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How to Calculate the ROI of Your HR Software

Dec 18, 2018
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fIs your HR software worth the investment? If you haven't performed an ROI analysis yet, you really should! This blog post will explain why measuring the ROI of your HR software is so important and how to do it properly. Let's get started.


The Importance of Measuring HR Software ROI

Measuring the return on investment (ROI) of any business process or tool is important. But since the human resources department deals directly with a company's most valuable assets, it's people, evaluating the ROI of their tools becomes absolutely essential.

You need to know if the HR software you're using (or plan to use) will be worth the investment. The next section will explain how you can discover the answer to this question for your own company.


Calculate Your HR Software ROI

To calculate the ROI of your HR software, you need to measure the costs of the solution against the benefits of having it.


Implementation Costs and Ongoing Fees

What does it cost your business to have HR software. This obviously includes the original price of your solution or the monthly fee for access to a cloud-based service. But it also includes other expenses such as installation and data migration fees, any training or maintenance costs, and the price of necessary updates.


Be sure to take all of these potential expenses into account when calculating the cost of HR software.


Benefits Experienced

Once you understand the expenses that HR software represents for your business, it's time to calculate the benefits of having this kind of solution. You'll want to estimate and quantify, to the best of your ability, both tangible and intangible benefits.


Greater Productivity

Without a doubt, the right software solution will make your HR department more productive. For example, HR Cloud offers our customers a paperless record keeping system, employee self service features, and more — all of which add up to time saved.

The key is to determine how much time will be saved and how much that time is worth. If you estimate that HR software saves your team 3 hours every week, then you just have to discover the median hourly wage of your HR team and multiply it by 12 (3 hours a week times 4 weeks a month.)


Reduced Employee Turnover

Employee turnover is a growing problem. The actual cost varies depending on the position being replaced (entry level worker, manager, c-level executive), but most experts agree that departing employees cost businesses roughly 30% - 50% of that position's annual wage.

Fortunately, HR software can greatly reduce these exorbitant expenses. By increasing employee engagement through streamlined onboarding and company culture building features, and the ability to manage both employee performance and satisfaction levels, HR departments are better equipped to keep team members happy and retain their organization's top talent.


Better Business Processes

Finally, HR software can improve multiple business processes such as recruiting, hiring, and onboarding new employees. Each of these tasks takes time and money. How much will your company save by streamlining these functions?

What if finding qualified candidates took two weeks instead of four? Vacancies cost the average company $500 a day. Optimizing just this one process could save your organization thousands of dollars!



These are benefits that are hard to quantify, but definitely exist and help make your HR software worth its price tag. Intangibles may include reduced stress levels and improved company culture.

While you might not be able to use these benefits in your actual ROI calculations, they are still worth recognizing. At the very least, they can be treated as special perks and help you make a decision if the pros and cons of HR software seem equal.


Bringing it All Together

Now that you've outlined the various costs and benefits of HR software, you can run a simple equation to estimate the ROI of your HR Software. Just take the total estimated revenue produced by your solution and divide it by the cost of using it. The resulting number is your ROI.

Many companies find that the benefits of HR software far outweigh any costs involved. The increase in productivity and reduction of employee turnover are simply too valuable to most organizations.

If your business has considered using HR software, but has yet to invest in a solution, we encourage you to try HR Cloud for FREE today. From onboarding to employee engagement, we'll give you the tools to better manage your team and run a more successful business!


Try HR Cloud For Free

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