Before investing in a core HR software, such as an HRIS, HCM, or HRMS, there is always the consideration of price. How much does HR software cost? Not just the dollar price tag for the software, but also the long-term financial commitment you make, the hidden expenses, additional costs for add-ons, and all the bells and whistles of getting a serious HR tool implemented at your company.
We’ve put together this guide to demystify HRIS and HR software pricing so that you can compare vendors and fees with all the cards on the table.
Quick note: This article is written with the assumption that you have a fair understanding of what HR software (human resources software) does. If you don’t, don’t worry. Simply refer to our guide on HR software for more context.
5 Common HR Software Pricing Models
The pricing models for HR software can vary depending on the vendor and the specific product. Different types of HR software would be charged differently, but pretty much all of them fall into one of these buckets though.
1. Subscription-Based Pricing
This is a common pricing model for cloud-based HR software (software that is hosted online). To maintain a subscription you’d pay a monthly or annual fee to access the software. The fee is typically based on the number of users, features, and the level of support that you want. It is normal for the price to drop and the length of your commitment increases.
While vendors generally sell subscriptions in set tiers or packages, certain customization is also common, especially when reaching an enterprise-level subscription. It is very common for subscriptions to operate on an annual basis with the option to upgrade at any point.
The benefit of a cloud-based solution is that you automatically have access to the latest version of the software with a simple online update.
2. A Perpetual (Once-off) License Fee
This pricing model involves a one-time fee to purchase the software license outright, which allows you to use the HR system indefinitely. However, the software will eventually become outdated, which means you may need to pay for upgrades and the necessary IT support to obtain and install a newer version on your system.
As opposed to a cloud-based solution, a once-off license allows for the software to be hosted on-premises by the company’s internal server. This limits the amount of support a vendor can offer, but there are benefits in the security offered. Regulated industries often operate on this model because data access is limited to internal devices.
3. Tiered Pricing
Some HR software providers offer different pricing tiers with varying levels of features and support. These are the packages we mentioned above when we discussed subscription-based pricing. In a tiered pricing model, you can choose an offering that best fits your needs and budget.
Naturally, more affordable tiers would offer limited access to the software’s features, or limit the number of users who can use it at a time.
4. Freemium Pricing (A Free Entry-Level Solution)
Some HR software providers offer a free version of their solution with limited features. This is a means of marketing the paid version, so a free version would offer just enough functionality that you like the tool, but still wish you could access more of its features. Free versions typically allow customers to upgrade to a paid version with more features and support at any time, making it tempting to just buy the tool when the free version’s limitations start bugging you— and it will.
A free HR software may offer a plausible solution for now, but there is a good chance that you’ll need more access or more seats as your company and staff count grow. The vendors rely on this because, when that time comes, it is much easier for your company to upgrade to a paid plan of your existing solution than to move over to a new vendor. For this reason, it is smart to consider whether the paid plans a vendor offers suit your projected needs, before you get too dependent on a free account.
5. Custom Pricing (Based on Module Access)
Some HR software providers may offer custom pricing based on your specific needs, such as your number of employees, company size, or the features you need.
This is a common structure for vendors who offer multiple solutions (modules) within their HR software ecosystem. For example, the vendor may have an optional payroll, learning management system (LMS), or applicant tracking system (ATS) piece that can be part of their HRIS solution, if you want it
The pricing for HR software can also be influenced by factors such as the level of customization needed, the complexity of the software implementation, and the level of customer support you require.
Is HR Software Right for You?
A key consideration in purchasing HR software is whether you actually need it in the first place. This is not a question you can expect a vendor to answer accurately. When it comes to assessing the need for a solution (whether there is even a problem to solve), and the benefit you’d get from implementing one, your HR consultant or HR team should be the voices you listen to.
Bear in mind that, besides the financial outlay, you’re looking at a period of implementation and onboarding that may require IT support, training, and an initial dip in productivity before your new HR software’s success is evident. Let’s look at some pros and cons of taking the plunge:
5 Reasons Why You Should Invest in HR Software
Comparing the prices for HR software can make you wonder whether the outlay is worth it. Here are just some ways in which the return on your investment validates the expense:
1. Time-Saving
HR software can automate workflows to do time-consuming tasks such as tracking employee attendance, managing benefits, and processing payroll. One of the many benefits of HR software is therefore an increase in human capacity on your HR team. This allows for a lot of time to focus on strategic PeopleOps improvements instead of ongoing administrative tasks.
2. Accurately Captured People Data
Because it is digitally captured, HR software can reduce the risk of errors and discrepancies in your people data. By automating data entry and analytics calculations, HR software gives you much better insight for workforce planning than any manually captured or paper-based system would. The effect of this is that you’re empowered to make better organizational decisions.
3. Automatic Compliance
Because it is continuously updated, HR software can help ensure compliance with labor laws and regulations. A software tool can also track employee hours worked to monitor compliance with overtime rules and manage employee leave.
Most HRIS or HCM solutions offer employees access to their own data via a secure self-service portal. This is where anyone within the organization would log in to update their employee data, manage their benefits preferences, and request PTO. Because the employee portal is access controlled, these systems automatically adhere to international privacy laws.
4. An Enhanced Employee Experience
In addition to the privacy offered by the employee self-service portals mentioned above, the access it provides is great for employees.
By simply logging onto their employee profiles, which might be accessible via a mobile app, your workers can view their pay stubs, log timesheets, request time off and get leave approvals. They can also view more personal HR information. For example, they can get details about their benefits, career plans, or skills development opportunities (depending on what modules the software includes). No need to wait for responses from an HR representative, help desk, or impersonal ticketing system.
5. Accurate Data Insight (People Analytics)
HR software provides HR teams with valuable data insights that would otherwise be very difficult to track. The software can report on employee turnover rates, time off requests, and training needs. Having instant access to accurate analytical information can help HR teams make informed decisions and improve their HR strategy.
Overall, investing in an HR software can help your organization streamline HR processes whilst reducing administrative burden.
If you’re still not sure whether the expense is justified, why not do a projective analysis of your hard-dollar ROI? We have a free online course that will show you how to think this through, compare your outlay with financial gains, and build a case for the HR tool’s implementation with leadership.
5 Reasons Why You Shouldn't Invest in HR Software
While HR software can offer a range of benefits to an organization, there may be some reasons why you may not want to make an investment right now. Such as:
1. A High Cost
The costs associated with purchasing, implementing, and maintaining an HR software system can be significant, and you may not have the resources to invest in such a system.
Even a free tool may need some initial set-up cost. For example, you may need IT support to achieve the HRIS integrations you need for your current tech stack to work alongside the solution.
2. Complexity
HR software can be complicated and hard to master, making the initial phase of implementation time-consuming and challenging. You may not have the resources or expertise to manage the implementation process, or may not want to invest the time required to learn how to use the software effectively.
3. Limited Customization
Depending on the vendor and access you can afford, HR software systems may not offer the level of customization your organization requires. If your HR needs or HR processes are too unique or complex for a standard, entry-level package, there might simply not be a suitable solution available within your price range.
4. Lack of Integration
Depending on your current tech stack, the HR software you want may not integrate well with all the systems you already have in place. While a lot of payroll, accounting, or performance management systems come with pre-built API or plug-and-play integrations, not all software solutions have the ability to integrate without considerable customization.
Without integration, any database that exists in your HR software must be duplicated in your existing system. This can create additional work for HR teams and reduce the overall efficiency of the HR processes. Not to mention, running two sets of data in tandem creates a high probability of human error.
5. Your Company is Too Small
While there are plenty of suitable HR software solutions for small businesses, the majority of vendors cater for large organizations with complex HR needs. For very small organizations, a simpler HR solution, such as Google spreadsheets or paper-based systems, may be more than enough to run effective PeopleOps.
It’s up to you to weigh up the benefits and drawbacks of HR software and decide what is best for your company. That being said, it may also be that a core HR software is a poor investment today, but a perfect solution down the line. Hang on to any research, comparison, and calculations you do for ease of future reference.
HR Software Pricing: What Does it Actually Cost?
The cost of HR software can vary significantly depending on the specific features and functionality included in the solution, the size of the organization, the type of pricing model used, and the vendor.
That, plus the fact that many vendors don’t advertise straightforward pricing makes it difficult to know what level of expense you’re in for.
We’ve been collecting data from real HRIS and other HR Tech users to get a sense of what companies pay for their software. The following finding should give you some idea of the range. To get full access to any of these datasets, all you have to do is submit your information.
The Cost of an HRIS for a Small Company (<100 employees)
The smallest organization in our HRIS pricing dataset is a company of 20 employees. They use Zoho People, which sets them back about $500 per annum on a month-by-month contract. That amounts to $25 per employee per year - the lowest cost in our dataset.
Looking at Zoho’s advertised prices (billed monthly), they are definitely a budget-friendly solution.
Other solutions favored by smaller organizations (with 100 employees or less) are:
Rippling - average cost of $112 per employee per year,
Gusto - average cost of $108 per employee per year,
On Pay - average cost of $56 per employee per year, and
Factorial HR - average cost of $100 per employee per year.
The Cost of an HRIS for Mid-Size Companies (100-250 employees)
What companies pay for an HRIS system in this range varies greatly depending on the vendor. On average, companies who submitted their data pay $112 per employee per month based on either a 1-year or 2-year contract with the vendor.
The most cost-effective solution we recorded was at a company of 200 employees that uses Freshteam. The solution costs them $9,500 per year, which equates to just $48 per employee. In addition to this, they pay a $1,000 annual platform subscription fee.
Another popular vendor choice in this bracket is SaplingHR which recently moved over to Kallidus. The average cost of their HRIS is $83 per employee per year.
The Cost of an HRIS for a Large Business(>250 employees)
Looking at respondent data from larger organizations of 250 employees or more, the cost per employee of an HRIS is comparatively low, about $80 per employee per year. However, the financial commitments are generally in the 3-5 year range.
Cost Breakdown - 10 Factors that Influence Your Outlay for HR Software
If you’re wondering how much you should spend on HR software, there is only one answer we can give— it depends.
Not all solutions are the same, and the ones with an attractive price tag might not be what your organization needs. Be careful not to forego massive functionality for the sake of a small saving. That being said, a higher price tag is also not necessarily an indication of a better solution for your company. Don’t fall for perceived perks, like extra user seats or granular reporting, that you don’t actually need or (realistically) will use.
Here are some of the factors that would, and should, determine the cost of your HR software:
1. The Size of Your Organization
Larger organizations with more employees may require more complex HR software systems than a startup on an SME. Naturally, a software system that must track and analyze the data of hundreds of employees would be more expensive than what you’d need for a team of fifty. But, when you break the HRIS or HRMS software price down to a per-employee figure, a lot of enterprise-level solutions are pretty well priced.
A tiered payment system may limit the number of employees you can have on the system before an upgrade is required. Bear in mind that your company will likely grow. If your current plan is a bargain, but the next step up is exponentially more expensive, you may be forced to switch vendors when you reach that stage.
2. Features and Functionality
The more features and functionality that HR software offers, the more expensive it can be. For example, if the software includes advanced analytics or predictive modeling, it may cost more than a basic solution that just holds your data.
Although it is easy to assume that more features equate to better value, you don’t want to pay for bells and whistles that you don’t end up using. Neither do you want to put your HR team in a position where their core tool is overly complicated to the point that it slows them down.
A good way to ensure you don’t overpay for HR software is to research the HRM features you can potentially get and identify the ones that would make a meaningful impact on your business. Use this list of “must-haves” as a point of reference when doing demos and comparing costs. Anything that you get on top of this list is gravy and shouldn’t impact your decision-making process.
3. Customization Requirements
If your company has specific requirements or if you need to customize the software before it can suit your needs, be prepared to fork out extra. Customization may require additional development on the vendor’s side, which can increase the implementation cost and the timeline for onboarding your team.
Be aware that customization is also not a one-and-done deal. If, for example, you need a custom interface for your accounting software to integrate with your new HRIS, you’ll also need to relook at that code every time either system gets an upgrade. In this scenario, it may be worth switching to an accounting solution that automatically integrates with the HRIS. The move may be cumbersome right now, but it will save you plenty of heartache in the future.
4. Integration Requirements
If an organization needs to integrate their HR software with other systems, this can add to the cost of the software. For example, recruitment software pricing will increase if you require integration with separate video interview software. The cost of integration can depend on the complexity of the systems involved and the level of integration required.
When considering an HR software, any pre-existing API or native integration with the tools in your existing tech stack is a major plus. The more integration you have off the bat, the less customization you’ll need to get up and running.
5. Implementation and Setup
The cost of implementing and setting up the software can vary depending on the complexity of the software, the size of your organization, and the level of customization required. If you don’t have an IT specialist or computer whizz on staff, you may need to hire some support.
Implementation costs can include data migration, training, and configuration. If the HR software vendor offers any of these services as a value add, take them up on it.
6. Licensing and Maintenance Fees
HR SaaS vendors typically charge licensing and maintenance fees on an ongoing basis. These recurring costs can vary and would be included with your monthly or annual subscription costs.
7. Technical Customer Support
Most vendors include implementation support and some technical support on an ongoing basis included with your plan. Typically, this would be a set amount of hours that you can engage with their support team per month. If you want unlimited access to support, be prepared to pay extra.
8. Cloud-Based vs. On-Premises
Cloud-based HR software is typically more affordable than on-premise software, as it eliminates the need for expensive hardware and maintenance costs. However, some organizations may prefer on-premise software for security or regulatory reasons.
9. Contract Length
When purchasing a cloud-based (SaaS) HR software, you’ll probably be asked to pay monthly, or commit to a full year at a reduced rate. Naturally, vendors want you locked in as long as possible, and will sweeten the deal to hold you to a longer contract. If the solution you buy works for you, this is a win-win.
Be mindful of what happens after a year though— when you and your HR team have grown accustomed to the tool. If the vendor offered a great discount to get your business, it’s because they know you’ll fork out the full price next year just to avoid moving. If the full cost of the software is beyond your means, you may find yourself in a sticky situation.
10. The Cost of HR Software: Per Employee Yearly and Monthly
Looking at the total price tag of HR software solutions can be daunting, so it’s important to also consider how far that money will reach. Breaking down the cost of an HRIS to what you pay per employee per year and per month helps to put the numbers into perspective.
According to the data we’ve gathered, the cost of an HR software varies between $25 and $360 per employee per year ($2 and $30 per employee per month). This is a significantly large range, because the data is also gathered from companies with teams of between 20 and 1,700 people. The plans they use vary, the countries vary, and the contract times they’ve committee to vary.
Bearing this in mind, here are the average HR software prices per employee we found:
- Bamboo HR: $76 per employee per year. $6.3 per employee per month.
- Gusto: $108 per employee per year. $9 per employee per month.
- Paycor: $238 per employee per year. $19.8 per employee per month.
- Rippling: $112 per employee per year. $9.3 per employee per month.
- SaplingHR: $83 per employee per year. $6.9 per employee per month.
For a more detailed breakdown of what these and more HR software vendors offer, as well as their pricing information, take a look at our list of the best HR software solutions. We’ve spent hundreds of hours talking to vendors in this space, doing demos, and getting user feedback so that your software buying journey can be off to a good start.
HR Software ROI (How to Calculate Your Returns)
Calculating the ROI (Return on Investment) of buying HR software involves comparing the costs of implementing the software against the benefits it provides. Here are the steps you can take to calculate the ROI of buying HR software:
Step 1: Determine the Costs of Purchasing and Implementing the HR Software
This includes the software license fees or subscription costs, installation costs, training costs, and any other related expenses.
Step 2: Estimate the Financial Benefits of Using the HR Software
This could include increased efficiency, productivity, accuracy, and reduced manual work.
For example, consider how much you pay your HR department per year. How much of that time is spent doing repetitive administration that a software can do instead? If it is half, you’re gaining half of their salaries by using HR software. In addition, you gain the added work they can do instead of these tasks.
Step 3: Calculate the Expected Cost Savings
Now to do the math. You can use spreadsheets to run projections of what your cost savings will look like and offset the cost of the HR software against this.
Make sure you run a conservative scenario to see your “worst case” gains. Chances are, the time your HR department spends on payroll administration, time tracking, and other tasks the software can do is already costing you more than the tool would. By inputting the real dollar amounts into your calculator, your ROI will soon become evident.
Also bear in mind the cost savings and revenue growth in other areas of your company. For example, the relief from admin will allow your HR team to implement an employee recognition program. The positive effect this has on employee retention also translates into financial gain.
Step 4: Calculate the ROI
Divide the expected cost savings and revenue growth you’ll see from by the costs of purchasing and implementing the HR software. Multiply this number by 100 to express the ROI as a percentage.
For example, if the expected cost savings and revenue growth are $50,000 and the costs of purchasing and implementing the software are $25,000, the ROI would be:
ROI = (($50,000 - $25,000) / $25,000) x 100 = 100%
This means that for every dollar invested in the HR software, you can expect to receive a return of $1.
Is Free HR Software Any Good?
The quality of free HR software varies depending on the provider and the specific features offered. While free HR software can be a great option for small businesses with limited budgets, it will never be an all-encompassing solution.
We mentioned this above, but it bears repeating: Whenever a vendor offers a free plan, they do so for the sake of marketing a paid version of the tool. They are counting on the fact that you will like the free version, but outgrow it at some point as your team or your needs become more significant.
5 Factors to Consider When Evaluating Free HR Software
1. Features
Some free HR software may offer limited features compared to paid options, but still include all the functionality you need. Consider your list of must-have capabilities. If a free tool ticks all the boxes, don’t assume a paid tool will serve you any better.
2. Scalability
Free HR software may not be as scalable as paid options. If your business is growing, it's important to ensure that the paid version of the software can accommodate your needs in the future at a cost you can afford.
It is tempting to use the free version of the fanciest tool on the market. Bear in mind that, when you outgrow the free version, you’ll be faced with the decision of upgrading to a paid plan of the tool you’re already familiar with, or moving over to a solution you can more readily afford.
3. Customization
Free HR software may not offer as much customization as paid options. That being said, if your needs are simple and the software can be tailored to meet them, it may be a valid solution.
4. Access to Support
Generally speaking, free HR software subscriptions don’t offer the same level of support as paid options.
If you have a tech-savvy person in the organization, you should be able to overcome most set-up and integration obstacles. Also make use of any support options that are available, such as help pages, community forums, or customer support chatbots.
5. Data Security
Evaluate the data security and privacy measures the tool has in place to ensure that your company's sensitive HR data is protected.
By nature, free subscriptions are offered by SaaS (subscription-based) solutions only. On-premises software licenses, which have optimal data security, will always be paid.
Overall, free HR software can be a good option for small businesses with basic HR needs. If your business requires a more complex tool now or down the line, a paid HR software solution may be a better option.
For a list of vetted vendors who offer the best free HR software solutions, consult our buyer guide.
Some Famous HR Software and Their Total Pricing (Starting + all other costs)
Here are some examples of well-known HR software costs based on the data we received from real companies.
BambooHR
According to our dataset, a company of 125 employees pays $9,500 per year on a 1-year plan, and a company of 250 employees pays $19,000 per year on a 3-year plan. Either way, this equates to $76 per employee per year.
No start-up costs were recorded.
Paycor
In one use case, a company that uses Paycor's payroll software for payroll functions in addition to benefits administration, and performance management. HR pays $23,000 per year to service a team of 95 employees on a month-to-month basis. This amounts to $242 per employee per annum.
In another case, a team of 60 pays R14,000 per year on a 2-year contract plus an extra fee for performance management functionality. Either way, the cost per employee is significantly higher than BambooHR and averages out at $238 per employee per year.
No start-up costs were recorded.
Rippling
At the time of writing this, our pricing dataset included three organizations that use Rippling. Interestingly enough one use case was of a company who has the tool exclusively for onboarding and offboarding, offboarding, and employee data storage.
The median cost per employee for Rippling per annum is $112. The lowest cost recorded is $95 per employee per year for the company with the longest financial commitment, a 2-year contract.
No strat-up costs were recorded.
Sapling HR (Part of Kallidus)
The companies in our data set that use Sapling, which recently became part of Kallidus, all range from 100-150 employees and pay between $80 and $85 per employee per year. One did note that, on top of this fee, they pay extra for an onboarding and learning management module.
No start-up costs were recorded.
UKG
Of the companies who submitted their data, UKG users recorded some of the lowest costs per employee. For a company of 700 employees, for example, the cost comes down to $57 per employee per year, based on a 3-year contract with the vendor.
Another respondent said that, for their company of 200 employees, the total bill comes to $60 per employee, and they’ve only committed to using UKG for one year.
No start-up costs were recorded.
These are just a few examples, there are many other HRIS software options available with varying pricing models. To make your search easier, we’ve compiled a list of what we believe to be the best HR software vendors on the market today.
It's important to evaluate each option carefully to determine which software solution is the best fit for your organization's needs and budget.
