Understanding HRIS ROI and Costs

A human resources information system (HRIS) is a powerful platform, and they have clearly shown that they can help businesses. As with any investment, businesses want to know what their return on investment can be, and the ROI calculation for using an HRIS is fairly simple. However, getting accurate numbers to plug into the formula can be tricky because some HRIS benefits are difficult to track.

Nevertheless, it's important to spend the time and effort to do a cost-benefit analysis as part of your business strategy. This will give you a sound estimate of what a strategic investment in an HRIS could mean to your company.

A fact-based estimate of HRIS ROI will help you make a good case for the investment to your CEO. You'll need to demonstrate that implementing, maintaining and upgrading an HRIS will be worthwhile for your company. Or, if you already have purchased one, it's important to get a handle on HRIS ROI to help plan future investments in HR software.

The Benefits of HRIS

An HRIS is a technology platform that handles human resources tasks, such as payroll processing, employee recruitment, onboarding and training. An HRIS may also include advanced workforce management features such as data analytics.

The principal benefits of an HRIS are that it helps to:

• Automate routine HR tasks. Automating payroll processing and employee recordkeeping saves time and improves accuracy.
• Streamline the recruitment process. An HRIS can keep track of applicants throughout the recruiting process.
• Increase employee engagement. Employees can use self-service portals to view and update personal information, sign up for training, and check their benefits and use of time off.
• Provide data analytics. An HRIS makes it easy to conduct deep analysis of your data. It generates reports and insights based on HR metrics that you can use to make better decisions on staffing needs, workflow, employee retention, and many other matters.
• Support HR compliance. An HRIS provides a secure platform for storing sensitive information. It can help a company comply with data-retention requirements. It also can issue reminders of important deadlines and generate reports that helps to monitor identify concerns.
• Enhances financial performance. The efficiency improvements and enhanced access to information that an HRIS provides aid in business management, profitability assessment, human capital management and business operations. These benefits contribute to giving your company a competitive advantage.

Costs of HRIS

Let's break down the costs of an HRIS. A cloud-based HRIS, the most popular type, is commonly calculated as a fee per employee per month.

• Monthly fee. The monthly fee might range from about $30 per employee per month to about $85 per employee per month, depending on the range of services desired. Discounts may be available for companies that purchase annual subscriptions.
• Labor costs for internal staff. When calculating the total costs of an HRIS, include costs for the time spent selecting and implementing the system. You also will need to estimate the labor costs for the staff to use and support the HRIS.
• Data cleansing and migration. When you first implement an HRIS, you’ll need to check the accuracy of your data and fill in any missing information.
• Staff training costs. Account for the costs of designing and conducting training sessions, as well as the time spent attending training sessions.

Savings

If you are considering an HRIS, it will be useful to begin establishing benchmarks so you will have grounds for comparison. Here are some factors to look at regarding the possible savings an HRIS might bring.

Unquantifiable savings/benefits

One complicating factor for calculating ROI is the difficulty of quantifying some of the savings and benefits. For example:

• Engaged remote workers. HR automation tools provide ways for remote employees to communicate better with their coworkers and managers, access information, receive training and get feedback and rewards.
• Improved company culture. An HRIS can contribute to improved company culture by enhancing new employee onboarding and increasing employees’ productivity and creativity.
• Better decision-making. Data analytics from an HRIS system empower companies to conduct data-driven financial analysis and forecast for the future.
• Improved employee wellness. Companies can use HRIS data analytics to fine-tune employee wellness programs. Also, employees can get 24/7 access to information about their healthcare plans.
• Stronger teams. HR data analytics can also help build stronger teams. They provide performance evaluations of teams and individuals, identify which employees may be best suited for new or open roles, and indicate what training they need to get up to speed.
• Empowered employees. Employees can access the HRIS system remotely on their phones, computers, or tablets from any location 24/7.

These benefits can significantly help reduce costly employee turnover, increase productivity, and enhance your company’s ability to meet its core goals. This is true even if the exact amounts of savings and benefits are hard to pin down.

Quantifiable savings

It is, however, possible to quantify other types of savings you'll see from HRIS software:

• Time savings. You can quantify the amount of time that staff save by automating payroll and other processes, such as using electronic signatures.
• Increased productivity and efficiency. HRIS analytics tools can pinpoint in which roles your employees will be most productive and where there are opportunities for improvement. A basic measurement is to look at current FTEs (full-time equivalents) vs. personnel levels after the system is employed. Switching from a manual to an automated process usually brings significant, measurable savings. You may find reduced administrative efforts, fewer manual processes and workarounds, and faster production of reports and charts.
• Reducing employee turnover. Employee turnover can be a major cost, and HRIS tools can help keep employees engaged and challenged, making them more likely to want to stay. You can track employee churn to measure the ROI here.
• Recruitment. The efficiencies of an HRIS system should help reduce both the time to hire and the cost to hire.
• Onboarding savings. With HRIS onboarding tools, employees will become more productive more quickly. You can measure the time it takes from a hiring decision to an employee becoming productive.
• Support compliance. An HRIS can help reduce potential penalties or fines by making it easier to meet rules and requirements.
• Improved time-off management. HRIS makes it easy for employees to track and report their time off, helping to save companies the cost of unreported time off days.
• Absenteeism. HRIS tools that help keep employees engaged can result in less absenteeism.
• Employee satisfaction. Better onboarding and communications, individualized training plans and 24/7 access to employee records and information improve satisfaction. Managers may also report favorably on their freedom from HR tasks and added time to work on core issues.

How to Gather Data on HRIS

To calculate ROI, you'll need data. Sources of data include:

• Interviews. Talk to your managers and employees about their experiences before and after an HRIS is implemented.
• Performance monitoring. Review productivity and business results for individuals and teams.
• Surveys and questionnaires. Use these instead of interviews or to augment them. You can make surveys and questionnaires anonymous to get more honest and frank responses from employees.
• Statistical reports and analytics produced by the system itself. Data analytics reports from your HRIS can be used in your ROI calculations.

The Formula for Great HRIS ROI

The formula for calculating the ROI from your HRIS is a simple ratio: Savings divided by costs, with the result multiplied by 100 to express it as a percentage.

TriNet offers a cloud-based HRIS that provides a comprehensive solution. It connects payroll processing, benefits administration, and HR tasks into a single platform to help save time and provide actionable insights.

TriNet could be the top choice for your company if you want a system that is both powerful and intuitive. Contact us today to find out more.