The human resources software industry – which include popular cloud-based applications such as Zenefits, Namely, BambooHR and Gusto (as well as those provided by big payroll service companies like Paychex and ADP) has been exploding over the past few years with recent reports forecasting the industry to bring in revenues upwards of $10 billion annually by 2022.

At first, the popularity of these applications may come as a surprise. Think about it: what business in their right mind would trust the cloud to store the most intimate details of their employees? The truth is that many businesses do trust the cloud for this purpose and they trust it for a single valid reason. But, maybe not the reason you think.

Sure, these applications provide a powerful way to manage all of the interactions with your employees. They store contact information which can be readily updated remotely. They enable your people to schedule vacations, notify of sick time and schedule themselves out of the office. They help manage performance reviews so that they’re done in a timely and more collaborative manner. They ease registration and administration for insurance and other benefits. Many of these applications integrate directly with popular payroll systems so that employees can receive real-time updates of their pay history, oftentimes from their mobile devices.

All of this is great stuff – and increasingly expected by younger employees and Millennials who are said to gravitate towards employers that are more tech-savvy.  But it’s not the main reason why employers are investing in these apps.

The reason is simply this: overhead gets reduced.

If you don’t have an HR application, then I bet I know what’s going on in your office. Whenever an employee needs to confirm their pay data, update their contact info, fill out an insurance application, submit review comments for a subordinate or request paid time off there’s someone – likely an administrator, office manager or HR person – somewhere in the middle.  Am I right?

Of course I am. The middleman (or woman) is tasked with answering questions, tracking paperwork and filing away information – all while discussing their recent vacation plans, the defeat of the local football team and the latest show to watch on Netflix. That’s nice, but let’s admit that this all consumes unnecessary time.

With an HR application all of this is done directly by the employee whenever they want and from wherever they want. Why? Because it’s all in the cloud and it’s all accessed from a mobile device. I’m sure your people enjoy the human interaction. But they also desire getting – and submitting – their information as fast as possible. More importantly, you want your HR administration – a necessary and important overhead – to be as productive as possible. Or perhaps – just perhaps – that administrative person can be spending more time doing other, more profitable work than filling out forms and similar tasks.

All of this cuts overhead. It makes people more productive. It’s a perfect example of how investing in cloud technology can produce measurable returns. That type of cost cutting will loom importantly when the next recession comes – as it always does – because the companies with the lowest costs are the ones that are best positioned to navigate through downturns.

That’s what HR applications, when implemented the right way, do. Sure, it’s a great benefit. But it’s an even greater cost saver.

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