easy feat, and adding employees to the mix can complicate things even more. As an entrepreneur, you may be tempted to manage human resources (HR) functions on your own, but at some point, you’ll likely need to use some type of HR solution to facilitate HR functions like employee recruitment, onboarding, time tracking, payroll and benefits administration. The best HR software can help you manage these HR processes from start to finish. To help you find the best HR software for your startup, we evaluated the top solutions on the market, comparing features, functionality, cost, usability and more.

The overall cost of your HR software will be contingent on factors like how big your startup is, the number of workers you employ and the specific features you require.

• Monthly rates: Most HR software companies follow a per-employee pricing model, with average monthly rates ranging from $5 to $20 per employee for basic features. Additional functionalities like payroll processing, employee benefits administration and performance management tools are often available as well, but they tend to have an additional fee. It’s also worth noting that, while less common, some HR software providers may also impose a setup fee or a monthly base fee, typically around $40 to $100 per month.
• Contract requirements: The length of your contract will depend on your HR software provider, but most vendors offer monthly or annual contracts. If they have both options, employers tend to get a better rate for longer agreements. However, as a startup, you may be unsure of your future HR needs, in which case a monthly contract might be a safer bet.
• Demos and free trials: While free trials can be helpful when choosing new software, not many HR solutions offer them. This is partially because uploading all your employee information into a system and getting it set up can take significant time, and a free trial with no employee data isn’t very useful. Instead, most vendors will provide some kind of guided demo where they can give you a firsthand look at the software using fictional data. During this process, they should be able to answer any questions you may have about the program.

Given the variability in pricing, contract lengths and features, it’s crucial for startups to seek quotes and demos from multiple HR software providers before making a final selection.

HR software providers offer a wide range of features, some of which will be automatically included in your plan and some of which will be optional add-ons. When looking at the HR functions available to you, it’s essential to consider which ones you need now and which ones you may need later down the road when your startup expands. Here are a few key features to consider.

Employee Recruiting and Onboarding

As a startup seeking HR software, there’s a good chance you’re in the process of recruiting and hiring your first employees. Most HR software can help with this by providing features like digital job postings, applicant tracking, offer letter templates and employee onboarding with e-signature capabilities. As employees go through onboarding, your HR software should have secure document management capabilities to retain important employee information. Some HR solutions also have automation features that let you set up employee onboarding workflows. This, alongside employee self-service tools, helps ensure accuracy and efficiency.

Time and Attendance Tracking

Whether you’re hiring salaried or hourly employees, it’s likely you’ll want a way to accurately track their attendance. This can be to ensure you’re paying employees for the correct amount of time worked, managing paid leave and abiding by overtime laws. The best HR solutions are cloud-based so your employees can clock in from any device with an internet connection. This is especially valuable if you have a remote or hybrid workforce. If you have a mobile team, you may even be able to use geofencing to monitor their location when they’re clocked in. [Read related article: How to Calculate Blended Overtime Pay]

Payroll Processing and Tax Administration

Processing payroll and administering payroll taxes can be an arduous task, especially when done manually. As your startup grows and you hire more people, it gets even more complex. HR software can help simplify the payroll process by automating some of the steps for you. If you use the time-tracking features often included in HR software, then those employee hours can automatically populate into your payroll runs. When employee pay is approved, the program can use predetermined pay rates to pay each worker. Paying your team is often simplified further through direct deposit, but other forms of payment like paper checks and pay cards can be an option as well.

While payroll taxes can be confusing for new employers, HR software can streamline this responsibility too. After new employees submit their tax forms, the system can withhold the applicable taxes and provide employee W-2s when tax season comes around. This ensures you stay compliant with payroll tax regulations. HR software typically integrates with other useful applications as well, like top-rated accounting software.

Employee Benefits Administration

When you first start your business, you might offer only the employee benefits that are legally required of you. But as you hire more workers, it’s often a good idea to expand your benefits offering to attract and retain top talent. HR software can connect with benefits providers to help administer benefits to your workforce. What’s even better, the best HR solutions typically have some level of guided benefits enrollment that lets your employees enroll in their benefits on their own.

Analytics and Reporting

It may seem tedious to track employee analytics and execute HR reporting, but the workforce insights you gain with HR metrics can lead to informed decision-making. Furthermore, instead of tracking this information manually, HR software can streamline the process for you, making analytics and reporting all the more worth pursuing. Since many of your workforce metrics are already in the system, it’s usually pretty easy to generate reports. Some common reports include data on employee headcount, recruitment, productivity, satisfaction, absenteeism and turnover rate. 

There are many variations when it comes to HR software, and it may be a little overwhelming at first to try to find the right solution for your business. But if you carefully evaluate your options and follow the advice below, you’ll be able to identify the system that’s the best fit for your startup.

Here is an easy four-step process for choosing the right HR software for your startup.

1. Identify which HR features you want and need.

Conduct a review of your current HR processes, if your startup has any, and identify what types of features you’re going to require from your HR software. Since HR systems can vary in what features they include, this step can help you narrow down quite a few options right off the bat. Some common features you may want to consider are employee onboarding, secure document storage, time management, payroll processing, benefits administration, reports and analytics, workforce management, and compliance assistance.

When you’re identifying the HR features your ideal solution should have, be sure to consider which features you currently need as well as which features you may need in the future as your startup expands. If a system doesn’t match your current and expected needs, cross it off the list.

2. Test the software functionality and usability.

When it comes to HR software, the top-rated programs tend to be intuitive and easy to navigate. However, some software comes with a steeper learning curve than others. For example, systems that can be highly customized with workflow automations will likely take longer to set up and learn how to configure than those that come with only basic functionalities. One is not necessarily better than another; it just depends on what you need the software to do and how much training your employees will need to use it.

While free trials are rare in this sector, most HR software providers offer free product demos to show you what their platform looks like and how it works. Take advantage of these, as they will give you a better idea of the user experience. If the HR solution comes with a mobile app, you may want to test out the usability of that as well. Keep in mind that mobile apps tend to have limited functionality compared to the actual computer program. Make note of which programs have high usability and the features you desire.

3. Compare customer support.

How vital is robust customer support to you? For some employers, the availability of customer support can make or break a product’s usability, but for others, it’s not a big deal. If you’re a newer employer implementing HR software for the first time, there’s a good chance you’ll need a responsive customer support agent to help you implement and learn the program. In this case, look for a provider that offers businesses dedicated support representatives.

You’ll also want to compare customer service communication methods. Most HR software vendors provide some level of support by phone, email and/or live chat. Be sure to choose one that uses your preferred method of communication.

4. Evaluate rates and contracts.

As a startup, you’re probably working with a limited budget. HR software is an investment, but you still need to be realistic about what you can afford. Once you know what features you need, how many employees you plan to enroll and what type of contact terms you want, you can get quotes from your top HR selections to determine how much each vendor will cost, and then compare from there to see which company can offer the best deal.

Using HR software has numerous benefits for startups, helping new businesses streamline their HR management processes and improve overall efficiency. Here are five key advantages of HR software for startups:

1. Efficient HR administration: HR software automates routine administrative tasks like payroll processing, attendance tracking and employee record management. This frees up valuable time for HR professionals to focus on strategic activities, such as talent acquisition and employee development, rather than being bogged down by paperwork. If you haven’t hired an HR professional yet and you’re administering HR tasks yourself, this level of efficiency can be an even bigger help, as it gives you time back to work on other business initiatives.
2. Improved accuracy: Manual HR processes can lead to errors in data entry, payroll calculations and compliance reporting. HR software helps reduce these errors by automating calculations and data entry, ensuring that payroll and compliance-related tasks are accurate and compliant with relevant laws and regulations. Small HR mistakes can lead to big problems for startups, so it’s critical to get it right every time. HR solutions can help you do that.
3. Enhanced employee experience: HR systems often include self-service tools that allow employees to easily update their personal information, request time off and access company policies and documents. This self-service functionality empowers workers, improves communication and can lead to higher employee satisfaction.
4. Data analytics and insights: HR software provides valuable insights through data analytics. Startups can use these insights to make data-driven decisions about workforce planning, performance management and employee engagement. By analyzing trends and patterns in their HR metrics, new businesses can identify areas for improvement and make strategic adjustments to their HR strategies. This can be especially beneficial as your company grows.
5. Scalability: Speaking of growth – as startups grow, their HR needs evolve. HR software is often scalable, allowing startups to add new features and functionalities as their workforce expands and their HR needs change. This scalability ensures your chosen HR program can grow with the company, saving startups from the hassle of transitioning to a new system as they mature.

In addition to the above upsides, HR software can also aid in compliance with labor laws and regulations, reduce the risk of noncompliance penalties, and provide a centralized repository for essential HR documents and records. These systems can also streamline the recruitment process, making it easier to attract and onboard top talent, which is crucial for startups looking to build a strong team quickly.

Overall, HR software can significantly benefit startups by increasing efficiency, reducing administrative burdens and enabling data-driven decision-making in HR management.