Payroll Vs. HCM or HR Software:What’s the Difference? And Which Software is Right for Your Business?

Employees are central to your company’s success, and a vital aspect of keeping your teams happy is ensuring that they’re paid for their work, correctly and on time each pay period. Managing employee payroll and benefits, and properly accounting for these important aspects of your business is key for not only pleasing your staff, but also making sure that you’re in compliance with the state and federal tax regulations that apply to payroll and benefits administration in your region.

There are several different types of software available that can help streamline your payroll and other HR duties, including:

  • Payroll Software
  • Human Resources (HR) Software
  • Human Capital Management (HCM) Software

While some components of these powerful software solutions do tend to overlap (or even integrate with one another), each has its own set of unique services and benefits. Understanding the difference between each of these systems will help you gain insight into which software (and tools) will benefit your business most.

What is Payroll Software?

Payroll software solutions are designed to help companies process payroll more efficiently and also provides tools that simplify tax calculations, compliance, and filing. Payroll software is available as a stand-alone solution with features tailored specifically to payroll processing, but it can also be part of a larger suite of tools for managing employees throughout their time at your company.

Payroll software solutions typically include the following features, capabilities, and automations:

  • Payroll processing
  • Direct bank disbursements
  • Tax compliance
  • Tax calculations and filing
  • Integration capabilities
  • Reporting and analytics 

What is Human Resources (HR) Software?

Human Resources (HR) software provides a more robust offering of tools that are centered on managing all the details associated to employee, from the moment of being hired until their time with the company is complete. Many HR software tools include payroll processing as part of their full suite of tools and applications, while others can be integrated with a payroll software of your choosing to provide and track payroll services in addition to other HR tasks. HR software typically includes features like:

  • Employee hiring and onboarding
  • Employee management and training
  • Time and attendance
  • Benefits and retirement package administration
  • PTO (Vacation, sick time, medical leave, etc)
  • Payroll and tax compliance
  • Reporting and analytics functions

What is Human Capital Management (HCM) Software?

HR and HCM software systems are often considered the same in terms of functionality and the tools included in a full suite of applications for every aspect of HR. However, Human Capital Management (HCM) software typically offers a more robust and comprehensive suite of tools and features (along with workforce automations and advanced reporting) that can help you manage the full spectrum of your human assets. 

Payroll Vs. HCM Vs. HR Software: Which is Right for Your Business?

Payroll software is a great solution for companies that need the ability to pay employees on a regular schedule and automate the manual work that comes along with the basics of processing payroll and reporting to governing bodies on necessary taxes. Small to medium businesses who simply need a better way to pay employees and simplify things at tax time can achieve great benefits from using an affordable payroll software system. 

If you have a medium to large company, then you’ll have more complex HR needs, including recruiting, hiring, payroll, benefits, tax compliance, and more. In these cases, using an HR or HCM software solution can bring all of your human resources tasks into a singular system, which along with workforce automations and advanced reporting tools, will help your HR team manage employees and all the intricacies of HR in a more efficient, streamlined fashion.

About Wheelhouse

Like what you just read? At Wheelhouse, we are passionate about all things software, and our specialty is connecting software buyers to an enterprise solution that perfectly matches their needs. 

Please visit our Payroll Software page for a complete list of all the solutions we recommend. Questions? Drop us an e-mail at and we’ll be happy to assist you!

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