How Much Does HR Software Cost ? - EmployeeConnect HRIS
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hr software cost

How Much Does HR Software Cost ?

In today’s business environment, online HR management becomes increasingly important for your company to remain competitive. Unfortunately, many decision-makers look at HR software cost without running deep cost-benefit analyses. The real question isn’t how much does HR software cost, but how much it costs to operate without the benefits of an optimised HR system. HR software saves money, streamlines operations, eliminates hard-copy files and keeps all business intelligence and employee files highly organised and easy to access from any location.

Three Types of HR Software Cost Models

The primary feature that most should feature HR software feature is a workflow driven,employee information database that reduces paperwork, keeps information organised and provides easy access. However, the details and software features can vary to an astonishing degree, to the point where you would question how they label themselves as HR Software. The three types of software include licensed software, which is usually onsite, online Software-as-a-Service applications and free HR programs that include open source software. Each of these options has its pros and cons depending on your business, budget and company size, but all provide major benefits when compared to handling HR manually or with spreadsheets.

Licensed Software

Licensed software was the traditional approach used by many organisations before other options became available through the cloud. However, licensing software can be confusing, frustrating and expensive. You can choose simple licenses for such HR functions as calculating payroll, but most companies need more robust solutions in today’s recruiting environment. The types of software licenses vary tremendously, and the licensing companies don’t always use the same terms. Although these tend to be onsite applications, an increasing number of vendors are offering cloud-based applications. Regardless of the software and its comprehensiveness, you should understand what you’re leasing, which support options are available and how difficult it will be to implement the system.

The type of license can significantly affect how your system performs and the cost that you pay. It’s important to review the details about ‘clickwraps,’ ‘click-through’ and ‘user update’ details. The types of HR software licenses include:

  • Proprietary: These licenses give companies the right to use one or more copies of the software, but the vendor retains ownership.
  • End User License Agreement, or EULA: These contracts can often limit how you use the software, and your staff need to abide by software publisher restrictions.
  • Workstation License: In this leasing option, only one computer can install and use the software.
  • Concurrent Use: If you buy several workstation contracts, a concurrent use agreement allows you to use the software on different computers as long as you don’t exceed the total number of licenses.
  • Site License: This license allows unlimited software use at one physical site.
  • Perpetual Use: This license allows you to use the software in perpetuity without paying a leasing fee. This is the kind of software that home computers usually have.
  • Support License: This option entitles you to receive software upgrades for a defined period of time.
  • Enterprise License: This contract allows every stakeholder in your company to use the software for a specified time, and this includes onsite and offsite contractors.

It’s vital to investigate the support options because licensed software invariably generates glitches. Instead of adjusting to your business, most out-of-the-box software requires you to adjust your business to the software.

Implementation can prove challenging for many licensed software applications. You might need to adjust your business, troubleshoot glitches or pay a developer to integrate the software fully into your business operations. Upgrades can also generate challenges unless your software is fully integrated. That’s why these hidden costs must also be factored into your cost-benefit analysis.

Cloud HR Software

Forrester Research predicts that 50 percent of employees will operate under flexible arrangements that include performing freelance work and working remotely. [2] SaaS HR software offers astonishing flexibility and a pay-as-you-go model that assesses fees for each employee per month. This is an ideal solution for companies that manage rapidly changing workforces and special projects and those organisations that have limited capital investment budgets.

Free online HR

Free online HR system includes open source programs that are shared over the Internet and refined by interested programmers from the online community of coders and engineers. This type of software comes with no guarantees or protection against risks, but you can access support services from the open source community of programmers and users. Many companies that have their own IT staff that handle troubleshooting, research and integration challenges, but free software often comes with hidden costs.

What HR Software Cost Really Means

In business, cost can’t always be viewed as an expense that can but cut or downsized. The costs of doing business usually affect your company’s ability to earn income, manage people and develop an appealing company culture – especially one that can attract and retain millennials. That’s why you need to consider the costs of essential management tools as investments that deliver long-term cost/value benefits. The many benefits of HR software include:

  • Making faster and more accurate payroll calculations and automating payroll deductions and payments for unusual expenses such as child support, court-ordered judgements, IRA savings and employee-funded benefits
  • Fostering the ability to manage employees
  • Providing a range of self-service options for employees such as onboarding, changing deductions, updating personal information and requesting time off for various reasons
  • Offering more HR-sponsored learning options
  • Increasing safety and security
  • Creating opportunities to engage staff with incentives and recognition
  • Developing better recruiting strategies
  • Automating many time-consuming HR functions
  • Freeing staff to concentrate on recruiting and training
  • Reducing human error
  • Simplifying compliance issues
  • Managing talent proactively and developing strategies for succession
  • Using HR metrics to study complex issues such as turnover rates and hiring costs
  • Optimising performance reviews
  • Streamlining communication and approvals
  • Reducing paperwork and increasing access to stored electronic files
  • Allowing staff to create bespoke reports and presentations

Outsourcing HR Is Practical and Affordable

You have several options for outsourcing your HR. These include leased cloud HR system and outsourcing HR duties to outside consultants. These companies include payroll services, benefits-driven companies, and open source HR software with paid options for more robust software needs. Many of these ‘free’ services charge for calculating payroll, and these fees can add up to more than the average cost of leasing more robust software options – especially if you have a lot of hourly employees.

HR Software to Remain Competitive

Regardless of which type of HR software makes the most sense for your company, it’s vital to begin building online HR capabilities in today’s competitive environment for recruiting the best talent. Fostering brilliant self-service options, managing talent proactively, streamlining HR operations and successfully negotiating expanded business imperatives require automation, online access and user-friendly features that the many software options provide to varying degrees of effectiveness. You can easily become confused over the various options, but that shouldn’t keep you from making a choice.

Which Model Is Best for Your Business?

The best practices for choosing software involve more than just determining HR software cost. HR Software is an investment, and the right choice delivers powerful cost-value benefits over time. Decision-makers should study the benefits, choose which benefits are most important for their companies and assess the capital investment costs based on potential rates of return. Most software systems reduce paperwork, automate HR processes and free staff time to concentrate on core HR issues. However, that’s where the differences begin to emerge. Proprietary systems, when fully integrated, can offer a range of benefits, but the high investment cost and built-in obsolescence are major concerns.

Free HR software cost can save cash starved companies money, but these systems rarely offer the kind of robust HR features that companies need to grow and remain competitive in acquiring, developing and retaining employees. In fact, the true revenue is usually hidden in a lucrative financial services relationships such as employee benefits, superannuation & insurance management. Leveraging a commission stream for simple HR services is not necessarily a bad thing, but not when it comes at the cost of your true HR needs.

A cloud HR system offers some extraordinary advantages given each company’s ability to pay-as-you-go for essential technology. However, companies with limited budgets might begin with free software until growth forces them to upgrade to paid versions or other HR software solutions. Most proprietary HR software providers now offer cloud HR software , and many vendors include robust talent management features in their software packages. Research shows that only 13 percent of companies rely on a bespoke system because most organisations use three or four HR applications.   Choosing systems and features as you need them has an extraordinary appeal because trends evolve at dizzying speeds. HR systems are no longer used just to improve efficiency; they’ve become essential for developing talent management strategies, fostering employee engagement and recruiting effectively.

Ari Kopoulos

CEO at EmployeeConnect