1. HR Glossary
2. Software as a Service (SaaS)

Software as a Service (SaaS)

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What is SaaS?

SaaS, or software as a service, is a cloud-based software delivery model. With SaaS, users can use applications without installing them on their local systems, as the applications are hosted by the service provider.

There are two models in which users can use SaaS -

• Subscription: Customers pay a fixed amount for using the services provided by the service provider. For example, using Adobe Acrobat Pro or subscribing to LinkedIn Premium.
• Pay-as-you-go: In this model, users need to pay based on use, storage, or other variables. For example, paying to use the ChatGPT API or upgrading storage in Google Drive.

Evolution of SaaS in HR

The evolution of the Software as a Service (SaaS) model can be divided into four phases. -

• Traditionally, firms used to rely on on-premises software for performing basic HR tasks such as attendance and payroll management.
• In the 1990s, cloud computing gained popularity. Subsequently, firms utilized cloud-based software for customer relations management and other purposes.
• In the 2000s, when the internet started to gain traction, firms adopted integrated HR software for streamlining HR management. For example, firms relied on software to perform multiple HR processes such as payroll, performance management, and compliance.
• In 2025, AI-powered cloud-based software is in demand, as businesses are shifting towards hyper-personalization and AI-powered automation.

Thus, in HR, software as a service has evolved from a siloed process to a business model that delivers a personalized experience with artificial intelligence.

Key Characteristics of SaaS

Cloud-Based Delivery

The service providers deliver the software by hosting it on the cloud. Subsequently, users can use it on the internet without installing it locally.

Subscription Pricing Model

As mentioned, there are two pricing models for using a SaaS -

• Subscription: Customer pays a fixed amount regularly to use the software as a service.
• Pay-as-you-go: In this model, the fees vary as they are charged based on a pay-per-use policy.

Automatic Updates

The software is automatically updated for all users. Customers do not need to pay additional charges for updating the software or for other licences.

Multi-Device Access

Many users can access a SaaS platform at the same time. For example, all the employees of an organization can seamlessly use factoHR’s ESS portal.

Integration Ready

A cloud-based SaaS HR software can easily integrate with existing systems. For example, clients can integrate payroll with performance management or attendance management systems.

Data Security Features

Many cloud-based HR software offer data security features. For example, HR platforms provide features such as multi-factor authentication and ISO-certified cloud hosting.

Increase Customization

AI-powered SaaS software provides a customized experience to each user. For example, some organizations use chatbots to solve simple employee queries and improve employee satisfaction.

How SaaS Works in HR & Payroll

A SaaS product is generally accessed in the following way -

• Cloud-based Hosting: The service provider hosts the software on the cloud and provides services such as cloud storage, conferencing software, or HR management platforms.
• Online Access: Subsequently, users access the services from a website or an application from any location with internet connectivity.
• Pricing: Organizations generally pay a fixed or variable rate based on the subscription/pay-per-use arrangement. This significantly reduces upfront costs.
• Maintenance and Security: The service provider maintains the software and manages data security. It is crucial to select secure software with proper security certifications, such as ISO.
• Centralized Data Management: All the information related to HR and payroll is safely stored in a central database. This database can be accessed in real-time for guiding strategy.

Why is SaaS Important for Modern HR?

Faster Implementation

Software as a service is a cloud-based delivery model. This enables providers to implement it faster compared to traditional on-premises software.

Support Digital Transformation

A cloud-based workforce management solution can support the digital transformation of your organization by storing all the documents centrally. This would help in record-keeping and compliance audits.

Remote Accessibility

In the wake of the COVID-19 pandemic, remote and hybrid work arrangements have become increasingly important, as they provide access to all HR processes. Some of these include attendance, payroll, performance, and leave applications.

Real-Time Updates

A software-as-a-service platform provides real-time updates on attendance, regulatory changes, policies, and leave status. This can be beneficial for both employers and employees. Employers can implement strategies for reducing absenteeism. Similarly, employees can check their leave status online.

Regularity Compliance

Digital software also streamlines compliance management. For example, employees can easily view their tax declarations and investment statements. Also, a SaaS platform secures data and helps comply with data privacy regulations such as GDPR and the Digital Personal Data Protection Act.

Improve Decision Making

HR managers can access all the information related to recruitment, hiring, and track employee performance in real-time. Subsequently, they can make better, data-driven decisions.

Benefits of SaaS for HR Teams

Relying on the software as a service model for HR management has many benefits. Employers can save costs, scale the software as per their requirements, and even update compliance measures. Let’s briefly explore the benefits of SaaS software. -

Cost-Effective HR Management

Businesses can save on higher up-front costs by investing in SaaS software. In traditional, on-premises software, firms need to pay upfront fees. On the other hand, firms only need to pay subscription/pay-per-use costs for a SaaS platform.

Accessibility

Cloud-based software is easy to access. For example, employees can access their payroll-related information, such as payslips and tax declarations. Similarly, employers can also access data on performance, payroll, and recruitment costs in real-time.

Scalability for Business Growth

Firms can easily scale the software as per their needs. For instance, if the headcount increases, the software can easily accommodate new employees.

Automatic Updates and Compliance

HR professionals can effectively streamline compliance management with cloud-based software. For example, the software automatically updates tax criteria as per the new regulatory changes. It can also automatically calculate leave balance, arrears, and other outstanding payments.

Integration with Other Tools

The SaaS platform integrates with two types of existing systems.

• Internal Integration: Firms can integrate performance and payroll management systems to provide performance-based incentives. They can also combine leave management and attendance management systems.
• External Integration: With external integration, employers can directly deposit salaries into employees’ accounts. This improves compliance as well as employee satisfaction.

Key Challenges of SaaS in HR

There are four key challenges of using SaaS in HR management. -

Data and Security Concern

In the software as a service model, employers completely rely on the provider for securing their data. In such a case, their data could be compromised in case of any data breach. So, employers should only trust ISO certified providers.

Integration and Customization

SaaS would be difficult to integrate with obsolete software. So, firms using on-premises software might face challenges in integrating with SaaS. Employers should consider preferring cloud-based software.

Cost and Management

While SaaS costs less compared to traditional softwares, it is possible that firms might need to pay more if the provider has a pay-per-use policy. So, prefer providers who offer fixed rates.

User Adoption and Training

Some employees may find it difficult to adopt the software-as-a-service model. Also, some nontechnical professionals might find the new software more complex. In such a case, prefer a provider that offers comprehensive training and implementation support.

Now, let’s explore the differences between SaaS vs. on-premises software.

SaaS vs On-Premise HR Software

There are several key differences between SaaS and on-premises HR software, including setup cost, flexibility, updates, and maintenance.

Set up Cost

Installing on-premises software can be costly, as the up-front cost is higher. On the other hand, SaaS is a cost-effective software-as-a-service model.

Flexibility

SaaS is designed for flexibility. For example, employees can record their attendance online. In contrast, on-premises software is less flexible. For example, HR professionals need to be in the organization for processing payroll and managing other HR operations.

Updates

A SaaS software is easy to update as it can be updated for all users in the cloud. On the other hand, on-premises software is difficult to update, as the provider needs to update each instance of the software.

Security

SaaS offers data security with end-to-end encryption and other similar features. At the same time, on-premises software offers security with features such as local control and in-house servers.

Maintenance

SaaS software is easy to maintain, as the clients do not need to maintain servers and clouds. In contrast, it can be difficult to maintain on-premises software, as it would cost more resources, effort, and time to maintain in-house facilities.

Accessibility

SaaS offers remote accessibility in real-time, as it is hosted on the cloud. Conversely, on-premises software is an in-house software and can be difficult to access.

Examples of SaaS in HR

Let’s look at five examples of SaaS software in HR.

factoHR

factoHR is a cloud-based solution that automates HR management for over 3500+ clients in 20+ countries. It speeds up onboarding, improves performance, and increases retention rates with advanced features.

Oracle Cloud HCM

It is a widely used software by many clients and governments globally. It offers a suite of features, including payroll, performance, and learning and development, among others.

SAP

SAP is a well-known software. It offers features such as compliance management, talent acquisition, and other core HR features.

Workday HCM

It is an online software used by reputed clients. It offers features such as finance management and HR management in a cloud-based environment.

Dayforce

It is a digital software. It provides features such as payroll management, recruiting, tax filings, and talent management.

Why is SaaS the Future of HR?

SaaS is the future of HR because it can easily integrate artificial intelligence with the business ecosystem. Subsequently, such platforms would be able to provide tailored experiences to their users.

AI-Powered HR Automation

AI automates some of the HR functions, including payroll management, performance appraisals, and even skill development.

Mobile First HR Platforms

Mobile-first HR platforms are becoming even more necessary, as smart devices are being used as digital offices. In such a case, businesses should adopt platforms that offer mobile-first features.

Advanced Data Analytics

Firms are also relying on advanced data analytics, including predictive analytics. These HR analytics enable better and faster decisions and help implement data-driven strategies. For context, predictive analytics utilizes machine learning and historical data for forecasting future trends.

Integration with Business Ecosystem

Businesses are increasingly moving towards integrated solutions rather than siloed softwares. In such a case, adopting an easy-to-integrate solution can be the difference between failure and success.

Personalized Employee Experience

Cloud-based Software is offering a personalised employee experience. For example, features such as mood analysis can help employers understand their employees and improve employee satisfaction.

Focus on Compliance and Security

Laws such as GDPR and the Digital Personal Data Protection Act (DPDP) are making compliance and security even more important. So, firms need to prefer software that protects their data and improves their data security.

Scalability for SMEs and Startups

India is a hub for startups and SMEs, and the government is also facilitating startups with various schemes. So, small and medium-sized businesses should choose software that can be scaled with the growth of their business.

Global Workforce Enablement

It is essential to have software that can manage HR functions in a cross-border work environment. Especially because remote and hybrid work arrangements are becoming normal. Also, firms are increasingly operating in a multinational setup.

Conclusion

Software as a Service model has come a long way from offering one or two services to delivering a comprehensive suite of tools. In HR, the future is with personalization, automation, and AI-powered features, which are becoming a priority for modern businesses. Firms should choose this type of software that offers a personalized and streamlined HR management experience.

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FAQs

What does SaaS Mean in HR?

SaaS in HR refers to using SaaS software for HR management. For example, using a cloud-based SaaS HR software for managing payroll.

Is SaaS Secure for HR Data?

Yes, reputable SaaS software secures HR data hosted on ISO-certified cloud centers and provides features, like end-to-end encryption and multi-factor authentication. This software also offers other features, such as audit trails.

How is SaaS Different from On-Premise HR Software?

SaaS is different from on-premises software in two ways.

1. SaaS is a cloud-based delivery model. In contrast, on-premises software is hosted locally.
2. SaaS offers multi-tenant architecture. So, it can be used by multiple users at the same time. However, on-premises software can only be used by local users.

Why Should Companies Choose SaaS for Payroll and HR?

Companies should choose a SaaS platform for payroll and HR because it speeds up HR processes. Additionally, it is easy to use and can be accessed from any location. Furthermore, firms can easily integrate AI-powered features and manage remote teams with ease on a SaaS platform.

What Types of HR Processes Can SaaS Handle?

A software-as-a-service model can handle all the types of HR processes, including payroll and compliance management, benefits administration, and leave management. In fact, with 360-degree feedback, a SaaS can also help review employee performance.

What Types of Businesses Benefit From SaaS HR Systems?

All types of businesses, including small, medium, and large-sized companies, can benefit from using SaaS HR software. For small businesses, it can offer affordable solutions. For medium-sized companies, it can offer scalability. Lastly, for large enterprises, it can be easier to manage HR across different locations.

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