User Study: 43% of SMEs in the UK use HR software

How do small businesses in the UK handle their HR? Do they use spreadsheets, notebooks or Google Calendar? In today’s fast world where time is money, it’s important for companies to invest in the right software that will help reduce time and money by speeding up processes and reducing errors.

HR-software

Gartner defines HR software as: “Business applications for the management of HR-related transactions, best practices and enterprise reporting. Functions typically include core HR tracking, payroll and benefits. The scope is often extended to include recruiting, competency management, training, time management, performance management and self-service offerings.”

We conducted a survey amongst British SMEs to understand how they are using HR software, below are the most relevant results.

Highlights of the study

  • Almost half (45%) of British SMEs in the education, financial and IT sectors in the UK don’t use HR software.
  • Price (24%) is the main factor stopping businesses from implementing HR software.
  • 44% are interested in investing in new HR software or update the current one they have.

hr software for small businesses uk

43% of SMEs in the UK use HR software

The results of the survey show that almost half of British SMEs (43%) are investing in HR software. This is a significantly large result compared to the CRM adoption, with only 31% of SMEs having a CRM solution in place.

The results also show a divide almost equal between companies that are using HR Software, with 45% of them currently not using any HR software.

hr software for small businesses uk

We wanted to know how midsize British businesses were tracking their employees so we conducted a survey of 282 of businesses in the UK: Results showed that only half have a system in place. But what are the reasons for not adopting a HR software?

Price stopping businesses from implementing HR systems 

When asked about the reasons that are stopping them from implementing HR software, respondents stated that price being too high (24%) was the main one. There is a misconception around small businesses that HR software can’t help them manage their staff and that it’s an unnecessary expense. However, as their business grows, they’ll need support to manage all the growing number of staff and the increasingly complicated HR processes that come with a larger company.

hr software for small businesses uk

Almost half of SMEs are interested in HR software

Despite the concerns listed above by businesses when looking to implement HR software, almost half of SMEs are looking to implement a system for the first time (23%) or are currently using one and looking to change it (21%) for another more suited to their needs.

hr software for small businesses uk

It’s important to note that once companies have tried a software solution, they are more likely to want to stay with software rather than moving back to manual methods or spreadsheets. Companies that are looking to implement software for the first time should look at less feature-heavy solutions to start with, and add tailored features as the business grows. 

Most HR software  vendors offer free trials and demos where you can try their features to see if it’s a good fit for your company.

Companies looking would mostly consider a free software

Almost half of businesses (40%) would only consider free software and a third (30%) less than £10 per month. 16% of respondents would be willing to spend up to £50 and 5% up to a £100.

hr software for small businesses uk

Most vendors on the market offer entry level, free software that has basic features. However, as your business grows, you may need a more comprehensive system. Most vendors offer different pricing plans that start a low cost with limited features and move up to pricier plans that include complex features. 

Users want payroll and time tracking

We found a clear relation on the challenges that companies are facing and the solutions they are looking for. When asked about the biggest challenges that HR departments are facing, managing payrolls (21%) and tracking productivity (26%) came up as the two main ones.  

hr software for small businesses uk

When we asked what features from an HR software that companies would be most willing to invest in, respondents indicated that managing payrolls (21%) and tracking workers’ time and holidays (21%). 

hr software for small businesses uk

Other features include tracking travel and expenses (10%), manage the workforce (8%), regulating health insurance and other benefits (8%),  the applicant recruitment and application process (7%), scheduling shifts (7%), tracking productivity (6%), and other (4%).

Payrolls and recruitment: The two most outsourced features from HR departments

The results of the survey showed that 81% of SMEs handle their HR inhouse and only 14% use and external company to help them manage their payrolls. Only 5% of them use an external consultancy or headhunter to help them with recruitment.

If you are interested in learning more about HR software options in the UK, visit our full HR software directory on Capterra UK.

Methodology of the study

To collect the data for this report, we conducted an online survey. The answers come from a sample of the target market UK. The survey was completed by 282 participants who qualified to complete the survey through screening questions out of a total of 289 participants in August 2019. Qualified participants are employed (full-time, part-time or self-employed), work in a small to medium sized enterprise (1-250 employees).