Do you know how many tools your company uses to manage scheduling, keep employee records, recruit new team members and track employee performance?
According to HR industry expert and analyst Josh Bersin, the average large company now uses 9.1 core talent applications — up from 7 in 2018.
Spending on these tools now averages $310 per year for each employee.
Companies are throwing money at HR tech, trying to find ways of transforming their workforces, increasing employee productivity, and improving quality of hire, employee engagement and retention.
And more and more of these tools are entering the market every day: the HR tech market size reached a total value of $28.65 billion in 2021.
In this post, we’ll discuss some of the key HR tech trends shaping this growing industry in 2023, and how they’ll affect the market going forward.
What is HR tech?
HR tech (or HR technology) is an umbrella term that covers all software, digital platforms, tools and cloud-based technologies that help to automate the HR function and make work easier for employees.
In a definitive guide to HR tech from 2021, Josh Bersin divides HR tools into three categories:
1. Core HR tools
These are traditional HR tech industry tools, such as those that help employers to track time and attendance, manage scheduling, keep records and run payroll.
These tools have been around for a long time, and many companies are now layering other tools on top of their legacy systems.
2. Talent management tools
Tools in this category include recruitment tools, talent marketplaces, learning and development platforms, and applications with a focus on culture or employee experience.
They help companies to recruit, develop and retain talent.
3. Work tools
Work tools are apps, programs or digital platforms that help to make work easier for employees.
They include communication and collaboration tools, project management apps and software that helps employees to track and achieve goals.
The Key Trends Shaping The HR Tech Space Today
The HR tech industry is growing rapidly, and societal factors like COVID, remote work and globalisation mean that it’s also undergoing significant change.
Once dominated by big players like Oracle, Workday and ADP, the space has seen an explosion of start-ups and scale-ups in recent years.
Large companies outside of the industry have also begun to expand their offerings to include HR tech functions.
Here are some of the key trends that are affecting the HR tech industry today, and which will continue to shape the market going forwards:
An Increased Focus On ‘Work Tech’
The COVID-19 pandemic represents the biggest overnight change to the way we work in living memory.
Millions of companies sent their employees home and had to continue doing business with everyone working from home.
Because of this, HR tech industry spending is now much more focused on tools that employees need to get their work done, and less on the core platforms that operate in the background.
In other words, any software companies invest in must feel genuinely useful and make work easier for employees.
Tools Built For Employees, Not HR Managers
Traditional HR software was built for HR professionals to manage functional operations like payroll and benefits.
But the new generation of HR tech tools is firmly employee-focused.
This means that they need to be easy to use and slot neatly into existing workflows: the goal is to make employees’ jobs easier, not give them extra work.
Companies that are doing well in this space are building tools that come with useful workplace integrations with platforms like Slack, Teams and Google Workspace.
Others are embedding crucial tools for remote work — like videoconferencing and chat functions — right into their platforms.
An Explosion In Wellbeing Tools
According to the Global Wellness Institute, workplace wellness is a 49-billion-dollar industry.
And according to a survey by Optum, 67% of employers say their spending on health and wellness will increase over the next three years.
A lot of this comes down to the pandemic, which brought employee wellbeing to the forefront for many organisations.
In recent years, there’s been an explosion of HR tech industry tools that focus on health, fitness, physical and mental wellbeing, and even financial well-being.
The challenge now will be to integrate these tools into other systems and encourage employees to use them.
A Desire For One-stop Solutions
The boom in HR tech tools has introduced a lot of confusion for HR leaders.
Many companies are still using their legacy systems for core HR functions and layering more modern tools on top of them.
Many employees don’t know what tools are available to them and what they can do.
This means that there’s a growing appetite for ‘all-rounder’ solutions that combine multiple functions.
Because of this, companies that are performing well in one space are working to expand their offering to include other areas.
An example is staffing agency Randstad’s launch of RiseSmart BrightFit, a tool that combines skills assessments with labour market data to suggest jobs and training to job applicants.
Other companies in the space are expanding through acquisitions: Workday recently acquired both Peakon (an employee engagement tool) and Adaptive Insights (a tool for enterprise performance management.
Increasing Adoption of AI Technologies
Only a few short years ago, concepts like AI and machine learning felt like a futuristic dream.
Today, they’re increasingly being adopted by many industries, including HR tech industry.
For example, IBM uses AI technology to monitor internal bulletin boards and communications to find areas of risk across its global operation.
Microsoft has introduced Microsoft Workplace Analytics, a tool which monitors conversational stress to identify problematic behaviour or professional challenges.
The same tool also analyses work behaviour and gives employees feedback to improve their scheduling, recommending skipping meetings if it thinks you’re wasting time.
And of course, AI has made its mark in the recruitment and talent marketplace space too, with several companies using sophisticated algorithms to match candidates to jobs.
Important Changes to Learning and Development Solutions
In the context of the War for Talent and the Great Resignation, it’s more important than ever for companies to be able to upskill or reskill their employees — a process which has traditionally relied on learning management systems, or LMSs.
But recent times have seen some big changes in learning and development tools.
There’s a greater focus on learning experience platforms (LXPs), which are a world away from the boring, text-based learning programs we’re used to.
These tools are user-focused and use interactive and intuitive methods to encourage employees to continue learning.
And this is another area where we’re seeing increasing adoption of AI and machine learning: some tools can track how people learn best and motivate them in the ways that work best for them.
A Focus on Employee Engagement, Listening and Feedback
Ten years ago, if you wanted to get an idea of the feeling on the ground in your organisation, you’d call up a company like Gallup, Kenexa or AON, and commission a survey at an astronomical price.
You’d wait months for the results — which wouldn’t give you many insights that were actionable on a day-to-day scale.
Today, more and more companies are performing more regular, small-scale analyses of their employees’ levels of engagement, motivation and happiness at work, using things like pulse polls and surveys.
These are easy to do with the right tools and can provide insights you can action straight away.
There are many players in this space from big to small, and a lot of all-in-one HR tools include some survey, feedback or employee listening capabilities.
An Emerging Gig Worker Management Category
The rise of the gig economy is one of the biggest changes to the world of work in recent years.
In the US, it’s grown by about 10 million since 2017 and is expected to reach more than 90 million by 2028.
A big driver behind this is the fact that there are now more places for freelancers or gig workers to find work.
The big players, like Freelancer.com, Upwork and Fiverr are household names, but there are also a host of smaller, more targeted platforms on the market.
In the US, Shift finds work for veterans, and The Mom Project is only open to women with children who want to do gig work.
On the company side, employers of gig workers also need tools to help them manage their contingent workers, a function that’s often neglected by traditional HR software.
This means there’s now a strong market for contingent work systems, vendor management systems and gig work platforms.
Looking to the Future of the HR Tech Industry
The HR tech market size is predicted to reach a value of $48.85 billion by 2027.
Big players in tech, like Google, Microsoft, Facebook, Salesforce and IBM, are getting on board and adding HR tech tools to their offerings.
And in 2021, more than $12 billion in venture capital was invested in the HR tech space.
All of this tells us that the HR tech market is likely to continue its expansion over the next decade.
And, as the HR tech trends above demonstrate, it’s an industry that’s willing and able to adapt, expand and change its offering based on the rapidly shifting needs of the market.
Want more insights into today’s workplace? Read our content on the Great Resignation and the biggest workplace trends in 2022.
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