Why do many Indian MSMEs ignore HRMS, and What Do They Lose As a Result?

The MSME sectors contribute a big part in India’s GDP and can even contribute more if companies switch from traditional methods to HRMS to manage their workforce. HRMS stands for Human Resource Management System and is an HR software application used by most companies to handle their daily workplace operations. From managing employee engagement and attendance tracking to payroll management and shift scheduling everything can be automated. HRMS reduces manual work and improves the overall company operations. In this way, HRs can focus more on their main goals and can do the tasks faster than usual. In this blog, we will learn what is MSME, why many MSMEs are overlooking the HRMS, and what benefits they are missing in their day-to-day operations. Why do many Indian MSMEs ignore HRMS, and what do they lose as a result?

What is MSME?
HRMS

What is MSME?

MSME stands for Micro, Small, and Medium Enterprises. The concept was first introduced by the Indian Government through the MSMED Act 2006. The aim of MSME is to reduce poverty and improve economic growth by offering more employment. MSME plays a critical role in eliminating the gender gap by ensuring women’s full and effective participation in the economy and in society. MSME (Micro, Small, and Medium Enterprises) is also considered the backbone of the economic development of the nation as it generates more employment opportunities for people in rural areas. Currently, approx 6.3 crore MSMEs sector are in India which contribute approx 8% of India’s GDP. Overall, they are one of the important parts of improving a nation’s economy.

Why Many of the Indian MSMEs Ignore HRMS

Human resource management systems are powerful tools that can reduce and automate most of the tasks related to HR. In India, though there are many Micro, Small, and Medium Enterprises, most MSMEs do not give much importance to HRMS. 

  • 1. Lack of Awareness

    Many of the owners in the MSME industry do not really know what exactly the HRMS could help them with. They do not know how these systems can modernize the ways in which the HR process is managed, increase employee engagement, and reduce administrative burdens, among others. Instead, they still like to use traditional methods such as using an Excel sheet or paper-based systems because it feels more comfortable to them.

  • 2. Believe More in Traditional Methods

    As we all know once we get comfortable with something it is tough to get out of the comfort zone and switch to new technologies. Similarly, most of the companies without proper knowledge of HRMS fail to see the benefits they would get in the long run by implementing HRMS in their workplace. Some owners of MSMEs believe that those simple processes are enough to manage their workforce. They might feel that with fewer employees, the manual handling of payroll, attendance, and employee records is manageable.

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  • 3. High Costs

    One of the major reasons for MSMEs in India not to adopt HRMS is due to the high cost that comes with such systems. Most small business owners feel that HRMS is well-suited to bigger organizations and will be an expensive asset for their small organizations. They feel that the cost of acquiring, installing, and operating will be too high for them. However, the perception that it is very expensive is not always true. For example, our hihellohr HRMS software provides all HRMS functions at a very affordable cost. With the growing advancements of cloud-based technology and subscription models, it has also become economical and accessible for MSMEs.

  • 4. Resistance to Change

    Change is not easy, and therefore, new technologies cannot be implemented immediately by most people easily. MSMEs avoid HRMS because they are happy with what is already in place. It takes time to learn some new software especially if the organization doesn't have experienced employees.

  • 5. Focus on Core Business Operations

    MSMEs typically only focus on the core business operations that contain production, sales, customer service, etc. All the activities related to human resources are considered less important, and therefore, owners take care of them without any specific tool or system. This concentration on core business operations does not provide time or interest in exploring modern HR technologies like HRMS that could also help businesses enhance their overall efficiency.

What Are MSMEs Missing by Not Adopting HRMS?

HRMS

1. Increased Efficiency

One of the key advantages of HRMS is improved efficiency in handling HR functions. HRMS Automates Processes, the most common processes that an HRMS automates include payroll, attendance tracking, and leave management. Small and medium-sized MSMEs where they are using manual methods take much time. Therefore, by not adapting HRMS, MSMEs miss the big opportunity to simplify these operations and afford more time for growth and development.


2. Correctness of Payroll and Compliance

Payroll management is the most critical and important function needed in every organization. Additionally, it is very important to handle and manage payroll correctly to avoid penalties which can lead to more serious problems. HRMS automates this payroll process by correctly calculating the employee’s payroll and tax deductions. MSMEs missing out on HRMS may have to struggle with manual payroll processes. 


3. Scalability and Growth Support

As MSMEs grow, their HR needs become more complex. Managing a growing workforce with manual methods becomes increasingly challenging. HRMS solutions are designed to scale as businesses expand, allowing MSMEs to manage everything from recruitment to performance appraisals more effectively. Without HRMS, MSMEs may struggle to keep up with their growing needs, potentially stunting their growth in the long term.


4. Better Employee Engagement and Satisfaction

HRMS will significantly improve the employee experience through self-service, performance tracking, and transparent communication. For example, leave applications can be made online directly and without asking HR. The same applies to their attendance records and payslips. MSMEs lacking an HRMS may not be able to successfully satisfy their employees, considering the processes may be lengthy and ambiguous, too much for any employee.

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