Total Cost of HRM vs ROI of HRM
Managing human resources is an integral part of running a business. However, managing HR can be time-consuming and challenging, especially for larger organizations. As a result, many businesses invest in HRM software to aid in their HR activities. But is investing in HRM software worth the cost? Let's compare the total cost of ownership (TCO) of HRM software and the return on investment (ROI) it generates.
What is the Total Cost of HRM?
The total cost of HRM includes the cost of software licenses, installation, maintenance, and training. Additional expenses may include data migration, customization, hardware, and support. These expenses can vary by vendor, with some charging an upfront fee, and others charging a monthly subscription fee.
The annual cost of HRM software ranges from $2000 to $25000, depending on the size of the organization and the features required. For example, a small business may need basic HR functions such as employee data management, while a larger business may require advanced features such as applicant tracking, performance management, and analytics.
What is the ROI of HRM?
ROI is a measure of the benefit an investment generates compared to its cost. In the case of HRM software, ROI is difficult to quantify as it is not a direct revenue generator. However, HRM software can help reduce administrative tasks, increase productivity, and enable better decision-making. HRM software can also aid in compliance, reducing legal risks and potential fines for non-compliance.
A study conducted by Nucleus Research found that businesses using HRM software achieved a 91% increase in HR productivity and a 10% reduction in labor costs. Furthermore, businesses saw a 13% increase in revenue per employee, indicating that HRM software has a positive impact on business performance.
Is Investing in HRM Software Worth It?
While HRM software does require an initial investment, the benefits it provides in terms of increased productivity, compliance, and overall business performance can lead to a positive ROI. By investing in HRM software, businesses can avoid the cost of hiring additional HR staff and reduce the risk of legal fines.
Additionally, HRM software can free up HR staff to focus on more strategic tasks such as employee development, talent acquisition, and retention. This, in turn, can have a positive impact on employee satisfaction and reduce turnover rates.
In conclusion, the total cost of HRM software may seem like a significant investment, but the benefits it provides can lead to a positive ROI. Investing in HRM software can streamline HR processes, increase productivity, and help ensure compliance, all of which can lead to improved business performance.