Calculating the Cost of your HRMS Investment

As the old adage says, money isn’t everything, and that’s true in all avenues of life. This is also true when it comes to your HR technology investment, money is a significant factor and the one that people find it easiest to relate to and understand. So, alongside all those service improvements, engagement improvements and so on, you do need to provide a few ‘hard cash’ figures and the first step is calculating exactly how much your new HRMS cost you to purchase and implement.

Once you have the HRMS investment figure, you’re ready to calculate the other half of the equation: the return.

So, how much did the system cost you to get up and running? This is likely to be far more than the purchase price on the vendor’s ticket or the monthly licence fee (often less than 10% of the overall cost of the system). What we’re talking about here is the total cost of ownership (TCO), and that includes a few well-hidden (or at least, not obvious and easily forgotten) cost headings. As a starter, consider the following:

  • Price tag – This is the amount you probably saw on the vendor’s website when you first were drawing up your shortlist of possible HMRS options.

  • Installation – What did it cost you to actually get to the go-live stage? Include any hardware costs, training costs, the fees charged by consultants, server and/or storage space in the cloud, the expense of staff time taken up by being trained, participating in focus/planning groups, being a member of the implementation project team and so on. In other words, consider all the hard work you did to get the system up and running and if you can put a price on it, do so

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  • System maintenance – These may be equipment costs; ongoing labour costs (people who spend part of their time keeping the system running – HR, IT, etc.), or even regular payments to ‘rent’ cloud space or expertise from the vendor/provider in line with the service level agreement.

  • System upgrades – These won’t impact every week or month (hopefully!) but nevertheless there is usually a cost when the system is updated and it’s part of your investment.

Depending on the size and nature of your business, these costs will, of course, vary – some will probably be barely there – but for a true picture and an accurate HRMS investment calculation, you need to include everything.

Once you have the HRMS investment figure, you’re ready to calculate the other half of the equation: the return.

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Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

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Dave Foxall