HR software: a payroll lifeline for Australian businesses

Published on 05/10/2021 by Laura Burgess

HR software in Australia

Human resources (HR) is an exciting and expanding field in Australia. Job Outlook, a government site that provides information about Australian labour market trends, says that the number of HR jobs has grown strongly over the last five years and is predicted to continue doing so in the next five. 

Prospects for the profession are largely positive. According to an HR Pulse Report from October 2020, produced by the Australian HR Institute (AHRI), 85.6% of HR professionals surveyed think that their organisation will recover from the economic impact of the COVID-19 crisis.

We wanted to find out more about HR in Australian small businesses and, in particular, the tools they use to help them manage HR. Small companies especially have fewer specialist staff, and many do not have HR departments at all. We were therefore interested to hear about whether they can benefit from human resources software to fill gaps in their skill sets.

We surveyed 700 decision-makers from businesses of 250 employees or less. You can find a full methodology at the bottom of this article.

What is HR software?

Human resources (HR) software helps business managers and HR professionals run processes related to finding, hiring, managing, rewarding, reviewing, and developing employees. Common features include payroll management, time and attendance tracking, job applicant tracking, and employee onboarding.

Managers gain several benefits by using HR solutions to manage these tasks:

  1. They can save time by automating the manual data entry and transfer required between common business systems.
  2. They have better insight into their workforce because all their employee information is in one place, and many software packages provide easy-to-understand visualisations of key business metrics.
  3. They can improve the employee experience by streamlining communications and making it easy for staff to find the information they need. Employees can also carry out simple tasks like requesting time off or checking their benefits allocation.

How common is HR software in small business?

The majority of Australian SMEs that we spoke to (72%) use software of some kind in their HR department. Most (81%) use it for payroll, but there are many other functions. These include working time, sick day, and holiday tracking (53%), workforce management (40%), and shift scheduling (37%).

AU Reasons to use HR software bar chart

However, our survey found that 14% of companies do not use HR software. While nearly one-third of these (31%) are considering purchasing such tools, the rest have their reasons for not investing. The main doubts are:

  • Lack of need (‘I don’t rely on software to manage HR’ —reported by exactly one-third of non-HR-software users)
  • Cost (‘The price is too high’ —19%)
  • Security (‘I am not sure if it’s secure enough’ —16%)
  • Implementation concerns (‘It will be difficult to implement it’ —16%)

What is cloud-based software?

Today, software can be deployed using two main models: on premise and in the cloud— but what’s the difference?

On premise refers to the traditional practice of installing software on computers that are located in the offices where employees work. These computers could be the devices (like desktop or laptop PCs) that staff use personally, or the software could be on servers in a server room. Companies pay for the software licenses, install the programs, and manage patching, hosting, and updates themselves.

Cloud-based software is hosted on computers managed by the software provider. Customers typically pay a fee per user per month and access the software via their web browser. The software company then manages updates as part of that fee.

The cloud is an increasingly attractive option, especially for small businesses that don’t have large IT teams to manage servers and software updates. This is reflected in our survey: 43% of respondents say they use cloud software compared with 32% who use on-premises software.

What HR challenges do small businesses face?

Companies choose software to solve challenges, and we wanted to find out what areas of HR SMEs struggle with. The most commonly cited challenge by respondents was finding new employees —reported by 39% of the managers we spoke to. Other common issues include managing payroll (36%) and managing the work of employees (35%).

AU challenges in the HR department infographic

So how do SMEs cope with their HR challenges? Around half of the businesses responding to our survey (50%) manage all HR in house, but 21% outsource payroll to external providers, while 29% use agencies to help them with recruitment.

When asked about the areas they would look to cover if they invested in HR tools, payroll management came out on top (55%) followed by time, sick day, and holiday tracking (41%) and workforce management (34%).

AU Areas of HR to invest in infographic

Did you know?

HR software shares many of its features with other software types. A business can integrate different tools to form an HR stack that provides the exact functionalities they need in a configuration that suits them. Components might include:

Payroll software, which streamlines the tasks involved in payroll services, such as payroll taxes, compensation, year-end bonuses, pay stubs, paid time off, benefits management, and organizing employee records.

Workforce management software helps organisations plan for tasks and allocate their people according to labour requirements and the resources they have at hand.

Time and attendance software replaces traditional paper-based systems such as punch clocks and timesheets. It helps companies schedule employees and track their hours, attendance, and absences.

Recruitment software helps businesses manage the entire recruitment process from one system— from creating and posting job ads to onboarding new employees.

Are small businesses happy with their HR tech?

Usage rates for HR tools are high among Australian SMEs —but so is the desire for something new. Less than one-quarter (24%) of the 700 companies we spoke to use an HR system and are not interested in an alternative. 45% say they currently use one system but would be interested in something else.

When it comes to how much respondents would be willing to invest in new HR tools, the most commonly selected price bracket is between AU$11 and AU$50 per user per month. One-third (34%) of respondents said they would be prepared to pay this. 

AU How much to spend on HR software? Bar chart

Did you know? Many HR software packages are available as ‘freeware’ or offer a ‘freemium’ model. Freeware costs nothing but may only provide basic features or include ads to help fund development. Freemium software offers basic features for no cost, but allows customers to upgrade to higher-cost tiers with more capabilities.

Key findings:

  • Most (72%) of the Australian SMEs that we spoke to use software in their HR department.
  • Half of the respondents manage all HR in house.
  • Recruitment, payroll, and work management are the greatest HR challenges for SMEs.
  • Payroll is the dominant application for HR software, followed by working time, sick day, and holiday tracking, then workforce management.
  • Only one-quarter of SMEs that use HR tools are happy to stick with it.
Looking for HR software? Check out our catalogue.

Survey methodology

To collect data for this report, we conducted an online survey in September 2021. Of the total respondents, we were able to identify 700 Australian respondents that fit within our criteria:

  • Australian resident
  • Employed by a small or medium-sized business
  • Employed full-time or part-time
  • Manager, CEO, executive, or business owner

This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the author

Content Analyst at Capterra, researching and giving insight on tech trends to help SMEs. Graduate of Bath Spa University, UK. Based in Barcelona after years of living in Australia.

Content Analyst at Capterra, researching and giving insight on tech trends to help SMEs. Graduate of Bath Spa University, UK. Based in Barcelona after years of living in Australia.