Electronic Data Interchange

(EDI)

Glossary of HR Terms Electronic Data Interchange (EDI)

What is EDI?

Electronic Data Interchange (EDI) is the standardized electronic exchange of business documents, such as invoices, purchase orders, payroll data, or benefits information, between organizations. It replaces paper-based processes with digital formats, enabling fast, secure, and accurate transfer of structured information.

Why it matters

EDI improves efficiency, reduces errors, and speeds up business transactions by eliminating manual data entry. In HR specifically, EDI is often used to transmit benefits enrollment data, payroll details, or compliance information between employers, insurance providers, and government agencies. It ensures data consistency, compliance with regulations, and seamless collaboration between business partners.

Where it fits in the HR stack

EDI sits in the compliance and systems integration layer of the HR stack. It is commonly connected to HRIS, payroll software, and benefits administration platforms to automate data exchange with external vendors such as insurance carriers, retirement plan providers, or government systems.

Common use cases/Examples

  • Transmitting employee benefit enrollment data from an HRIS to insurance carriers.
  • Sending payroll information from employers to third-party payroll processors or banks.
  • Filing tax information directly with government agencies.
  • Exchanging employee hours and scheduling data between workforce management systems and payroll.
  • Ensuring secure communication of compliance-related data (e.g., ACA reporting).

Examples of companies that use it

  • Large enterprises with complex benefits ecosystems, such as Walmart or GE, using EDI to connect HRIS with multiple insurance carriers.
  • Payroll providers like ADP or Paychex that rely on EDI to exchange payroll and tax data with banks and regulators.
  • SMBs using HRIS vendors (e.g., BambooHR, Zenefits, Paycor) that offer EDI integrations for benefits enrollment.

FAQ

EDI uses standardized document formats (e.g., ANSI X12, EDIFACT) for batch file transfers, while APIs allow real-time, flexible data exchange between systems. Many organizations now use a mix of both.

Yes. While APIs are growing in popularity, EDI remains widely used in industries like healthcare, HR, logistics, and finance due to its reliability and compliance standards.

Benefits enrollment, payroll processing, tax reporting, and compliance filings are among the most common HR use cases.

Yes. EDI transactions follow strict security standards (encryption, authentication, and auditing) to ensure sensitive employee and business data is protected.

Not always. SMBs may rely more on APIs or direct system integrations, but EDI becomes important when working with large vendors, carriers, or government agencies that require it.