Breaking Down the Cost of HRIS Systems: What to Expect

The HRIS is the foundation of any company's HR tech stack. And while many buyers are focused on the sticker price, there are other hidden costs that need to be factored in when considering a system investment. Learn more with OutSail

Brett Ungashick
OutSail HRIS Advisor
July 4, 2023
user comparing HRIS systems

When considering the implementation of a Human Resource Information System (HRIS), it is crucial to understand its various costs. HRIS systems are powerful tools that streamline HR processes, improve efficiency, and enhance decision-making. However, like any investment, they come with costs that must be carefully evaluated. In this article, we will break down the cost considerations of HRIS systems, including upfront costs, ongoing costs, hidden costs, and the return on investment (ROI) they can provide. Understanding these factors allows you to make informed decisions when budgeting for your HRIS system.

Upfront Costs: Purchase and Installation

Choosing the Right HRIS System for Your Organization

Before delving into the cost considerations, selecting an HRIS system that aligns with your organization's needs and goals is essential. Conduct thorough research, evaluate different options, and consider scalability, customization, and vendor reputation. By choosing the right HRIS system from the start, you can avoid potential costly changes in the future.

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Software License Fees

The software license fee is one of the primary upfront costs of implementing an HRIS system. This fee typically depends on the number of users and the functionalities required. It is crucial to carefully analyze your organization's size and the features you need to ensure you choose the appropriate license that fits your budget.

Implementation and Customization

Once you have acquired the software license, the next step is implementation and customization. This process involves configuring the system to meet your organization's specific requirements. While some HRIS systems offer user-friendly interfaces that allow for self-configuration, others may require professional assistance from the vendor or a third-party implementation partner. The cost of implementation and customization varies depending on the complexity of your organization's HR processes and the level of support required.

Hardware and Infrastructure

In addition to the software costs, you may need to invest in hardware and infrastructure to support the HRIS system. This includes servers, time clocks, storage devices, network equipment, and other necessary components. It is essential to assess your existing IT infrastructure and determine if any upgrades or additions are necessary to accommodate the new system.

Training and Change Management

To ensure the successful adoption and utilization of the HRIS system, adequate training and change management efforts are crucial. Investing in comprehensive training programs for HR staff and end-users will enable them to maximize the system's capabilities. Additionally, change management activities can help mitigate resistance to change and facilitate a smooth transition to the new HRIS system.

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Ongoing Costs: Licenses, Upgrades, and Maintenance

Software Licenses and Subscriptions

Once the HRIS system is implemented, you will incur ongoing software license and subscription costs. These costs are usually based on a per-user or per-month basis. Reviewing your licensing agreement periodically to ensure compliance and evaluate whether the current license structure aligns with your organization's needs is essential.

Upgrades and Enhancements

Technology evolves rapidly, and HRIS systems are no exception. Vendors regularly release updates, upgrades, and new features to improve system performance and address emerging needs. Staying up to date with these upgrades can enhance the functionality and security of your HRIS system. However, it is important to consider the costs associated with upgrades and determine if they provide sufficient value to justify the investment.

Note: Most modern, cloud-based systems will automatically upgrade their software without your team having to pay any additional costs or re-installations.

Technical Support and Maintenance

Maintaining an HRIS system requires ongoing technical support and maintenance. Vendors usually offer support services, such as troubleshooting, bug fixes, and system maintenance, either as part of the software package or as an additional service. It is crucial to evaluate the support options available and choose a vendor that provides timely and reliable assistance to minimize downtime and ensure system stability.

Hidden Costs: Training, Data Migration, and Integration

Training Costs for New and Existing Employees

Implementing an HRIS system often requires training for both new and existing employees. New hires need to be onboarded and trained on using the system, while existing employees may need to adapt to changes in their HR processes. Training costs can include developing training materials, instructor fees, and productivity losses during training sessions. Investigating these costs is essential when budgeting for your HRIS system.

Data Migration and Data Cleaning

Migrating data from legacy systems or manual records to the new HRIS system can be complex and time-consuming. It may involve data extraction, data transformation, and data loading activities. Data cleaning and validation are also necessary to ensure data accuracy and integrity. These tasks can incur costs related to data migration tools, data analysis, and professional services.

Integration with Other Systems

Organizations often have multiple systems that must communicate and share data with the HRIS system. Integrating the HRIS system with existing systems, such as payroll, time and attendance, or performance management systems, may require additional development efforts and integration costs. Considering these integration requirements and associated costs is crucial to ensure seamless data flow across systems.

Understanding ROI: The Value of a Good HRIS System

Increased Efficiency and Productivity

An HRIS system's primary benefits are increased efficiency and productivity. Automating manual HR processes, such as employee onboarding, leave management, and performance evaluations, can save significant time and effort. By streamlining these tasks, HR professionals can focus on more strategic initiatives, leading to increased productivity and improved employee experiences.

Enhanced Data Accuracy and Reporting

HRIS systems provide centralized databases that house employee information, enabling accurate and up-to-date data management. This data can be leveraged to generate reports and analytics, providing valuable insights for decision-making. Access to real-time data and customizable reporting capabilities can empower HR professionals to make data-driven decisions, improving HR strategies and outcomes.

Compliance and Risk Mitigation

HRIS systems often include features that facilitate compliance with legal and regulatory requirements. They can help automate compliance processes, such as generating reports for government agencies or managing employee records under data privacy laws. Organizations can mitigate the risk of penalties and legal issues by ensuring compliance, potentially saving substantial costs in the long run.

Improved Employee Engagement and Self-Service

Modern HRIS systems often offer self-service portals where employees can access and update their personal information, request time off, or enroll in benefits programs. These self-service capabilities empower employees and promote a sense of ownership over their HR-related tasks. Increased employee engagement and satisfaction can lead to higher retention rates and a positive organizational culture.

Conclusion: Budgeting for Your HRIS System

When budgeting for an HRIS system, it is crucial to consider all cost aspects, including upfront costs, ongoing costs, and hidden costs. By conducting a comprehensive analysis, selecting the right system, and factoring in training, data migration, and integration expenses, you can ensure a smoother implementation process and maximize the benefits of your HRIS system. Remember to evaluate the return on investment (ROI) by considering the efficiency gains, data accuracy improvements, compliance benefits, and enhanced employee engagement that a good HRIS system can provide. With proper cost considerations and strategic planning, you can make an informed decision and budget effectively for your organization's HRIS system.

What are the upfront costs associated with implementing an HRIS system?

Upfront costs include software license fees, implementation and customization expenses, hardware and infrastructure investments, and training and change management costs.

What ongoing costs should I expect after implementing an HRIS system?

Ongoing costs typically include software licenses and subscriptions, upgrades and enhancements, technical support and maintenance fees, and any additional services required for system optimization.

Are there any hidden costs I should be aware of when budgeting for an HRIS system?

Hidden costs may include training expenses for new and existing employees, data migration and cleaning costs, and integration fees for connecting the HRIS system with other existing systems within the organization.

How can I evaluate the return on investment (ROI) of an HRIS system?

ROI can be assessed by considering the efficiency gains, productivity improvements, data accuracy enhancements, compliance benefits, and increased employee engagement resulting from the implementation of the HRIS system.

What factors should I consider when selecting an HRIS system to ensure it aligns with my organization's needs and goals?

Factors to consider include scalability, customization options, vendor reputation, integration capabilities, and the system's ability to streamline HR processes and improve decision-making.

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Meet the Author

Brett Ungashick
OutSail HRIS Advisor
Brett Ungashick, the friendly face behind OutSail, started his career at LinkedIn, selling HR software. This experience sparked an idea, leading him to create OutSail in 2018. Based in Denver, OutSail simplifies the HR software selection process, and Brett's hands-on approach has already helped over 1,000 companies, including SalesLoft, Hudl and DoorDash. He's a go-to guy for all things HR Tech, supporting companies in every industry and across 20+ countries. When he's not demystifying HR tech, you'll find Brett enjoying a round of golf or skiing down Colorado's slopes, always happy to chat about work or play.

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