Is HR Software Necessary For Startups? Pros and Cons to Consider

best HR software for startups

Is HR Software Necessary For Startups?

Do startups need HR software? Discover the advantages and disadvantages of implementing HR software in your startup. Learn how HR software can streamline processes and improve employee engagement, as well as the potential challenges and costs to consider.

Often, startups argue about the importance of HR software and whether it is necessary. If you are asking if HR software is necessary for startups, the answer is yes.

HR software helps startup HR teams to stay organized in disseminating HR duties such as hiring, training, and managing employees. It offers a central interface to help you automate and oversee all the duties from a single point.

Also, HR software serves as an employee self-service portal, and startups without a human HR manager can effectively keep the startup running with the aid of this software. The beauty of this is that a startup built on a solid HR system will make your team run faster and more effectively, reducing human errors, saving time, and giving your company a positive image.

Unstructured HR processes can birth faulty recruitment practices, toxic work environments, employee mismanagement, and damaging staff morale. Having HR software is necessary for every startup.


Why Do Small Businesses Startups Need Human Resource Software?

Small business startups have limited resources and need HR software to operate effectively. Here are some of the reasons small business startups need HR software.

1. Lack of dedicated HR staff

Many small businesses do not have a dedicated HR staff. The HR responsibilities and duties are delegated to an in-house or cross-functional manager. Imagine a single person handling projects and HR duties that consist of hiring, handling payroll and benefits, promotions, time tracking, and disciplinary action, which can be overwhelming.

Indeed, HR software cannot effectively replace an HR administrator, but it can make the work easy for whoever handles those duties. The persons handling the duties can automate some processes and focus on the more critical aspects.

2. Measure performance

Measuring the employee’s performance for promotions or additional benefits is often difficult. This results from a lack of formal or standardised tools or review processes. But with HR software, you can easily set a centralised formal procedure that will checkmate the employee objectively.

This is important because motivation and rewards help motivate employees to do more and meet expectations.

3. Record-keeping and regulatory compliance

Another primary reason small startups need HR software is to keep an adequate record and ensure regulatory compliance. You can easily automate and centralise the record features, which make records accessible and easily searchable. The HR tools can automatically calculate tax and employees’ wages and salaries. As a small business startup, you must balance tax codes, labour laws and health care reforms.

Additionally, HR software helps to keep you compliant with the necessary regulatory authorities. HR regulations constantly change, and the widespread increase in remote work models has made HR management more complex. HR software will help you to stay compliant and current with all these changing policies because failure to stay compliant can result in processing delays, mistakes and legal cases.

4. Talent Management

Pew Research in 2022 reported that 22% of U.S. workers want a job change within the next six months. This makes talent management a necessity. This is one of the significant drivers in purchasing HR software.

As a small business startup, if you don’t manage your employees, you may lose them to higher competitors. So you must guide them jealously. You can automate processes with HR software that aids you in developing their skills, motivating them, assessing their performance, and compensating and promoting them.


Types of HRM Software that Small Startups Need

HR software for small businesses can be divided into three main classes, which are:

  • Core HR
  • Strategic HR
  • Integrated HR suites.

1. Core HR

Core HR is the type of HR that offers solutions to administrative functions of the business. These administrative functions include benefits administration, payroll, attendance tracking, time tracking, regulatory compliance and workforce planning. Also, core HR offers a self-service portal where the employees can access their work-related data and enter requests – basically everything that has to do with core functions of the workplace.

Core HR can automate the following:

  • Employee scheduling: Keeping      and    administering        duties to employees.
  • Time tracking: Keep track of the employee entry time, number of hours worked, and time off.
  • Payroll: Manage and calculate payments to employees.
  • Benefits: Manage and administer employee benefits, such as leave, death benefits, retirement and health insurance.

2. Strategic HR

Strategic HR offers solutions that help hire, retain, and develop the best employees. This strategic HR is in charge of talent management as it develops and automates recruitment, training, performance management and succession planning processes. Some may cover only aspects of talent management, such as the recruitment processes.

3. Integrated HR Software

Integrated HR software offers end-to-end solutions to functionality across most areas of HR management. Integrated means it is comprehensive and can perform the functions of Core and strategic HR. These include administrative functions like hiring and training and strategic functions like talent management.

Integrated software can come with additional features such as:

  • Social recruiting
  • Learning management
  • Applicant tracking
  • Onboarding
  • Reporting/analytics
  • Compensation
  • Succession planning
  • Goal tracking
  • Document management


What is the Best HR Software for Small Startups

Not all HR software is suitable for small businesses. Some are built with advanced features that can make them too sophisticated for a small startup. Below are the top 3 HR that are suitable for small startups:

  • BambooHR
  • BreezyHR
  • Bambee HR


BambooHR is one of the best HR software for small startups to manage the employee lifecycle. It is a payroll management tool where you can keep track of your employee data, reviews, and retention and time-off requests.

BambooHR is compatible with mobile devices and offers management features to manage the hiring process simultaneously.

BambooHR doesn’t offer a free package. Pricing is gotten only on demand.


BeezyHR is another top HR software for small startups known for its hiring automation process. It helps automate the hiring processes, such as screening, interview scheduling and email alerts.

BreezyHR offers a free plan for bootstrapped small startups, but its features are limited compared to the paid plan. The disadvantage of this plan is that it does not go beyond the scope of hiring.

Bambee HR

Bambee HR is a human resource outsourcing solution that offers one of the most budget-friendly HR solutions to small startups.

Bambee HR helps small startups handle all their HR needs, such as ground-building employment policies, employee benefits, and HR procedures.

Additionally, Bambee HR offers extensive support to startups to resolve HR challenges they might be having.

Chris Cornell

Chris Cornell is a leading expert in the field of research and data analysis. He is also a technical project manager and SCRUM professional with over 3 years of experience in the field of data analytics, research, and professional writing. Cornell has worked for reputable companies and research institutions, and his expertise includes statistical analysis, survey design, and data visualization. Presently, he is focused on actively building the Nenody brand and providing value and evidence-based information.

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