Are you considering some new HR tech for your business? You might be looking at a human resources information system, or HRIS. Maybe you require an upgrade or need to switch providers. In any case, you’re likely wondering how to convince C-suite or the finance team to approve the funds so you can acquire the technology you need.
You could make a better case when you can prove the HRIS has a strong return on investment. There’s just one catch: you have to be able to calculate the ROI of your HRIS! This can be tricky to do, especially since HR tasks are often not seen as revenue-generating activities in a business.
There is a way to prove ROI for your HRIS. Just follow these steps.
Calculate the Total Cost of HRIS Ownership
Your first step is to have an accurate tally of what your HRIS costs you. This includes not just annual payments or monthly subscription fees but set-up costs, training, and other fees.
If you’re adopting your very first HRIS, you’ll want to include enough budget for deployment-related costs. Labour costs for internal staff and consultancy fees for external partners should also be factored in.
You should also calculate the cost of the HRIS over a period of a few years. Some of the benefits of the HRIS won’t be immediately apparent. If you calculate ROI over, say, a 2-year or a 5-year period, then you’re more likely to show greater returns. Even if those returns don’t show up in Year 1, you may see even greater returns in Year 2 and beyond.
You’ll want to figure out how much the HRIS costs you per user in your organization. The number of users will vary depending on the size of your organization. For an organization of 100 people, you might have just 2 or 3 people using the system. A company with 1,000 employees will have more users and will be charged a monthly fee per user.
Calculating the Benefits of Your HRIS
The next step is more difficult. You’ll need to calculate a dollar value for the benefits of the HRIS.
Why is this so tough? A lot of HR tasks aren’t immediately quantifiable, unlike sales or other areas of the business. Nonetheless, adding an HRIS can have a significant impact.
You’ll want to keep tabs on the following areas:
- Employee turnover: adding an HRIS often reduces turnover
- Reduction in administrative hours: an HRIS frees up employees’ time
- Hiring costs: the HRIS can often decrease hiring times and lower costs
You can estimate how much an HRIS will impact any of these areas. Take employee turnover. Suppose you annually have two employees leave the company. You spend $10,000 per departing employee. If the HRIS can reduce turnover by 50 percent, then you’ll have saved $10,000.
An HRIS could reduce the amount of labour spent on a wide variety of HR tasks. Calculate the number of hours your HR team spends on administrative tasks. Multiply that number by the hourly wage for your HR administration personnel.
Now reduce that figure by up to 60 percent. That’s how much the HRIS could save you.
You could repeat the exercise with hiring costs. You might also want to look at productivity, which can be increased when you adopt an HRIS. Other areas to consider include improved benefits usage and administration, payroll errors, and leave management. What would improvements in any of these areas do to help your bottom line?
Calculate ROI on Your HRIS
ROI is quite simply the benefits of your HRIS less the cost of the system. You’ll then multiply the figure by 100 to determine the percentage return you’re receiving on your HRIS.
Calculating ROI on any HRIS can make a compelling case to adopt the system or review one that might not be delivering on all its promises.
Looking for an HRIS that can do more and supercharge your ROI? Get in touch with our team and discover just how much the right HRIS can do for you!