--- description: Over half of UK SMEs use software in their HR department. We asked how they're using HR tech and the benefits it brings to their companies. image: https://gdm-localsites-assets-gfprod.imgix.net/images/software_advice/og_logo-55146305bbe7b450bea05c18e9be9c9a.png title: HR tech: One-third of UK SMEs are looking for something new --- # HR tech: One-third of SMEs are looking for something new Canonical: https://www.softwareadvice.co.uk/blog/2260/hr-tech-smes-uk Published on 20/10/2021 | Written by Sonia Navarrete. ![HR tech: One-third of SMEs are looking for something new](https://images.ctfassets.net/63bmaubptoky/7B-Y2emDGnhox0DErGtPFEjVGnuzdeaU79dxlg3qlrs/9a69444339b9944863d5b1fd946dc454/HR-Tech-UK-Header.png) > The management of human resources (HR) as a distinct practice was born in the early 20th century. The UK’s professional body for HR, the CIPD, can trace its roots back to 1913, for example. What started as a means of ensuring that the people at a company were performing effectively and efficiently has gradually become a discipline concerned with relationships. ----- ## Article Content The management of human resources (HR) as a distinct practice was born in the early 20th century. The UK’s professional body for HR, the CIPD, can trace its roots back to 1913, for example. What started as a means of ensuring that the people at a company were performing effectively and efficiently has gradually become a discipline concerned with relationships.But throughout its development, HR has always been driven by data. Whether it’s basic metrics like attendance, pay rates, and employee turnover, or more complex information like employee satisfaction, HR professionals rely on robust data in order to make the best decisions for both employer and employees.For that reason, HR has always made use of tools to make data collection, storage, and transfer more efficient —from typewriters, photocopiers, and fax machines to today’s digital technologies.With this in mind, Sofware Advice wanted to find out about the use of HR software among UK small and medium enterprises (SMEs). We surveyed 1,000 managers from companies with 250 employees or less to hear about their HR challenges, solutions, and goals. You can find a full methodology at the bottom of this article.How do UK SMEs manage HR?HR departments in SMEs face many challenges. Often, small companies do not have dedicated HR teams, instead using external partners for certain tasks and relying on managers to cover the rest.Among the companies we spoke to, recruitment (‘finding new employees’) is the greatest challenge for HR departments, reported by 32% of respondents. Other significant challenges include managing payroll, tracking metrics such as the productivity of employees, sick days, medical leave, and holidays, and managing the work of employees.Nearly half (49%) of the SMEs we spoke to manage all HR in house. However, 24% work with partners to manage recruitment, and 27% outsource payroll to external suppliers.How do SMEs use HR software?HR software is, of course, another tool to help busy HR departments —or non-HR-specialists— cover HR tasks. Of the companies responding to our survey, just over half (56%) use software in their HR departments, while 29% do not.Perhaps surprisingly, 15% of managers in SMEs don’t know whether their HR department uses software or not. This raises questions about whether such tools are being used effectively. Employees (including managers) are likely to have frequent interactions with HR software for common tasks like booking holidays, checking payslips, conducting performance reviews, and recruiting new staff.Payroll is by far the biggest application for HR software among the SMEs we spoke to. Of those who use software in their company, 73% said they use it for managing payroll.  After payroll, other common uses include tracking working time, sick days, and holidays (48%) and workforce management (44%).How does HR software work?HR software provides the tools that help managers look after their people. The software can automate many common procedures in HR, including:Financial tasks like payroll.Administrative tasks like time and attendance tracking or shift scheduling.Performance-related tasks like reviews, disciplinary procedures, recruitment, and onboarding.HR software also provides insight into key business metrics, so managers can make better-informed decisions about their company and its workforce. The software also stores all HR-related data in one place, helping companies secure their data and comply with regulations for their locality and industry.Other solutions related to HR software:HR software shares some of its features with other tools. These include:– Employee vacation \& PTO tracking software, which helps firms manage holiday bookings across their workforce.– Employee goal setting software, which helps employees and managers set and track performance targets.– Talent management software, which helps companies retain and motivate their workforce. It often includes features such as onboarding, performance management, compensation management, and succession planning for when employees leave.How much does HR software cost for SMEs?HR software comes in various forms and price brackets. While many solutions offer a free trial or freemium version, pricing plans can exceed £100 per user per month depending on the needs of the business. When we asked SMEs how much they would be willing to pay for HR software per user per month, £11-£50 was the most popular price band, chosen by 30%. More than one-quarter (27%) would only consider free software (also known as freeware.)10% of respondents selected “Other”, suggesting that they might prefer a one-off purchase and an on-premise installation rather than a subscription-based payment model.Why do SMEs choose the cloud for their HR software?Nearly half (47%) of the SMEs we spoke to use cloud-based software, compared to 27% who use on-premise products. The major differences are twofold:1. In the cloud, the software is hosted on machines provided and managed by the software provider. Users access the tools via their web browser or, increasingly, via a mobile app.With an on-premise installation, the customer is responsible for providing hardware, installing the software, and managing updates.2. In the cloud, the customer generally pays a regular fee (often per user per month for HR software) and the provider gives them access to the software and continually updates it as part of that fee.When working with on-premise tools, the customer usually pays a one-off cost for the software, then pays again if they want to upgrade to a new version.Cloud-based software is a popular choice for SMEs (who often don’t have dedicated IT teams) because they don’t have to worry about hosting, securing, or updating the computer systems required to run their software. They can effectively pay and use the tools right away. If they don’t want the software anymore, they simply cancel their subscription.Are UK SMEs happy with their HR software?Of the businesses we spoke to, more than one-third (37%) are on the lookout for new HR software. Of these, 74% already use one HR system and are interested in an alternative, while 26% don’t use any HR software but want to start doing so.However, one-third (34%) don’t use any HR software currently and are not interested in using it in the future.When asked why they have not invested in HR software, affordability and lack of need are the main blockers: 34% of SMEs who don’t use any HR tools say “I don’t rely on software to manage HR” and 32% say “the price is too high”.In summaryRecruitment and payroll are the biggest challenges for HR departments in UK SMEs.56% of UK SMEs use HR software, with payroll by far the biggest use case.HR software helps automate HR tasks and works with many other software types to help companies get the most out of their people.One-third of UK SMEs are on the lookout for new HR softwa re, with the most popular price range being £11-£50 per user per month.Looking for HR software? Check our catalogue. ## Disclaimer > Survey methodology:To collect the data for this report, we conducted an online survey in August and September 2021. Of the total respondents, we were able to identify 1,000 UK respondents that fit within our criteria:UK residentOver 18 years of ageFull-time or part-time employedIn a management/executive position (manager or owner)Work in an SMB (with 2-250 employers)  ## About the author ### Sonia Navarrete Sonia is a Senior Content Analyst, helping SMEs choose the best software. She published in Raconteur, Computer Weekly and IT Pro. Journalist and PR. 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