Here are three questions you must answer in order to measure the financial return of HR technology for your company:
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HR software, also known as Human Resource Management Systems (HRMS) or Human Capital Management (HCM) software, is a digital solution designed to streamline and automate various HR-related business practices.
It allows HR professionals to manage employee data, track attendance, process payroll, handle recruitment and onboarding, administer benefits, and much more – all from a centralized platform.
So, what are the key features and benefits of HR software?
1. Employee Information Management: Human resources software provides a centralized database for storing and managing employee information. It eliminates the need for manual record-keeping, making it easier to access and update employee data whenever necessary and to maintain the accuracy of employee information.
2. Time and Attendance Tracking: With HR software, tracking employee attendance and managing leave becomes effortless. It allows employees to log their working hours, request time off and enables supervisors to approve or reject such requests seamlessly.
3. Payroll Processing: HR software automates the payroll process, reducing the chances of errors and ensuring accurate and timely salary payments. It calculates taxes, deductions, and benefits, saving HR professionals valuable time and effort.
4. Recruitment and Onboarding: HR software simplifies the recruitment process by creating job postings, managing applications, and conducting candidate screenings. It also facilitates the onboarding process, ensuring a smooth transition for new hires.
5. Performance Management: Performance evaluations and goal setting can be easily conducted using HR software. It allows managers to track employee performance, provide feedback, and set objectives, contributing to a more transparent and efficient performance management system.
6. Training and Development: HR software can help create and manage employee training programs, track progress, and provide learning resources. It promotes continuous learning and development within the organization.
7. Compliance and Reporting: HR software ensures compliance with labor laws and regulations by generating reports and maintaining accurate records. It simplifies the process of managing employee benefits, tax forms, and other legal requirements.
Now that we covered some basics, let’s get into the good stuff.
Question No. 1: What is the typical cost of HR Software?
The overall cost of HR software factors heavily into how long it will take you to see a strong ROI.
On the surface, the lower the cost, the faster you should be able to recoup the expense. But it’s not always so simple.
After all, one HR technology might be more expensive than another, but deliver more value over the life of the product, ultimately resulting in a higher ROI.
That’s why the information-gathering stage is so critical to the process of calculating the ROI of HR technology.
As for pricing, it will depend on the vendor you choose. HR technology platforms are often priced on a per-employee-per-month basis. Because the costs can range anywhere from $6 – $25 per employee per month, a company with 500 employees can expect an annual expense between $36,000 – $150,000, depending on the features and services included.
It’s also important to note that there can be additional costs associated with implementing and maintaining the platform, from implementation, training, and ongoing support, all of which need to go into the calculation of the ROI of HR Technology.
Question No. 2: What do we need from our HR Software?
The majority of HR platforms share core features that allow an organization to hire and manage its workforce. But some platforms offer more features than others, and you’ll want to make sure you select a platform that specializes in the outcomes you need.
Are you looking to improve workforce productivity and cut costs by automating time-intensive administrative tasks, avoiding errors, and reducing paper handling? Or are you more focused on streamlining recruiting, hiring, engagement, and employee retention? The ROI of your HR software will depend on how many of these features you deploy and the benefits you get from them.
For example, the core PrimePay HR product focuses on HR administrative functions such as payroll, time and attendance, benefits, and retirement. But PrimePay HR also offers a suite of products that include functionality to support recruitment, onboarding, talent management, and training.
Question No. 3: How many people will benefit from HR Software directly?
Next, consider the people and processes that will benefit from the HR system being in place. Theoretically, the more people the HR software impacts in an organization, the greater the potential ROI of product. For example, every employee in a company is affected by an HR platform’s payroll service, so the ROI for this function is high.
And if the HCM platform offers support for employee engagement and company culture, there can be wide-reaching cost savings when you avoid the high cost of turnover, which one HR Dive study shows can be as high as $15,000 per employee. All of these factors need to be considered to maximize the ROI.
HCMs will also deliver a higher ROI when they have a high repeatability factor, which is the frequency at which a system will be used for a specific task. In the payroll service example, breadth and repeatability go hand in hand, as every employee will come into contact with the software every pay period.
There are direct benefits to repeatability, as according to the American Payroll Association, organizations with integrated timekeeping and payroll reportedly overachieved their revenue targets by as much as 7%. Data from Nucleus Research also shows that cloud-based HCM technology is projected to deliver 3.2 times the ROI of a system hosted on-site.