Office paper waste is estimated at 12.1 trillion sheets per year, accounting for roughly 50% of the total waste businesses produce. Without document management software, paper usage can also be a significant financial drain for businesses.
Research indicates that paper-related costs — printing, storage, and retrieval — can consume up to 3% of a company’s total revenue. Not to mention all of the hidden costs of paper usage, like the time and money spent organizing, locating, and storing paperwork.
With the right document management system in place, businesses can adopt more sustainable, efficient, and secure business models. But what is document management software, and how do businesses implement it?
In this article, we’ll go over the definition, features, and benefits of document management software, and provide step-by-step instructions on how to make the switch to a cloud-based document system. Lastly, we’ll go over how Factorial’s document management solution is used.
Table of Contents
- Key Facts: HR Document Management Software
- What Is an HR DMS?
- Why Should Businesses Automate Document Management?
- How Do You Implement a Document Management System?
- What Features Should You Look For in HR Document Management Software?
- Factorial’s HR Document Management Tool
Key Facts: HR Document Management Software
- What it is: Document management software (DMS) is a digital system that centralizes the storage, organization, signing, and sharing of employee and company records− replacing paper-based filing with a secure, searchable repository.
- Market size: The global document management system market is valued at approximately USD 11.81 billion in 2026 and is projected to reach USD 21.39 billion by 2031, growing at a 12.61% CAGR.
- HR technology gap: According to SHRM’s 2026 State of the Workplace Report, only 43% of HR professionals and executives rated their organization’s HR technology as effective− underscoring the need for purpose-built solutions.
- Paper waste cost: Office paper waste is estimated at 12.1 trillion sheets per year, with paper-related expenses consuming up to 3% of company revenue− costs that a cloud-based DMS can substantially reduce.
What Is an HR DMS?
Document management software (DMS), also known as EDMS or employee records management software, is a paperless solution that centralizes document processes for organizations. Specifically, it involves storing, managing, signing, and sharing employee and company files, contracts, and legal paperwork.
There are two types of document management software: on-premises document management software and cloud-based document management software. Depending on your business model and compliance needs, one option might be better suited than the other. Typically, cloud-based solutions are more cost-effective and are a better choice for businesses looking to grow, as they allow users to access files from any location and at any time.
Cloud-based deployment now leads the DMS market, capturing approximately 63.7% of global revenue share in 2026, driven by the flexibility and scalability these platforms offer distributed teams. For US employers specifically, a cloud-based HR DMS also supports compliance with federal and state data-handling requirements — including HIPAA for health-related records and OSHA’s five-year log retention mandate.
Why Should Businesses Automate Document Management?
There are many reasons why businesses choose to automate document management. Automating document management makes daily processes more efficient and less wasteful. In this section, we’ll go through some of the biggest ways that businesses can benefit from going digital.
Increased reliability
Operations are the backbone of any organization. By making your processes clear and organized, you improve your internal and external communications and day-to-day interactions.
Your team will know how to access and share documents in a secure and reliable way. Whether the documents are related to recruitment, onboarding, or payroll, having a digital system reduces back and forth and hassle, building more confidence in a system that works.
Compliance and audit readiness
US employers face a patchwork of federal and state document retention requirements. Under federal guidelines, payroll records must be kept for at least three years, while OSHA injury and illness logs must be retained for five years. A digital document management system creates automatic audit trails — logging who accessed, edited, or signed each file — making it far easier to demonstrate compliance during a government inspection or legal dispute. For organizations subject to HIPAA, role-based access controls within a DMS provide an additional layer of protection for health-related employee records.
Cost-effective
There are several ways that you can save by using a document management system. As previously mentioned, you can cut out numerous expenses tied to paper usage, including:
- Office and storage space: Say goodbye to huge filing cabinets and rooms full of folders. The benefit of document management software is that it takes up virtually no extra office space. This means that you can repurpose rooms and manage your resources more effectively.
- Paper and printing: Aside from being wasteful, printing out employee records and documents can get expensive, especially if your team relies on paperwork to complete daily tasks.
- Extra staff: Using a paperless document management system allows employees to be more autonomous. They can access and upload documents as needed, without having to ask anyone to dig through records. By eliminating these mundane tasks, employers can better allocate spending and resources.
Increased security
There are many data security threats that businesses regularly face. Often, sharing digital documents via email does not protect against cyberattacks, phishing, and other privacy concerns. Here are some of the ways that document management software can make your processes more secure:
- Access control — With paper systems and with Google Docs, you risk facing compliance issues or even data breaches when handling sensitive information. With the right document management software, you can control permissions and determine who is authorized to access documents.
- Reduces errors — Paper records can easily be misplaced or lost, and manual filing increases the risk of costly mistakes. Factorial allows you to create custom folders and organizational structures for each document type, so locating the right file takes seconds rather than hours.
- Clear documentation — With document management software, you can keep a more organized and clear track record of documents over time. If something goes wrong and you need to conduct an audit of business processes, you’ll have all of the needed information clear and available.
Zero-waste solution
Businesses in the United States generate approximately 21 million tons of paper annually. The U.S. Environmental Protection Agency reports that paper and paperboard products make up the single largest material category in municipal solid waste, accounting for 23.1% of total generation.
An estimated 40% of the world’s logging industry output goes into manufacturing virgin paper, making paper production one of the most resource-intensive industrial activities globally. Additionally, the pulp and paper industry is one of the largest water users and polluters in the United States. By reducing your company’s paper waste, you also help alleviate several environmental problems, such as deforestation, water contamination, and carbon dioxide emissions.
Remote work possibilities
Although there are many advantages to hybrid and remote work, teams with digital workforces often face more difficulties with business operations and communications. With the right document management software, team members can easily sign legal documents electronically and securely, removing an obstacle for remote management.
How do you implement a document management system?
Although moving from a paper-based filing system to document management software might feel overwhelming at first, it can significantly simplify your long-term processes. Here are some of the steps to make the transition as smooth as possible.
1) Create folders for every type of document
The first step to effectively using document management software is creating a cohesive archival system for all of your files. This will likely require inter-departmental collaboration, as many types of documents and organizational systems are already in place.
Rather than try to duplicate your existing processes, use this as an opportunity to create a better and more simplified version. The goal is to make a system that is clear and intuitive. This might mean adopting a company-wide nomenclature for files or dividing files by department.
2) Upload documents to your system
The next step includes uploading employee files, IDs, payslips, contracts, leaves, etc. If your company has an entirely paper system in place, the transition to scan and upload might initially be a lengthy process. Divide the material and work phase by phase. Having a system that allows you to upload files in bulk will speed up this process considerably.
3) Notify employees
Last but not least, you will need to have a way of notifying employees as soon as documents are uploaded and accessible. Employees should understand how documents are stored, where they can find them, and (if the software allows for it) instructions on how to upload documents themselves. Systems with built-in notification systems are advantageous for employee communication.
4) Train your team and establish governance rules
A document management system is only as effective as the people using it. Once documents are uploaded and employees are notified, schedule a brief training session covering how to search for files, upload new documents, and use e-signature workflows. Establish clear governance rules — such as who is authorized to delete or archive records, and how long different document types must be retained. For US employers, federal guidelines require payroll records to be kept for a minimum of three years and OSHA logs for five years, so building these retention schedules into your DMS from day one prevents compliance gaps later.
What features should you look for in HR document management software?
Document management systems come in all shapes and sizes. There are, however, some key features that you should look for when finding the right fit for your team. The best document management systems have the following tools available:
The table below summarizes the core features to evaluate when selecting an HR document management system:
| Feature | What it does | Why it matters for US employers |
|---|---|---|
| Document repository | Centralizes all files in a searchable digital archive | Eliminates lost records. Supports audit readiness. |
| E-signature | Enables legally binding digital signatures | Compliant with the ESIGN Act (15 U.S.C. § 7001) |
| Automated workflows | Triggers actions based on document events | Reduces manual follow-up. Speeds onboarding. |
| Access management | Controls who can view, edit, or sign documents | Supports HIPAA and state privacy compliance |
| Version control & audit trails | Tracks every change and user action | Provides defensible records for legal disputes |
| Bulk actions | Applies changes to multiple documents at once | Saves hours during policy updates or open enrollment |
| HRIS/payroll integrations | Syncs document data with HR and payroll systems | Eliminates duplicate entries. Reduces data errors. |
Document repository
Document management software allows you to centralize and store all of your documents in a central repository. This minimizes the time spent hunting for paperwork and reduces the possibility of documents getting lost.
Electronic signature (e-signature)
With electronic signatures, or “e-signatures,” users can quickly approve and complete legal documents with ease. Many businesses use document management software to request e-signatures for documents like contracts, legal agreements, payslips, and timesheets.
Automated workflows
Automated workflows allow managers to cut down on time and ensure that the right parties are reviewing the right documents. This feature lets users determine “triggers” that enable actions to take place automatically. For example, when a contract receives approval, a manager receives a signed copy automatically.
Access management
Many document management systems also have a way of controlling and managing who can access documents. As mentioned before, this is critical for secure data processes and compliance with privacy regulations.
Version control and audit trails
Version control ensures that every edit to a document is tracked and that previous versions remain retrievable. This is especially important for contracts, policy handbooks, and compliance forms that are updated periodically. Audit trails complement version control by recording every user action− who viewed, edited, or signed a document and when. Together, these features provide the defensible documentation record that HR teams need during internal reviews, regulatory audits, or employment disputes.
Bulk actions
Document management systems that allow you to make changes in bulk can have a significant impact on business operations efficiency. With this feature, you can upload and make changes to multiple documents at once. For example, if you need to create an extra field on 100 forms, you can create the field on one form and duplicate the change for the other 99.
HRIS and payroll integrations
A document management system that connects directly with your payroll platform and HRIS eliminates duplicate data entry and reduces the risk of records falling out of sync. When an employee’s contract is updated in the DMS, the change can automatically propagate to the relevant payroll or benefits record. This integration is especially valuable for US employers managing multi-state workforces, where payroll tax documents and state-specific compliance forms must stay current across multiple jurisdictions.
Factorial’s HR document management tool
If you want to ensure that company and employee documents are processed efficiently and securely, Factorial’s document management software is right for you. Our cloud-based HR software uses a powerful encryption system, so you can rest assured that employee data and legal documents are safe and protected. Additionally, you can communicate updates with employees, send document requests, build custom approval workflows, and create unique access permissions for users.
According to SHRM’s 2026 State of the Workplace Report, only 43% of HR professionals rated their organization’s HR technology as effective− a gap that purpose-built, integrated platforms are designed to close. Factorial’s document management module addresses this directly by combining secure storage, e-signatures, automated workflows, and access controls in a single environment, so HR teams spend less time on administrative tasks and more time on strategic priorities.
There are many document management systems out there that provide users with basic storage and processing options. However, with Factorial’s all-in-one software for HR management, you can process payslips, employee IDs, company contracts, and more. From recruitment to onboarding to payroll, Factorial’s software helps reduce mundane administrative tasks and unnecessary expenses. Request a demo to see how Factorial can work for you!
FAQs
What are the top 5 document management systems?
The best document management systems offer a central repository, e-signatures, automated workflows, and secure access controls. For an integrated solution, Factorial’s all-in-one business management software includes these essential features, helping businesses manage documents securely and efficiently from a single location.
What is the difference between CMS and DMS?
A Document Management System (DMS) is used to store and manage internal business documents like contracts and employee files. In contrast, a Content Management System (CMS) is designed to create, manage, and publish digital content for external audiences, such as websites and blogs.
What is an example of a document management system?
An example is the document management tool within an all-in-one business management software like Factorial. It provides a secure, cloud-based repository for employee files, contracts, and payslips, and includes features like e-signatures and automated workflows to simplify processes.
What is DMS document management?
DMS, or Document Management Software, is a paperless system that centralizes an organization’s document processes. It is used to securely store, manage, share, and track business files, such as employee records and contracts, in order to improve efficiency and security.
What is the document management system for HR?
A document management system for HR is a specialized tool for securely handling all employee-related files, including contracts, payslips, and onboarding paperwork. Factorial’s all-in-one business management software includes a robust DMS designed for HR, centralizing documents and automating workflows for greater efficiency.
