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What is HCM?

September 22nd, 2021 | 4 min. read

By Gia Rolen

What is HCM? Is it another ambiguous, corporate term, unclearly defined across the internet by intimidating acronyms and large words? And why is it important? Should it even matter to you and your business? 

If you’re researching this buzzword, it’s likely because you’re new to the industry -- or you’re looking for a different provider. People are your most important asset (and also the most expensive!) so understanding what Human Capital Management means can be crucial to developing a winning company culture. 

As a Payroll and HCM provider, we’ve noticed a disconnect when this term is used. Our goal is to help small businesses win. This means helping them understand these overdressed terms - because they’re not as complicated as they sound.

Familiarizing yourself with these words will help you decide where you want your business to go and what it needs to get there. It’ll also stop sleazy salespeople in their tracks. You know what these terms mean and if you need them. 

So let’s get to it. 

What is HCM? 

Human Capital Management (HCM) refers to the relationship between an employer and the employee, from the time they are hired to the time they retire (or get fired). It is your all-in-one back office manager, helping you maximize productivity, retain the best talent, and harness people power, so your business can keep winning. 

HCM solutions integrate several business functions into one platform. You won’t need multiple systems to manage your payroll, timekeeping, or benefits administration - it’s all in one location. 

Why is HCM important?

You already have some type of HCM process in place. It may look like file cabinets full of personal employee information, taking up valuable office space and vulnerable to theft or loss. Or perhaps it is an employee’s data that is stored through various portals, making it difficult to even process a PTO request. 

A payroll and HCM provider can help you streamline these processes, alleviate you (and your staff) from wearing too many hats, and create a better work/life balance. Your time can be better invested in developing your business, building your company culture, and engaging with your employees. 

What’s included in an HCM system?

You may be familiar with the four primary aspects of HCM: payroll, time & attendance, benefits administration, and onboarding. These are the bones of an HCM system. Let’s explore them to see if they line up with your business needs. 


Paying your employees accurately and on time is a non-negotiable aspect of staying compliant and maintaining a healthy work environment. 

Even though payroll is one of the simplest aspects of HCM to understand, there are still factors you have to consider, like how many employees you have and the frequency in which you pay them (weekly, bi-monthly, or semi-monthly). 

An HCM platform stores all of this employee data, including pay history and past W-2s. This saves you time from having to pull pay stubs for an employee and empowers them to access their information at any time. 

Time & Attendance 

To process payroll, you need to gather the time that each employee worked for that pay period. You’ve probably kept track of this yourself for a long time, but as you continue to grow, it gets complicated trying to keep up with everyone’s schedule. 

A comprehensive HCM system will offer mobile, desktop, and physical clock options for punching in and out, while also automating PTO requests, shift differentials, and holiday pay. Whether your team is always on the go or at a job site, a timekeeping feature ensures you collect this information and actively prevent issues like time theft. 

Integrating this with your payroll will no pun intended, save you time.

Benefits Administration 

As you continue to grow, you have more to consider than logging time and paying your employees. If you have over 50 employees, you’ll be required to offer benefits to your team under the Affordable Care Act (ACA)

It’s important to stay on top of this, even before your workforce begins to grow. Instead of donning a second hat, you can implement an HCM system with self-service, electronic open enrollment. 

If you let go of an employee, this integration will automatically terminate those benefits and help you with administering COBRA.  


When you hire a new employee, you have to take them through the onboarding process: filling out a W4 and i-9, reviewing the company handbook, and signing any other necessary documents. 

You can reduce this time (while also going paperless!) and dedicate an employee’s first day to training and meeting the team. A great onboarding system will reduce the cost per hire, digitally enter employee information, and automate acknowledging an employee handbook.

Additional Features of an HCM system 

Try to think of HCM as a car with four essential parts: the engine, the chassis, the body, and the transmission. Without these components, your vehicle cannot move forward. They are required for it to start and stop, and to get you where you need to go. 

Over time, you may want to modify this car and adapt it to your lifestyle and interests. You could invest in bigger tires, install a better sound system, or buy a roof rack for your newfound interest in kayaking. 

Similarly, an HCM platform will adapt to your changing business and grow with you and your team. These additional services fine-tune and streamline your processes, allowing you to have a well-rounded workforce. 

Most HCM packages contain additional features around hiring, training, and performance


As a business, figuring out your hiring process is vital for attracting the right candidates. Do they apply in person or online? How many interviews are necessary before you make a decision? 

An intuitive HCM platform will help you track applicant info and transfer it into your system, centralizing all of their data in one place and preventing you from re-entering it. You’ll also be able to send offer letters, collect electronic signatures, and post to over 600+ job boards. 


Whether your employees are required to learn a new software or review company policies, having a thorough training platform (or Learning Management System) in place will allow your team to excel in their roles and align themselves with your company culture and values. 

On-demand, self-paced learning enhanced with games and badges will encourage your team to finish training, while you track their progress. A great HCM software will allow you to access an extensive library of content on pertinent topics like OSHA safety. 


If you struggle with high turnover, introducing a performance management system can be a game-changer for retaining your top talent. Engaging with your team will help them understand clear expectations, goals, and the progress they’ve made. 

It helps you keep track of performance reviews and gauge when an employee is qualified for a raise. Being involved with your team is needed more than ever for growing your business, retaining your talent, and creating a wonderful company culture. 

A great HCM system makes everyone’s lives easier. 

HCM covers your most important back-office functions (payroll, time, benefits, and onboarding) while also offering services that will help you and your business get one step better every day. 

Finding a system that will manage and organize employee data will empower you to focus on the passion that started your business and the team that supports you. Being a great leader to your people is more important than managing every aspect of your business. 

If you’re interested in integrating an HCM platform into your workplace, check out this article about what to search for in an HCM partner.