How much should you be spending on HR software?

How much should you be spending on HR software - People Development Network
How much should you be spending on HR software - People Development Network

 

For companies who aren’t currently using HR software, knowing what to expect in terms of cost is a critical factor to consider. In business, budget restrictions can be a challenge that can dissuade decision-makers from purchasing new software – after all, without investing in a product, it can be hard to determine whether there will be a positive return on investment. Implementing HR software is an investment that changes the way the whole business operates, but no-one wants to opt-in on a purchase when they aren’t aware of the advantages or the cost. The benefits of HR software far outweigh the cost, but how much can companies expect to pay?

Key Features of HR Software

Business procedures and systems vary from industry to industry, but there are certain capabilities that are common across all organisations. HR software has been an invaluable resource for various processes in human resource management, from automating payroll-related tasks to simplifying candidate sources, improving employee engagement and optimising personnel tracking. HR software can assist with the running of companies in a number of ways including:

  • Recruitment, such as managing job postings, applicant tracking and employee onboarding
  • Benefit administration, including managing employee enrolment to providing specific benefit plans to customers
  • Scheduling shifts
  • Managing staff performance, including recording employee goals, documentation for appraisals and reviews, and tracking goals on a task level, as well as automatically compensating staff through payroll
  • Online learning such as training employees to help them achieve goals and ensuring the company stays compliant in specific areas for staff members who need to be skilled for certain roles
  • Reporting, including turnover, payroll costs, staffing allocation and Equal Opportunity Employment reports

How Much Does HR Software Cost?

The pricing of cloud-based software products has changed in recent years. What was once a pricey investment is now an affordable system that can be purchased in a variety of ways, from a one-off annual fee to monthly payments, depending on the provider. Because of the volatile nature of the industry, providers have found ways to drive the HR software market towards a more cost-effective solution. Each software vendor’s prices vary so below is a rough guide to help you determine the price range you can expect to pay for different pricing models.

Pay Per Employee/Per Month

Many vendors, such as with Cezanne’s HR software, charge a monthly fee for each employee in the organisation, irrespective of whether they use the software or not. There can sometimes be a one-off implementation fee on top of this as well, but the cost per employee typically decreases as the total number of employees increases. The usual cost for this type of software plan ranges from as little as £1 to £10 per employee per month, depending on the vendor.

Pay Per User/Per Month

For this price plan, businesses are expected to pay a monthly fee for each administrative user of the software, rather than every employee in the company. The term ‘users’ can sometimes be used interchangeably with ‘all employees’ though, so be sure to check the terms and conditions when opting for this type of payment plan. As with the previous payment model, there is usually an implementation fee along with the monthly payment to set up this software. This type of software ranges from £5 to £20 per user per month.

One-Off Payments

For larger organisations, the one-time payment plan may be more suitable and requires the company to pay a larger sum upfront based on the specific features the company requires. This type of payment structure may be based on the size of the company and often comes with an annual support fee or add-ons for a more customised software solution. The price of this can range from £500 into the thousands, depending on the business size and needs.

Free Plans

If your budget doesn’t allow for HR software, free payment packages are a solution that are not completely free of charge but do allow you to utilise certain features of the product at no cost. For smaller businesses and start-ups who want to benefit from the enhancements that HR software can provide without having to spend a fortune on advanced solutions, this type of payment plan could be a good balance. Alternatively, free trials of paid products are a great way to see how the software will integrate with your business without having to invest money until you’re sure which product is the best match.

However, studies have shown that regardless of the size of the business, companies expect to spend around the same amount on HR software each year. The average spend that companies expect to pay on software annually is around £5000, with ancillary costs for customisation, training and maintenance factored in on top of the monthly costs. Because vendors rarely make their pricing publicly available, it can be difficult to budget for such costs ahead of time, particularly for businesses who haven’t purchased this type of software before. But £5,000 is a good ballpark figure to expect to pay, aligning with the average that businesses in a host of industries pay for their HR software each year.

Conclusion

Ultimately, the cost of HR software depends on the needs of the business and the size of the company. The amount a business is willing to allocate towards HR software will almost always align with the value the software can bring to the company. Weighing up the pros and cons of different vendors will help you to determine the right solution for your business’ specific needs. It can be tempting to low-ball your budget when trying to get HR software approved by decision-makers in your company, but it’s always a better option to be realistic and many companies are more affordable than one would expect initially. HR software nets a positive ROI in the majority of cases and can help to streamline the day to day processes of the business, from making tedious tasks such as approving holiday easier to making payroll and compliance more efficient.

christopherbreaux

christopherbreaux

christopherbreaux

Latest posts by christopherbreaux (see all)