A seven step guide to planning your HR software budget

We have plenty of budget articles, outlining the costs – obvious and otherwise – of selecting and implementing your new HRMS from various perspectives. However, what we don’t have is an article that focuses on the process instead of the contents of your budget. So here it is…

1. Start with a ballpark figure

Rather than play a budgeting version of the pin the tail on the donkey game, it’s helpful to start from a fixed point and a ballpark figure is helpful. Yes, you’ll probably end up a long way from this initial reference, but you have to start somewhere. You might look at the standard price tags on a selection of systems, or a popular alternative is to allocate an amount per employee per year. The Sierra-Cedar HR Systems Survey 2016-17 suggests that this figure commonly ranges between $100 to $500 USD. Then it’s time to start refining that figure and making it more ‘real’!

Use this HRMS pricing guide to forecast baseline costs for your HR software budget

2. Decide on what functionality you need (and when)

Before you can know how much it will cost, you need to be clear on exactly what you want. Most HRMS come with a standard set of features with the option of paying extra for additional functionality. This information comes from talking to your stakeholders about the functions the organization needs. Once you have your list, you can research systems that offer what you want.

As always, budgeting is a balancing act. Too high and you won’t get approval. Too low and the system you can afford won’t deliver what you need.

Once option is to stick to the basic features but add a cost line for ‘additional functionality’ which can be used to bring other features online when the basic HRMS has proven its worth and people start asking for more.

3. Factor in deployment-related costs

Is your system going to be on-premises or cloud? There are significant differences in pricing models which have been discussed in detail in previous articles.

4. Clarify what customization you'll need

Sticking to the basics is a good strategy – especially if this is your first HRMS – but your requirements might insist on custom integration with other systems, a tailored mobile app, or simply applying your corporate logo as internal branding… Any customization costs extra.

5. Research consultancy fees

Do you need specialist help with the selection or implementation of your HRMS? An HRMS consultant can bring vital experience to the project and help avoid the pitfalls that you cannot foresee. However, choosing the right consultant makes all the difference and, of course, they can add significantly to the overall project cost.

6. Factor in user training cost

Training is often the project element where savings are made. Don’t!

If you weight your available budget in favour of functionality and clever features but skimp on training, you’re more likely to end up with a technological white elephant that nobody uses. User engagement is critical to getting the return on your investment, and use depends on the quality of the training.

7. Updates and maintenance

If you’ve opted for a cloud system then the pricing model is almost certainly pay-as-you-go, the exact cost depending on the number of either employee records or user accounts. However, if you have an on-premises system, you need to check more carefully about what’s included in the license fee… and what may be included in an additional maintenance contract.

Finally, add in a 10% buffer to allow for price increases or unanticipated expenses.

Ultimately, this layered approach to budget planning is a pre-selection estimate exercise. Once the selection process is over you can recheck your figures, testing them against the system you have in mind. That’s the final figure that you’ll need approval for…

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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