From Silos to Synergy: The Competitive Edge of HR and ERP Integration

ERP and HR system integration

Imagine your business operations running seamlessly, costs being slashed and productivity soaring. This vision is now a reality—offered by ERP systems as they continue to dominate the market with a projected USD 183 billion share over the next year. On the other hand, nearly half of large businesses worldwide are already harnessing the power of HR management systems (HRMS), with 80% of SMEs following suit.

ERP systems are essential for businesses seeking long-term innovation, efficiency, and cost savings. With all your key business processes connected, you can easily get a bird’s eye or granular view of critical data involving costs, productivity, performance, and more.

But where do human resources fit into this equation? Can an ERP system fill in for an HRMS or do they work better together?

We’ve shared our insights below.

Is using an ERP system alone enough?

An ERP system facilitates the free flow of information across various departments so you can have a centralized hub of real-time data. It gives you and your team access to the same data for easier collaboration and decision making. You can tailor your ERP system’s reports to your specific preferences or depending on who’s viewing them.

With an ERP system, business data is no longer siloed. Even if you have multiple systems—one for accounting and another for task tracking, for example—you can integrate them into your ERP system to connect and synchronize the automation of critical business processes.
Considering those, is an ERP system alone enough for your business?

Yes and no.

If your goal is to unify your business’ data and automate multiple key processes, then an ERP system alone may be enough. It can help manage your workforce easier with detailed reports on critical productivity and performance metrics. Furthermore, it can automate payroll, saving you time and resources.

However if you want to achieve HR efficiency beyond streamlined productivity and payroll, then an ERP system alone may not suffice. Investing in a dedicated HR software and integrating it with your ERP system is the key to accelerating business growth fueled by an efficient workforce.

What does an HRMS add to an ERP system?

Here’s how ERP and HR system integration can transform your business’s efficiency and workforce.

1. Paperless Core HR Workflows

A core HR system speeds up the onboarding process so your new hires are ready to work not weeks after getting hired, but just days. You can store and process their data—contracts, tax information, government IDs, health insurance, etc.—in a secure digital library, eliminating 90% of paperwork eating up your HR team’s time.

Integration with your ERP system, whether it’s SAP, Oracle NetSuite or Microsoft Dynamics 365, allows you access to real-time workforce information, making it easier to track attendance and process payroll. You can also view valuable workforce insights whether as a broad snapshot or granular reports.

2. Intelligent time and attendance management

If you want to enhance attendance management with your ERP system, you can pay for an additional ERP module (if your provider offers one) or integrate a third-party system with your current software.

The second is a more cost-effective option. Not only will it streamline time and attendance management, but it will also give your employees a more convenient way to clock in and out of work. They can register their attendance through their mobile devices and verify them with biometrics data or face ID, ensuring that their attendance is valid. 

If you manage a team of field agents or remote workers, your employees can clock in remotely and you can approve their attendance through a mobile app.

Whether employees clock in or out onsite or remotely, their attendance is automatically synced with their payroll, ensuring accurate pay.

3. Flexible and tailored payroll

While an ERP system like SAP or Oracle NetSuite can automate payroll calculations, an HRMS offers more flexibility by tailoring calculations to local tax and labor laws. You can also set various payroll schedules like monthly, bi-monthly, weekly, and electronically disburse salaries straight into your employees’ bank accounts. If an employee has incurred cash advances or pending reimbursements, those amounts are also applied to their payroll.

Additionally, employees can view their payslips from their HRMS’ mobile app so they can track their own contributions, deductions, taxes, and net pay. This also lets them have more secure digital copies of their payslips for their records.

4. Comprehensive Productivity and Performance Tracking

An ERP system can track workers’ productivity, but HRMS integration allows for more powerful productivity tracking through comprehensive task management tools. You can create smoother workflows by assigning tasks to team members, tracking progress with real-time updates, and getting full visibility on timelines, deadlines, and who’s working on what.

While managing tasks, you can also track KPIs and goals in real-time, letting you measure and provide feedback on your team’s ongoing performance. It is worth noting that 89% of HR leaders agree that ongoing feedback has a positive impact on businesses.

Aside from ongoing evaluations, an HRMS also supports 360 degree feedback for a collaborative appraisal approach. Your employees can get feedback from multiple sources, enabling you to get a firmer grasp of their strengths and weaknesses. In turn, you can identify the right opportunities for them to take to enhance their skills.

5. Easy benefits access

An HRMS equipped with a streamlined benefits management system makes it easy for your employees to access their earned wages and request loans. No need to go through multiple processes and staff members just to make a cash advance.

Besides advanced wages, employees can also easily take out social security, pension, company loans, or any other type of loan your company allows. And once employees get their funds, you can simply implement a flexible repayment plan integrated with their payroll, automatically deducting a fixed amount every payday until their full loan is repaid.

6. Secure Expenses Management

 

Reimbursements are one of the most challenging aspects of HR management. Without a proper system to manage employee expenses, companies risk losing up to a billion dollars to reimbursement fraud.

An expense management module is a key component of an ERP and HR software ecosystem. It automates claims by letting employees submit electronic copies of receipts and other relevant documentation, eliminating troublesome paperwork. Managers can then process claims by viewing breakdowns of expense types, vendors, and cost centers. Approved reimbursements are paid along with payroll.

You can also prevent out-of-pocket expenses by pre-funding anticipated expenditure, which also ensures optimal HR budget control.

How ERP and HR System Integration Transforms the Business Landscape

The blended functions of an ERP system and HR software sync essential business and workforce data, which aids in critical decision making. This integration fosters seamless data flow between departments, reducing redundancies and ensuring accurate financial and employee information.

Routine tasks, such as payroll, attendance, and benefits administration, can be automated, freeing HR teams for more strategic work. Real-time data minimizes errors and ensures consistency across all business functions. It also provides comprehensive analytics from both HR and operational perspectives, helping decision makers steer their actions in the right direction.

ERP and HR system integration, whether through SAP, Oracle NetSuite, Microsoft Dynamics 365, or another platform, also boosts cost savings as it reduces overhead and operational efficiencies, preventing losses due to fraud and human error.

Lastly and most importantly, integrated processes enable ongoing and consistent performance management, improving employee experience and satisfaction.

The strategic fusion of ERP systems and HRMS helps businesses across industries achieve a holistic view of their operations and workforce. By future-proofing your systems and workflows now, you’ll significantly increase productivity and ultimately gain a competitive edge.

To learn how your current systems integrate with KAMI, talk to our experts today.