Our HRIS report found, on average, companies spend approximately $145 per user per month on their system.

This is a great starting point for calculating the cost of HRIS, but there are few more factors to consider when working out your budget, and, ultimately, the worth of implementing an HRIS in your business.

HRIS can do a lot for an organization. It can save a lot of money, reduce administrative HR burdens, and improve employee retention.

It can also be costly to implement

But, how much exactly should you be spending on your HRIS system?

We’re going to walk through calculating the HRIS cost for Company X, and explain some of the key areas of HRIS ROI that you should look out for when implementing.

Using the data from our HRIS report, we’re able to calculate that Company X will require 10 employees to be listed as users of their HR software. Users, in this case, refer to employees who will have administrative privileges and are responsible for managing and maintaining the system. These employees will likely be in a dedicated HR team in a company of this size.

Determining the number of users of an HRIS is an important step in calculating your system cost as most HR software will be calculated on a cost per user pricing model.

The average cost for an HRIS system is $8,750 per user over a five year period or $145 per user per month. For larger companies, this cost increases to $11,200 per user over five years, breaking down to $187 per user per month. 

We’ve found that larger companies are spending more per user on their HRIS system. Interestingly, larger companies usually benefit from economies of scale meaning their cost per user goes down, despite their overall system cost being higher. However, our research has shown the opposite trend for HRIS systems. 

It’s possible that larger businesses need greater scope in terms of features and functionality requirements, resulting in a higher cost.

Your HRIS budget should, first and foremost, focus on the cost of the software. However, there’s more to consider beyond the software cost alone.

When calculating your budget you should consider startup costs, one-time costs such as initial purchase price, and ongoing costs, operational costs that continue after the initial payment.

You need to consider:

• Deployment related costs: this includes the software licensing cost, as well as additional hardware or server space, and any additional software needed to support your system.
• Labor costs for internal staff: the time your staff take to choose the system, prepare for the implementation either via training or cleansing data, as well as the time they spend during implementation should also be accounted for.
• Consultancy fees: if you need to hire a consultant during the selection or implementation process, this needs to be accounted for in your official budget and included in the total cost of ownership for your HRIS.
• Data cleansing and migration costs: this is particularly important for large businesses who are consolidating their disparate systems. Someone needs to map the existing data from legacy systems to the new HRIS and ensure that data is correct; this a time-consuming process, but essential to the success and accuracy of your system.
• Updates and system maintenance: either from your own IT department maintaining the system, or paying for system upgrades if not included in your software cost.
• Staff training costs: this includes initial user training cost supplied by either the vendor or consultants for both the cost of training materials and the staff time spent being trained.

You should have a clear figure of what these costs amount to so you can calculate your HRIS return on investment.

How do I determine my HRIS ROI? 

The decision to implement an HRIS comes from measurable business objects. Our research showed that one of the main reasons that businesses chose to implement HR software was to increase efficiency and gain greater functionality. 

Efficiency gains come in many forms and can provide cost savings resulting in a positive ROI, including: 

• Time savings from employee self-service resulting in faster HR transactions as employees manage their own information and transactions such as booking time off.
• More streamlined processes resulting in time savings on administrative tasks for HR staff. This also ties into consolidating disparate systems as working in one system, rather than consulting and working across multiple systems for one task is cumbersome and time-consuming.
• Improved onboarding leading new employees to feel more confident in their decision to join the business and more likely to be retained.
• Lower employee turnover by calculating the number of recruitment campaigns you haven’t run and allocate a cost value.
• Better legislative compliance by reducing incorrect or late filing from system settings and notifications.

You must assign a cost value for all of these benefits, whether that be the hourly wage of the HR worker who would have to carry out that task, or a set cost for each benefit. And, of course, there’s the obvious stuff like headcount reduction – if you are genuinely providing the same or better HR service with less HR staff then a simple FTE (full-time equivalent) calculation will give you a figure to throw into your HRMS return too.

Now you know what you can expect to pay for HRMS and what you can expect to gain from implementing a new system. Whether you realize these benefits is up to you. 

HRIS budget varies depending on business size, you can use our HRIS report to find accurate data on HRIS budget for companies of the same size as yours. 

Don’t forget that cost is only one part of your HRIS selection project, when you’re selecting software remember the ACE software selection process: affordability, cost, efficacy.