Insights From Our Software Advisors: Stand Out in Human Resources

Tools buyers are replacing with HR software

When our advisors asked buyers what methods they were currently using to handle their day-to-day human resources operations, here's what they found:

• Around 42% of buyers use non-specialized tools, such as accounting and database software, to handle HR operations. 
• Nearly 19% of buyers rely on manual methods, such as spreadsheets or have a paper-based approach, whereas 18% do not have any system.

While spreadsheets and non-specialized tools may suffice for small businesses, they often lead to inefficiencies, tracking errors, and rising costs as companies scale. Non-HR-specific software can create misalignment and require multiple licenses and integrations, adding financial and operational burden.

This technology gap presents an opportunity for vendors to support digital adoption. A dedicated HR solution centralizes key functions, such as employee data management, recruiting, onboarding, and payroll, reducing errors, simplifying workflows, and improving long-term efficiency.

Why buyers switch to HR software

Our advisors conversed with buyers currently using either manual methods or non-specialized software and are seeking a switch to HR software. These discussions highlight businesses’ real-life pain points: inefficiency (35%), limited functionality (27%), and unreliability (12%) of their existing tools.

• Inefficiency: Manual workflows for onboarding, leave tracking, and performance reviews are slow, leading to inefficiencies. Such methods are also prone to typos, miscalculations, and omissions, resulting in inaccurate employee records, payroll mistakes, and compliance issues.
• Limited functionality: Most non-specialized software tools don’t offer the required features and functionality for HR management, such as automations and built-in support for onboarding and evaluations. As a result, businesses face higher administrative burden, manual errors, and slower workflows.
• Unreliability: Tools hosted on unstable servers may suffer frequent downtime. Poor backup protocols can result in data loss during crashes or updates, disrupting access to critical HR functions.

Our interactions with buyers clarified that many vendors struggle to show how their software improves HR managers’ daily workflows. Compared to manual methods and non-specialized tools, dedicated HR systems offer clear, purpose-built advantages, as listed below:

• Centralized employee information management: Access a centralized repository to store and manage personal details, job history, performance reviews, and training records in one place. Authorized users can access and update records, improving accuracy and compliance.
• Streamlined recruiting and onboarding: Automate job postings, applicant tracking, interview scheduling, and candidate evaluation, among other tasks. This feature reduces time-to-hire and improves the candidate experience.
• Efficient performance management: Facilitate the creation, tracking, and evaluation of employee goals and objectives, promoting alignment with organizational objectives. HR tools also enable continuous feedback and coaching to boost engagement and align performance with business objectives.
• Accurate payroll processing: Automate payroll calculations based on attendance records, benefits deductions, and tax withholdings. HR software also ensures timely payments, reduces errors, and generates reports for compliance and financial analysis.

What HR software features are valued the most

When evaluating HR software, our advisor conversations and review analysis reveal a gap between what buyers seek and what users value the most.

• Buyers prioritize payroll management (55%), followed by time and attendance tracking (42%), employee management (41%), onboarding (28%), and applicant tracking (21%).
• Current users rank employee database management highest (32%), reflecting its daily operational importance.

This discrepancy highlights a key insight: while buyers focus on automation and compliance features during purchase, users rely on tools that centralize and maintain accurate employee records.

• Employee database management helps HR teams store and access personal details, job history, and performance data in one place, reducing errors and improving consistency across the organization.
• Payroll management automates wage calculations, tax withholdings, and deductions, ensuring timely payments and regulatory compliance.

Use cases for HR software

Beyond traditional HR teams, dedicated software supports varied industries, from healthcare and nonprofits to construction and manufacturing, each with distinct workflows and specialized feature needs. For example:

• Healthcare and medical firms use HR software to automate candidate sourcing, track applications, and manage recruitment pipelines. Dedicated healthcare HR software solutions also manage complex shift patterns and rotations for medical staff, optimize workforce utilization, and ensure adequate coverage.
• Nonprofit organizations use the software to streamline volunteer recruitment processes, track applications, and manage onboarding tasks, such as background checks and training. The software delivers online training content and tracks learning progress, ensuring skill enhancement and compliance with nonprofit sector standards.
• Construction and contracting businesses use HR software to track and manage a diverse workforce across projects and job sites, including full-time employees, contractors, subcontractors, and temporary workers. The software helps construction managers maintain records of employee certifications (e.g., safety training, equipment operation), ensuring compliance with industry standards and regulatory requirements.
• Manufacturing firms use HR software to manage shift patterns, overtime, and workforce rotations to optimize production schedules and maintain operational continuity. The software automates payroll calculations, including shift differentials, bonuses, and deductions, ensuring accurate and timely payments aligned with production schedules.
• Maintenance and field service businesses employ HR software to automate onboarding procedures, including safety training, equipment familiarization, and compliance documentation, to accelerate new hire readiness for field deployment. Some HR solutions also optimize the scheduling and dispatching of technicians based on skills, availability, geographic proximity, and customer service requirements.
   

Average budgets for HR software across industries

Businesses across the top five industries are willing to allocate an average budget of between $35 to $160 per user, per month. Additionally, the overall average budget for purchasing human resources software is approximately $69 per user, per month. 

However, the budget for purchasing HR software varies from one segment to another based on factors such as the size of the workforce, complexity of workflows, regulatory requirements, and the need for specialized features such as mobile access, multi-state payroll management, or resource optimization.

Here’s how different human resources industry segments budget (in dollars, per user, per month) for purchasing human resources software.

Buyer goals and challenges—what advisors are hearing

Buyers in the HR space often come with specific expectations and recurring questions that reflect their unique operational needs. Through direct conversations with our software advisors, we’ve gathered insights into buyer behavior and tasks, revealing patterns in their priorities, challenges, and decision-making criteria.

• What common misconceptions do buyers have about HR software?
  Buyers often assume that applicant tracking systems (ATS) include post-hiring features such as onboarding, payroll, and time tracking. However, these functions are typically handled by separate tools or broader HR platforms. This misconception can lead to confusion during evaluations, especially when buyers expect a single product to manage both recruitment and core HR tasks.
• What are some common problems buyers are trying to solve with HR software?
  Buyers are looking to simplify and unify HR tasks, especially around post-hiring processes like payroll, time tracking, and employee management. Many currently rely on separate systems for each function, which creates inefficiencies and manual work. They want tools that reduce administrative burden and support employee engagement and recognition, such as shout-outs or rewards for achievements.
• What are the integration requirements for HR software, and how important are they?
  Integrations are increasingly expected. For instance, employee engagement tools are often part of a broader human resource information system (HRIS) suite rather than standalone systems. Buyers prefer solutions that integrate with core HR platforms to ensure data flow, reduce duplication, and support centralized reporting. This trend applies across the HR software market, not just to engagement tools.
• Is there anything unique that buyers in this specialty specifically ask for?
  Yes, employee recognition features are a growing priority. Buyers want tools that facilitate shout-outs, rewards, and other forms of acknowledgment to boost morale and engagement. While these systems are relatively simple, they’re often expected to integrate with core HR platforms. Moreover, standalone engagement tools are becoming less common, with buyers favoring integrated solutions that support broader HR goals.
   

Recommended actions for HR software vendors

Here are five strategic actions sales and marketing teams can take to better meet buyer expectations and differentiate in a competitive HR tech market:

1. Position your product as a replacement for non-specialized tools:
   Highlight how your HR solution consolidates payroll, onboarding, and employee data management into one platform. Use messaging that emphasizes reduced errors, simplified workflows, and improved compliance compared to spreadsheets or manual methods.
2. Bridge the gap between buyer and user priorities:
   Structure demos to start with payroll and time tracking features, then showcase how your tool supports centralized employee records. Use this contrast to demonstrate how your product supports both operational efficiency and long-term workforce planning.
3. Showcase industry-specific use cases:
   Create tailored messaging and landing pages for key verticals. For example, highlight shift scheduling and credential tracking for healthcare, or volunteer onboarding for nonprofits. Use real-world examples to show how your product adapts to niche workflows.
4. Be transparent with pricing and integration capabilities:
   Update your Gartner Digital Markets profile with clear pricing aligned to buyer budgets. List integrations with core HR platforms, payroll systems, and employee engagement tools to show how your product fits into existing tech stacks.
5. Make onboarding and employee engagement features a selling point:
   As buyers often struggle with implementation and increasingly seek recognition tools to boost morale, sales and marketing teams could promote built-in onboarding support, training resources, and responsive customer service. Highlight employee recognition features like shout-outs and rewards, and show how they integrate with broader HR workflows.
    

Rise above your competition with strategic insights

HR software vendors face intense competition in a crowded market. With the right insights, you can identify buyer priorities and pain points, then tailor your messaging to address them directly and capture attention.

With more than 10 million active software buyers on our sites every month, Gartner Digital Markets can equip you with the strategic insights you need to level up your marketing strategy and become a leader in your category.

Log in to your Gartner Digital Markets account and optimize your profile to ensure buyers understand how your software meets their evolving needs. 

Once your profile is ready, use this insight to build a high-quality sales pipeline and this resource to master follow-ups that convert leads into customers.

Methodology and buyer demographics

Findings are based on data from conversations that Gartner Digital Markets’ advisor team has daily with software buyers seeking guidance on purchase decisions. The data used to create this report is based on interactions with small and midsize businesses seeking human resources management tools. For this report, we analyzed approximately 6,900+ phone interactions from Aug. 20, 2024, to Aug. 20, 2025.

The findings of this report represent buyers who contacted Gartner Digital Markets and may not be indicative of the market as a whole. Data points are rounded to the nearest whole number.

The buyers we interacted with are largely small businesses representing a growing majority of HR software purchases. Below you’ll find the demographics of the buyers so you can see the size and type of businesses, from annual revenue to industry.