How to identify employee costs using your HRMS

Any employer can tell you that employee costs are a major part of any budget. As you look at a line item for staff costs each year, is it a surprise? Or are you giving it a best guess and hoping that your employee costs come in under budget?

HR costs now extend well beyond salary and benefits into systems, compliance, and workforce enablement. If you have an HRMS, this task becomes easier as you can use the system to analyse and act on employee costs before they spiral out of control.

Tracking direct employee costs

You may be tracking obvious data elements such as salary, but are you using your HRMS to track all direct employee costs? Often, salary, bonus and health plan costs will be stored in the HRMS if it feeds payroll, but even if your HRMS isn't, there is usually a benefit to tracking other monetary costs such as allowances and earnings, in particular if they are over a certain threshold.

Direct HR costs typically include:

• Base pay, variable pay, and incentives
• Employer-paid payroll taxes
• Health, dental, and retirement contributions
• Allowances, stipends, and reimbursements
• Recruitment and onboarding costs

Another major monetary employee cost is training. Many companies invest in an LMS to track training taken to ensure compliance, but are you maximizing your investment by tracking the associated cost of training sessions?

Also relevant are the costs of external training courses, as these can often be more expensive than internally provided options. When training costs are not tracked at the employee or role level, HR teams struggle to evaluate return on investment or make informed budget trade-offs.

Tracking indirect employee costs

Do you track equipment and devices given to employees? Even if you don't track the exact costs, it's important to note who has what. You can then use monthly estimates for budgeting.

Many times, a manager signs off on a request and then forgets about the cost over time. By tracking all of this data in the HRMS, you’re putting data at your fingertips for analysis.

Indirect HR costs include:

• Hardware and equipment (laptops, peripherals, security tools)
• Software subscriptions and HR tech licensing
• Remote work stipends and home office allowances
• Wellbeing programs and employee assistance
• Compliance, reporting, and regulatory overhead

I know of a major company that embarked on a project to reconcile employee costs due to various items provided by the business: home broadband, phone cards, mobile phones, etc.

As the items were not tracked in the HRMS, much reconciling was done using HRMS data and comparing it to the data found in other systems. In some cases, employees were no longer with the company but still generating a cost through these services that were never cancelled!

This scenario is increasingly common in hybrid and remote environments, where costs are spread across HR, IT, and finance. Your HRMS is a key weapon in winning the war over cost control.