The ROI of implementing HRM software: Is it worth the investment?

HRM software costs depend on factors like the number of users and features. It's more helpful to consider how the price structure fits into your budget while meeting your requirements.

Here are the aspects of HR software pricing you need to think about.

Many HR management software tools have tiered pricing, starting with basic features at a lower cost. As your organisation and its needs evolve and grow, you can upgrade to access advanced HR features. This means that small businesses don’t have to pay for tools they won’t actually use and can help protect their profit margins.

For example, Personio offers a Core plan with essentials like automated workflows and document management, while our Core Pro adds more advanced capabilities like position management and our public API. 

HR management software usually follows a subscription-based model where you pay a recurring fee at a given interval. Here are a few common types of pricing plans:

• Pay as you go: Access the software as and when you need it, with no commitment

• Fixed-rate: Agree to pay the same rate per month for specific features

• Per-user pricing: Pay a floating rate based on the number of people who use the system

• Usage-based: Pay based on how much you use particular software features like background checks or payroll runs

Many systems use a mix of strategies to keep prices competitive. For instance, Personio has a fixed fee for most products but applies a floating rate for job postings.

Some HRMs offer optional extra HR modules like recruitment and performance management that enhance the platform’s capabilities. This gives you more control over the costs and the complexity of your setup. 

While you can use third-party software integrations to achieve certain functionality, these add-ons are built for your specific HR management software, meaning they may be easier to implement and incorporate into your existing workflows. 

Great HR solutions recognise exceptional circumstances where organisations need a lower rate. For example, many charities and nonprofits operate with a limited budget as they rely on contributions. For example, Personio offers a special discount for qualifying organisations.

Understanding the costs of an HRM is only half the story. The real question is, what is the potential value of HRM software for your organisation?

A great HR system will make a difference for your whole team, from your people ops department to managers and employees. Some benefits, like time savings and accuracy, are immediate, while others materialise over time.

To truly understand the ROI of HRM software, you have to consider its impact on all aspects of HR management.

Cost savings are often the biggest focus when pitching HR software to management. Showing how the solution pays for itself and then provides extra returns helps you make a strong case for the investment.

By automating tasks, you can reduce spending on labour and resources across various departments. Our 2024 Power of Personio Report discovered businesses can save up to 31% on HR costs and 17% on payroll-related expenses with Personio. Because you require 18% less time in IT support, you can also see cost savings there.

And those are just the direct costs. HR management software also frees up time, allowing you to get deeper into critical tasks and find ways to reduce expenses further. For example, you can focus more on workforce planning and ensure you’re not overstaffing any departments.

Aside from reducing expenses, HRMs increase your total output. Automation handles many of your routine tasks while you get more efficient at others.

Our report found you can expect HR processes to get up to 42% faster and your team to become 38% more productive with Personio.

Take onboarding, for example: Personio lets you automate tasks like collecting documents and signing contracts. You can even create custom workflows for new employees with checklists and notifications to walk them through onboarding. 

Meanwhile, our centralised dashboard lets you track progress and respond quickly to unexpected issues like conflicting start dates or missing equipment.

HRMs improve the employee experience to make teams more productive and foster loyalty across your organisation. Our report shows companies typically see a 22% increase in satisfaction after introducing Personio.

Automated messaging helps you become more supportive of your people’s needs. For example, Personio increases your response time to employee inquiries by up to 27%, meaning teams aren’t left waiting for resolutions to issues. Our AI-powered Conversations feature lets you automatically provide targeted advice or redirect staff to resources.

But HR management software isn’t all about automation. Many employees appreciate self-service features that allow them to view, upload and amend their files. They get more autonomy over how their data gets handled and greater assurance about security at your organisation.

Improving the employee experience can bring significant returns as your team becomes happier and improves overall performance. Gallup research has found that an engaged workforce results in: 

• Higher productivity levels

• Better product quality

• Greater customer loyalty and engagement

• Lower turnover rates

• Less absenteeism

And these benefits have a knock-on effect. For example, a low turnover rate means you can allocate fewer resources to filling open positions. Plus, Gallup reports that high employee engagement can ultimately make a business up to 23% more profitable. 

Recruitment has a major impact on finances, as the longer the hiring process, the longer critical positions go unfilled. The median cost to fill an empty role ranges between £1,500 and £2,000, and any way you can reduce this will positively impact your business’s bottom line. 

With HR systems like Personio, you can reduce the time to hire by 24% and minimise productivity gaps.

HR tools speed up hiring by automating repetitive tasks like writing job descriptions and posting ads. Instead of you having to read hundreds of cover letters, the software can process them and schedule interviews. It can also filter out unsuitable applicants and give insights into the most promising ones.

HRM software also helps you make informed decisions, so you don’t overlook top talent or pick the wrong applicants. Built-in screening and talent assessment tools help you get to know each candidate better and evaluate them more thoroughly.

HRMs help you avoid costly mistakes by automating key processes like payroll and leave management and giving you more oversight on related data.

Time tracking is a good example. If you miscalculate the number of hours an employee has worked and run the payroll, you might need to pay extra for an immediate transfer to fix the mistake. HRMs prevent errors like these by automatically recording time sheets and sharing the data with your payroll.

These mistakes can add up. Research shows a company with 1,000 employees spends an average of $248,735 per year fixing time and attendance errors.

Leveraging HRMs to improve accuracy doesn’t just spare you the cost of fixing mistakes. Errors and oversights can lead to compliance issues, with hefty penalties attached.

For example, most HR management systems help you collect, verify and store your team’s documents. This helps you check whether all new hires have the right to work in the UK, potentially avoiding fines of up to £60,000 per worker.

Compliance issues often have a snowball effect. News about penalties or legal action can cause organisations to lose credibility with customers and employees alike. And the bad press can deter people from working with you, hurting your business in the long run.

By improving compliance management with an HRM, you’re future-proofing your business from legal issues, fines and damage to your reputation. 

Altogether, HR software reduces the friction in everyday processes and resolves common problems, making operations easier for everyone.

When all your processes are consolidated onto one platform, your team doesn’t have to juggle multiple systems or tools. Personio, for example, makes records management easier and saves teams up to 17% of the time used to find and update data.

There’s also less need for departments to message back and forth, minimising the risk of duplicated tasks and wasted effort.

And recent industry surveys suggest you could do with the extra support; most HR teams say their stress levels keep increasing due to the pressure to do more with less. By removing unnecessary hurdles, HRMs make it easier to stay on top of employee management and perform your job well.

Despite the advantages, over a third of small to medium businesses still haven’t invested in HRM software.

Now, it’s time to make that leap. While thoughts of your budget may hold you back, our research shows companies can expect a 6% jump in revenue after implementing Personio. 

Investing in powerful HRM software can bring you significant returns. Our comprehensive features streamline your operations, from high-level processes like performance reviews to daily operations like time tracking.

And it’s not just about the numbers. Personio helps you create a stronger company culture that employees want to form part of.

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The top HR software for you depends on many factors, such as your business size and industry. That said, top solutions should have all the essential features, such as attendance monitoring and performance management, plus desirable extras like payroll and recruitment tools.

HR professionals leverage a combination of features to automate and monitor processes using human resource management (HRM) software. Some common examples include workflow automation, document management and people analytics. Modern HRM software has self-service features, so employees can also benefit directly from using the tools.