How Applicant Tracking Systems Actually Work

HR Tech

6 minutes

February 24, 2025

Written by Hirex

The numbers are staggering - 98.4% of Fortune 500 companies use ATS (Applicant Tracking Systems) to screen job applications. Landing a job without understanding these systems has become virtually impossible.

The reality is harsh - ATS filters out 75% of resumes before they reach a recruiter's desk.

We created this complete guide to show you the inner workings of ATS systems. Corporate jobs attract 250 applicants on average, and companies need ATS software to handle their hiring process quickly.

The silver lining exists - modern ATS technology can help eliminate hiring bias by evaluating qualifications and skills objectively.

Our guide covers everything about ATS, from simple functionality to AI-powered features that have altered the map of hiring.

What is an ATS System and Why Companies Use It

Applicant tracking systems (ATS) work as the central nervous system of modern hiring processes.

These systems manage the entire recruitment cycle through software that collects, stores, and analyzes candidate information while optimizing the hiring workflow.

Definition and core purpose

An ATS works as a digital command center for recruitment operations. The system automates resume parsing, candidate matching, and communication tasks. It maintains a centralized database for all job applications.

Modern ATS platforms come with sophisticated features like career site plugins, built-in sourcing tools, and AI-backed candidate comparison capabilities.

Key benefits for employers

Companies using ATS software see their hiring processes improve by a lot. Research shows that 86% of companies report faster hiring cycles, and 78% see better quality in their new hires. The key advantages include:

• Lower hiring costs through process automation

• Optimized candidate screening and evaluation

• Better collaboration among hiring teams

• Better compliance with hiring regulations

• Improved candidate experience management

Adoption rates across industries

ATS adoption varies in different business segments. Large organizations with over 500 employees show an 89% adoption rate.

Small to medium-sized companies (under 100 employees) have a 36% usage rate. 75% of recruiters and hiring professionals now depend on ATS technology. This shows its growing importance in business sectors of all sizes.

The system becomes more popular, especially when you have intense competition for talent. Companies use ATS to handle high application volumes and maintain consistent hiring practices.

How Modern ATS Software Actually Works

Modern ATS software uses sophisticated technology to process applications with high precision.

Natural Language Processing (NLP) creates the foundations of these systems, which helps them understand and analyze resume content beyond simple text matching.

Resume parsing technology

Modern ATS's power comes from its parsing capabilities. The system converts submitted documents into machine-readable formats.

The parser then extracts important information like contact details, work history, and qualifications to create structured profiles. The best parsing technology gets a 95% accuracy rate compared to human processing.

Keyword matching algorithms

Modern ATS has grown beyond simple keyword scanning. These systems understand the context and relationships between different skills and experiences through semantic analysis.

The software recognizes industry-specific terminology and can figure out related skills based on job titles, even when candidates don't list them directly.

This contextual understanding helps qualified candidates stay in the running despite small differences in terminology.

AI-powered candidate scoring

The most sophisticated part of modern ATS lies in its scoring mechanisms. These systems use weighted scoring algorithms that assess candidates on multiple factors.

The AI matches applications against job requirements and looks at elements like skill relevance and recent experience. The system updates dynamic rankings as new applications come in or job requirements change.

The sort of thing I love is that AI-powered screening has been shown to increase the quality of shortlisted candidates by 75%. The technology makes the hiring process fair and quick by removing personal details from resumes during initial screening.

Inside the ATS Resume Screening Process

The screening process starts right after candidates submit their applications through an ATS system.

The software processes applications through sophisticated steps to assess each candidate objectively.

Original document processing

The ATS immediately converts resumes into a machine-readable format as they enter the system.

The software breaks down each document into distinct categories such as work history, skills, education, and contact details.

This parsing technology extracts relevant information from resumes of all formats with remarkable accuracy.

Qualification matching

The ATS implements a multi-step qualification assessment process after parsing. The system shows knockout questions to check if candidates meet simple requirements.

These direct queries appear as checkboxes or short-answer questions. Candidates who don't meet the specified standards get filtered out automatically.

The system assesses applications based on several criteria:

• Required skills and certifications

• Educational qualifications

• Years of experience

• Location requirements

Candidate ranking system

Each candidate receives an Intelligent Selection score in the final stage through a sophisticated scoring mechanism.

Modern ATS platforms analyze qualifications' overall context instead of just counting keywords. This creates a detailed ranking that helps employers spot the most promising candidates.

The system matches candidates against job requirements and assigns scores up to 100%.

Candidates scoring between 70-100% move to human review. Companies often hire applicants with match rates as low as 40%.

Shortlisted candidates advance to the interview stage while others receive automated updates about their application status.

The Future of ATS Technology

ATS technology leads to a fundamental change in recruitment practices as we look toward 2025.

Recent data shows that 67% of organizations now see increased AI usage as a top talent acquisition trend.

AI and machine learning integration

Sophisticated algorithms in AI-powered ATS platforms are transforming candidate evaluation. These systems can analyze response content and assess candidates' tone, facial expressions, and body language during video interviews.

AI-driven ATS brings several key improvements:

• 74% of recruiters expect AI to automate repetitive tasks

• 67% anticipate faster candidate sourcing

• 59% look forward to better candidate participation

In spite of that, organizations must balance automation with personal touch, since 40% of talent specialists worry about AI making the process impersonal.

Predictive analytics capabilities

Predictive analytics has become the lifeblood of modern ATS platforms. Organizations using these capabilities report 67% better-quality hires and employee retention rates have jumped by 30%.

Predictive analytics' effects go beyond simple hiring metrics. Research shows that 84% of recruiting experts expect evidence-based decision-making to become more systemic.

Organizations can now forecast future talent needs based on historical hiring trends and departmental growth patterns.

Companies have seen real benefits with a 50% reduction in time-to-fill positions. ATS platforms will keep evolving through 2025, offering sophisticated predictive capabilities and AI-driven insights that support strategic hiring decisions.

Conclusion

ATS technology has become crucial for job seekers and employers. Modern ATS platforms offer sophisticated features that extend beyond basic resume parsing and reshape how companies identify and review talent.

These systems speed up hiring, make it fairer, and improve its efficiency through AI-powered screening, predictive analytics, and machine learning.

Companies report impressive hiring outcomes, including better-quality hires, shorter hiring cycles, and higher employee retention rates.

Successful organizations balance tech advances with human interaction, giving candidates tailored attention throughout their application process.

ATS technology will shape recruitment practices even more in the future. Smart companies use these systems not just for hiring but also for strategic workforce planning and talent forecasting.

ATS systems might seem complex but they serve a simple purpose - they connect the right talent with the right opportunities.

Hirex can help you be proactive with these technological advances and optimize your hiring process!