The core function of HR tools is to help companies effectively hire and manage employees, but in the early days, many of these tools were more work than they were worth. Founded on the idea of automating administrative tasks like payroll and employee tracking, HR tech has grown into a thriving marketplace of powerful solutions.

In the first section of this article, we're going to cover a snapshot of the HR tech market - we'll give an industry overview and talk about how some of these tools can automate aspects of HR. We'll also uncover some trends that could affect how certain tools you use day-to-day function and close with a few HR tech startups that are blazing new trails. But let's start with an industry snapshot.

According to Fortune Business Insights, the global HR tech market is estimated to grow at a 9.2% compound annual growth (CAGR) over the next decade. This is may seem like an ambiguous number but it's important to understand what it signifies. Currently, U.S. companies are experiencing a workforce shortage that's baffling many experts, and upon initial inspection, it comes down to one primary metric, labor force participation. But it's actually a much bigger issue that's complex and nuanced.

On May, 13th, the US Chamber of Commerce posted a great article titled "Understanding America’s Labor Shortage" where they talked about the nearly 1.7 million Americans who aren't actively participating in the workforce. According to some estimates, the average technical role is experiencing 70%+ workforce shortages right now. This included everything from skilled trades to software engineering and nursing. One of the primary reasons for this shortage is that it's difficult to find and retain employees. But why? You may be wondering - we have more employee engagement solutions, more recruiting solutions, and more employee retention programs than ever before - so what's happening?

There isn't one answer to this complex question- but there are a few main points to consider. First of all, according to Adecco, in 2020 more than 29 million baby boomers retired, leaving a huge hole in the workforce. Second, many working parents have left corporate roles in favor of online options like influencer marketing, affiliate marketing, and consulting- preferring to start their own businesses and control their own schedules over participating in the workforce. Third, according to the US Chamber article, more than 25% of Americans reported that they were receiving unemployment benefits while they were out of work, but many of them did not return to the workforce when those benefits ended. This is a huge problem because more than 10,000 baby boomers will retire every single day for the next 3- 5 years - totaling more than 4.1 million by 2027.

Now, you may be thinking, "Thanks for the overview, but how does this help me understand the HR tech industry?" The answer is straightforward: organizations that excel in recruitment, compensation, and enhancing employee engagement in the coming decade will flourish. Conversely, those who don't may struggle to survive.

This is where a robust and effective HR tech stack can make all the difference. Beginning with recruitment tools like AI-sourcing, interview intelligence, and onboarding software that ramps employees quickly and supports team health employee engagement tools, diversity solutions, and compensation intelligence software, HR tech has become an integral part of the modern workplace.

As labor force shortages increase, HR automation tools will be key to streamlining employee workflows. Without them, HR teams will run out of bandwidth and the quality of work may decline. New tools that we'll discuss in a moment will be able to handle everything from recruiting and onboarding to performance management and employee development. So let's dive in.

News and Trends in the HR Tech Industry

The most pressing trends affecting hiring right now are:

1. Pay Transparency,
2. DEI (Diversity, Equity, and Inclusion)
3. AI-Hiring
4. Remote, Hybrid, and In-office Work Environments
5. Company Culture
6. Skills Based Hiring
7. Labor Force Shortages.

One notable HR tech trend in 2024 that's making a huge splash is artificial intelligence (AI) in hiring. The rapid adoption of artificial intelligence (AI) and machine learning (ML) is completely changing how recruitment teams view candidate sourcing, resume screening, and applicant skills assessments. Tools like HireEz can fill your applicant pool, applicant tracking systems like Lever can manage them, and interview intelligence by Pillar can screen and schedule them for interviews with little human involvement.

This is a stark change from past systems where humans were required to participate in each step of the hiring process. Up until these systems created one complete hiring ecosystem, it was estimated that HR teams and hiring managers would spend up to 14 hours per open role. Meaning, that if you were a one-person recruiting "team," hiring more than 2- 3 people at a time, you could expect a 60+ hour work week. Now with AI and ML, you're looking closer to 2- 3 hours per open role - and the predictive analytics are 100 times better than they used to be.

Data and predictive analytics are another great HR technology example where innovation has revolutionized the space. Modern HR technology in 2024 has access to more data points than ever before, and with the power of AI, that data can be harvested for insights. This means that organizations can quickly identify bottlenecks, predict employee success, and make data-driven decisions to improve their company culture and overall employee experience. This will be especially important as more companies adopt global workforces and hybrid work environments in the coming years.

Our final point in the "news and trends in the HR tech industry" section is skills-based hiring. As the gap between the number of unemployed individuals and the number of jobs available increases so will the requirements for many of these roles. Now, I don't think you’ll have to worry about high school-educated doctors anytime soon, but qualifications for many roles will have to change to keep up with growth and demand.

Many roles in account management, sales, and software development and engineering that used to require at least a bachelor's degree are opting for certifications, boot camps, and other alternative methods to train and educate their employees, making the workforce more accessible to people from boarder and more diverse backgrounds. This is where solutions like interview intelligence are becoming necessary. As job qualifications change, so will interview processes. Using structured interviews to accurately and objectively assess a candidate's skills will be the future.

HR Tech Startups

According to the Fortune Insights article we referenced in the first section, between now and 2032, the HR tech market size will grow to 81.84 billion dollars (which is more than double that current market cap). Demand for innovative types of HR technology will drive much of this increase as new employee obstacles become apparent.

At this point, let's shift the conversation to HR tech startups that are tackling these challenges head-on. But more than the startups themselves, let's uncover the innovative solutions they're bringing to the marketplace and how those innovations will change the workforce of tomorrow.

Over the last decade, Y Combinator (YC) has been one of the biggest investors and incubators of HR technology. With well-known names like Checkr, Rippling, Deel, Lattice, and Human Interest, YC has investments in, no less than, 60 HR tech companies. Other large-scale investors in this space that are driving change are Long Journey Ventures, NFX, SignalFire, Reach Capital, and Xfund.

HR Tech Tools and Their Objectives

The companies investing heavily in HR tech tools are focusing on a variety of innovations aimed at transforming the modern workforce. From fairness, objective hiring, global workforce support, and pay transparency, here's a quick glimpse into the mission behind each tool.

1. Checkr: This company is known for its advanced background screening tools designed to streamline the hiring process. The objective is to improve compliance, reduce bias, and make quicker, data-driven decisions during recruitment.

2. Rippling: Rippling offers an all-in-one HR and IT platform that manages employee data, payroll, benefits, and IT resources from a single system. The main objective is to automate administrative tasks and ensure seamless onboarding and offboarding processes.

3. Deel: Specializing in global payroll and compliance, Deel helps companies hire international employees and contractors seamlessly. Its objective is to simplify cross-border payments and ensure compliance with local labor laws.

4. Lattice: Lattice focuses on performance management and employee engagement. It provides tools for setting goals, continuous feedback, performance reviews, and analytics. The objective is to enhance employee development and retention by fostering a transparent culture of continuous improvement.

5. Human Interest: This company offers affordable, easy-to-manage 401(k) plans for small and medium-sized businesses. The objective is to enable companies to provide competitive retirement benefits, assisting in employee retention and financial wellness.

In closing, each tool is focused on creating a more efficient, effective, and compliant process for companies to retain great talent and employees to do great work. Beginning with task automating, uncovering valuable insights from data, delivering fairer results, and enhancing employee experiences, these innovations are building the foundation for a new era of human resource management (HRM).

If you'd like to see how Pillar's interview intelligence can help you automate aspects of the hiring process that don't require "human touch," uncover candidate insights that help you make better hiring decisions, and mitigate bias in your hiring process, book a demo today. Our team would love to show you how this HR tech revolution will save you time, money, and help you achieve better hiring outcomes.