HRMS Contracts: Be Careful What You Sign

Once you’ve selected your new HRMS system and are at the point of signing your HRMS contract with your chosen vendor, you should – as with any supplier contract – seek professional legal advice as to exactly what you are committing to. That said, from the system and selection process perspective there are some issues and pointers to bear in mind…

Get What You Think You’re Paying For

First of all, and without wishing to be too obvious, everything you have negotiated should be in the HRMS contract. You’re contracting to purchase the system as it has been described to you throughout the selection process, plus whatever ongoing service and maintenance fees have been agreed on.

Be Wary of Hidden Extras

Try not to focus too much on the up front cost or license fee; the software’s ‘price tag’ is far from the full cost in many instances. As we’ve said elsewhere, the total cost of HR administration includes a number of so-called hidden costs and you need to be clear how the purchase of your chosen system will impact on those. For example, if you’re buying an HRMS that cannot be maintained in-house then the contract needs to include a negotiated price and service agreement for maintenance; otherwise you’ll be over the proverbial barrel when it’s update time.

Ensure Your Future Needs are Being Met

While in the process of nailing down the HRMS contract, it is worth contemplating what you might require from your new system in a few years’ time.

For example, the trend for self-service functionality (for both employees and managers) continues. Not only does increasing options for user engagement and control shift the routine work closest to the point of input, there are also the twin tides of mobile and BYOD to consider. As the evolution of tablet and other mobile technology has allowed greater interactivity with ‘field’ staff for workforce and supply chain management, so HR is able to ride that same bandwagon and reach out to all staff through various mobile apps. Similarly, while the line-blurring with the rise of BYOD (bring your own device) can cause handling headaches for IT teams, it means self-service HR is available more widely than ever. Put simply, if you think you will be accessing other features and modules from the same vendor in the short to medium term, it may be worth including terms and prices in the initial HRMS contract.

Another example of future-proofing is compliance. Whichever country you operate from, the local labor and employment legislation will lay certain obligations on employers with respect to employee data and records. Your shiny new HRMS may comply with the law as it stands on the date of purchase but does the contract offer provision for changes in legal requirements?

A final word of caution… You may have built an excellent foundation for your future relationship with the HRMS vendor of your chosen system; it may be honest, open, trusting, and flexible but when it comes to contracts, business is business. Read it carefully. Have it checked by a professional. Contract checking is part of your due diligence process and done properly can help avoid future disputes and keep your partnership going.

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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