HUMAN CAPITAL MANAGEMENT

INTRODUCTION

Human capital management is a key process for every organisation and this is a standard offering from
most of the leading ERP vendors in the market. The offerings differ for different packages. In this chapter
we discuss the general modules of HR solution which are covered by most of the leading ERP packages
available in the market.

Human capital management system – Different modules

 Recruitment management
 Time, attendance and leave management
 Compensation management
 Benefits and payroll
 Talent management/Performance management
 Learning management
 Personnel management
 Employee Relationship Management (ERM) and Employee Self-service
 HCM analytics

HUMAN CAPITAL MANAGEMENT SYSTEMS

Human capital management processes in the organisation spread across several processes as
shown in Figure 20.1. These processes cater over the entire life cycle of an employee, start before an
employee joins an organisation and continues till date the employee leaves or retires the organisation.
While the order in which a company automates their human resource management processes varies as
per the company, typically transaction intensive processes like payroll, employee record management,
time and attendance management, leave management, etc. are first automated. The simple logic for this
automation is the volume of data/records and transactions. Recruitment processes are next to be
automated. Strategic processes like talent management, performance management and learning
management processes are last to automate. Figure 20.2 describes this order of automation.

Recruitment Management Module

Human resource management applications help in automating the recruitment process. The drive for
such automation is that companies need to identify and hire the best talent, quickly and cost effectively.
These solutions help companies by managing applicant flow and selection, managing applicant volumes
by screening and selecting the best candidates using a variety of search, analysis and interactive
methods and thus, reduces hiring time and cost per hire. It has been seen that if a company’s recruit-to-
hire cycle time for skilled positions are too high (say, 6-8 weeks), there is a strong chance that some of
the best candidates are being lost to competitors. Recruitment automation helps in reducing the cost
and time of hiring by:

 Completely electronic recruitment process eliminating all paper documents

 Using internet to attract candidates (company website, job portal, etc.)
 Automating all record-keeping (digital records of candidate’s profile, certificates, etc.)
 Better collaboration between recruiters and hiring managers so that managers can optimise
their time by focusing on best candidates only.
Time, Attendance and Leave Management Module

Human resource systems help in managing time, attendance and leave of employees. Today there are
lots of technology advancements in this area and traditional punch cards are getting replaced by
biometric devices, mobile devices and HRMS systems need to support these multiple input methods.
Capturing employee time is important for employee’s payroll calculation and the HRMS packages can
interpret time data based on configurable pay rules to calculate gross pay of employees. Table 20.2
shows the details of HRMS module.
Compensation Management Module

Employee salary and compensation represent a huge fixed cost on most of the companies’ total
expenses. ERP’s compensation management modules can ensure a consistent application of
compensation policies across the enterprise, integrated compensation planning-budgeting and by tying
compensation more directly to performance, it ensures top performers are rewarded. Compensation
management systems encompass compensation planning/budgeting, salary administration, salary
structure management, market pricing of jobs, incentive management, etc.

Benefits and Payroll Module

Benefits and payment are little different topics. While Payment is more related to month-end salary,
benefits include things like medical benefits, subsidised car or housing loan, etc. that a company offers
as part of total compensation package.

 Benefits: Leading HR solutions can administer multiple employee benefit plans and programme
structures. Solutions support enrollment processes of employees to these different benefit
plans, determine eligibility for programme participants. Leading HR solutions also support
benefits like paid leave programmes (automatic accrual of paid leaves), medical benefit
programmes, housing and car loan benefits, etc.
 Payroll Human resource solutions supports different payroll-related things like:
 Payroll administration: This includes things like administering payroll data and structures,
employee data, deductions/adjustments, one-time and special payments, direct deposit of
payments in employee’s bank account, etc.
 Payroll processing: Payroll module of HR solutions have capabilities like gross and net payment
calculations, income tax and professional tax calculations, provident fund and gratuity
calculations, different allowances and deductions calculation, etc.
 Supporting multi-country localisation and taxes: This is one area where tax rule, provident fund
rules, etc. may vary in every country. If a company decides to roll out the payroll module of a
single ERP in multiple countries, then the product needs to support localised payroll
requirements, income tax rules, provident fund and gratuity regulations, professional tax laws of
multiple countries. This is the reason that leading ERP solutions like SAP and Oracle had come up
with different versions of payroll module for different countries, i.e. SAP HR Payroll for U.S., SAP
HR Payroll for UK, etc.

Talent Management/Performance Management

Talent management incorporates a variety of strategies and best practices, including competency
assessment, performance management, career planning, succession planning, training, development
and fast-tracking of high performers to identify key contributors and future leaders. Each employee’s
skills, competencies, experiences should be catalogued and available online, enabling the allocation of
the right employee to the right job. Ideally, a human capital solution for talent management should
provide an integrated set of applications for strategy, assessment, competency management,
performance career planning, succession planning, learning and development. A talent management
module of an HR solution as shown in Figure 20.6 helps in the areas of:

Learning Management

For some ERPs, learning management module is a part of talent management, for some ERPs it is a
different sub-module under HR. Learning management module helps in administering employee training
programmes and course offerings as well as delivers online learning programmes and content. As shown
in Figure 20.7, different areas of learning management solution are discussed below:
Personnel Management

HR packages also need to handle personnel management issues like:

 Labour relations: This includes supporting processes for grievances and discipline in the
organisation.
 Non-employee administration: This includes tracking and managing non-payroll workers such
as contractors, temporary workers, consultants, etc.
 Maintaining detailed employee records

Employee Relationship Management (ERM) and Employee Self-service

ERM seeks to enhance the relationships of the employee to the enterprise, managers, co-workers and
external parties. A common way of achieving this is by deploying employee portals that connects
employee to business processes, relevant information, resources and people. ERP can achieve higher
levels of customer satisfaction by delivering online services and making employees more productive.
Leading ERP HR solutions provide different technologies here like:

 Employee portal: The package offers a personalisable portal designed for employee
communications, content management, and integration to self-service applications.
 Employee self-service: Leading ERP HR solutions can deliver comprehensive employee self-
service applications including benefits, maintenance of personal data, leave application,
accessing pay slip and payroll data, registering to a new training, etc. Employees maintain all
these data and do all these transactions themselves.
Human Capital Management Analytics

Human resource solutions can also support different analytics/KPIs and reports needed for effective
management of HR in an organisation. Most of the leading HR packages provide these analytics out of
box as part of their ERP solution and, in some cases, as part of their business intelligence solution. Table
20.3 is an example of such KPIs/reports for different HR modules.