How to avoid hidden HRMS costs

We all know that when it comes to price tags, what you see is rarely what you pay, and the experience when choosing a new HRMS is no different. When selecting and implementing HR technology, there are a number of potentially hidden costs that must be considered and minimized; here we define them and point the way to keeping them as low as possible.

System installation –

the cost of implementation, getting it all up and running; including data cleansing and migration, and any initial hardware costs if you’re deploying your HRMS on-premises.

That last point about deployment presents an obvious saving here. SaaS or cloud systems require no on-site hardware or accommodation and unless the potential drawbacks of an off-premises HRMS are especially relevant to your business, the cloud offers an enormous range of options. Also, as a preventive measure, regular data quality checks will reduce the scale of the data cleansing necessary when changing systems.

System upgrades & maintenance costs –

the periodic costs related to upgrading to the latest software version and any other IT costs specifically related to maintaining the system.

This one shouldn’t be so hidden as the others. Avoiding unexpected expense here is more a case of asking the right questions of vendors during the selection process, exploring their proposed upgrade schedule and any associated costs.

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Direct labor costs -

the cost of employing the staff necessary to support the system (these tend to be more when you need in-house IT staff to support on-premises hardware).

Again, while Cloud HRMS doesn’t necessarily function better or worse than its on-site sibling, there’s no escaping that hardware needs maintenance and if the hardware belongs to you, you bear the cost of that directly. However, any cloud system will be priced to cover the supplier’s operating costs, including hardware upkeep, so always look at the total costs when comparing different systems.

Direct non-labor costs –

including selection and implementation consultants, the vendor’s added extras and/or facilities, and any related corporate overheads such as the downtime as staff/users undergo system training.

Any training professional will tell you that the cheapest training event is the one that works, because it doesn’t have to be repeated or supplemented later. Although in-depth analysis of training needs can be time-consuming (and therefore expensive) when done properly, it leads to the design and delivery of fit-for-purpose training; cheaper in the longer term.

Indirect labor costs -

labor costs for employees involved in ‘HR activity’ that is directly related to the system (e.g. collection of staff data, timesheet monitoring, answering staff questions, and so on).

This kind of activity cannot and should not be avoided. However, it should be calculated before implementation and measured afterward. Any comparison should show that the amount of time spent supporting HR procedures has dropped after the new HRMS is in place and being used as intended. Monitoring time spent supporting the system will highlight areas or activities that could be managed more efficiently. Besides, the whole point of automation is that it be a labor-saving device.

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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