How Much Does HR Software Cost?

Many of the HR systems aimed at small businesses publish their pricing on their website. Typically these costs will run from approximately £1 per employee per month to £7 per employee per month, depending on the mix of functionality you require. The cost per employee is often much greater than other providers but, these systems have no, or very low minimum spends so it’s perfectly possible for a small business to pay less than £50 per month for a basic HR system. 

As HR systems become more complex and configurable, the harder it is for the vendors to provide accurate pricing on their website. 

To see approximate price estimates for some of these vendors use the links below. 

General HR Software Pricing Guide

One of the most common questions we get asked is how much will a new HR system cost? The short answer is, it depends.

Subscription costs for an HR system

Nowadays, nearly all HR software is delivered as Software as a Service, also known as SaaS HR, cloud HR or online HR. This model of delivering HR software involves the buyer subscribing for a license to use the HR system for a period of time.

Over the course of the lifetime use of an HR system it is the subscription costs that are likely to be the greatest constituent. The ongoing subscription costs of a SaaS HR system depend on a number of things. These can be broken down as buyer led factors and vendor led factors.

Buyer led factors

  • The functionality you need

One of the major influences on the price of a people management system will be the mix of functionality you require. Simple requirements that just require basic self-service access to an HR database that can help record and manage absences will be very cheap. Adding on recruitment, onboarding, performance management, LMS and payroll modules will be more expensive.

 

  • The number of employees you want to have access to the HR system

Most HR systems base their subscription costs on the number of people who will be using their software. This is usually either done in bands of employees or on a per employee per month/year. Typically, the more users who will have access, the less it will cost per employee, but the more it will cost in total subscription fees.

 

  • The length of contract you sign up for

For smaller organisations whose needs may change rapidly, the contract term may be as short term as a rolling monthly contract. For larger organisations looking for long term certainty about their expenses, a contract may run for five or more years and include scheduled price increases. As a general rule, the longer the commitment you’re willing to give to a vendor, the less the subscription cost should be per month or year.

 

  • The vendor you choose

Some vendors, particularly those aimed at larger organisations, enforce minimum spends as a tactic to help target the size organisations they are geared up to serve.

 

  • Whether you’re buying through a buying framework?

Some sectors are supported by buyer frameworks. Think of these like a discount buyer club whereby the member organisations pay a small fee to be a member of the buyer club, but in return they receive preferential rates from suppliers that the buyer club has shortlisted as being a good fit for their members.

In most instances, buying through a framework will give you competitive rates, but will usually have less wriggle room for negotiating a special price based on your own circumstances.

 

  • How tough of a negotiator are you?

At the smaller end of the market the pricing is often fixed. Each deal is worth such a small amount of money that it’s not worth the supplier’s time to haggle on price. Often the process is automated and you just punch in some credit card details so won’t even have the chance of negotiating with a sales person.

Once you start dealing with the mid-size suppliers, negotiating isn’t just a possibility, it’s essential. Vendors will nearly always improve upon the original price they quote.

It’s rare that any one piece of functionality is unique to one vendor so we would always recommend considering multiple different suppliers to understand what is they each offer and at what price. As the buyer you will need to determine what functionality is critical to you and what is a nice to have and at what price. Once you’ve seen some demos and received some proposals, use your knowledge of what each supplier can offer to negotiate to your advantage.

If you don’t ask you don’t get so, always ask for a discount and back up your request with a reason why it should be considered. This can be as simple as, “if you’re able to reduce the price to XYZ, I’ll be able to sign the contract this week” or “we really like your offering but competitor ABC is 30% cheaper than you. If you can meet us halfway, we’ve got a deal”.

 

Vendor led factors

Some of the factors that affect the negotiating leverage you have depend on how badly the supplier, or the individual sales person at the supplier wants to win you as a customer. Many of these factors are outside of your control. For example, if the sales performance of the vendor is way behind their target for the year they will be highly motivated to win any customer, even at a heavy discount.

Something you can influence is the timing of you signing a contract. Most vendors set their sales teams monthly, quarterly and annual targets. Signing towards the end of one of these timeframes will give you greater leverage. You can either prevent the sales person from having a disastrous month, or if they’re already ahead of their target, ensure they get a large commission cheque. We’ve seen one example of a buyer signing on the day before the Christmas break being rewarded with a discount of over 30% off the previously quoted price that, a few weeks beforehand, the sales person was adamant they couldn’t improve upon.

Approximate Monthly Subscriptions for HR Systems – Per Employee Per Month

Subscription costs for an HR system

Beyond the ongoing subscription costs, the other consideration for the total lifetime cost of an HR system is also the initial setup fees which can include bespoke development and configuration of the HR software, consultancy and training of your users. 

For HR software aimed at smaller organisations, often the systems are simple and available in an out-of-the-box state. This simplicity means that there’s nothing for the vendor or the user to configure, there’s no consultancy required and little if any training is needed to understand how to get the most out of the software. At this level, if there are any upfront fees at all, you can expect them to be in the hundreds of pounds rather than thousands. 

Once you start looking at solutions that are more flexible, and can be tailored to the specific needs of an organisation, the complexity, and therefore the upfront cost increases. The greater the complexity the greater the cost. As an approximate guide, consider the upfront costs to be in the region of 50% to 200% of the annual subscription fees.

If you want to keep your upfront fees to a minimum, some suppliers are happy to decrease the initial costs in return for an increased annual subscription, although it’s worth noting that you will probably end up paying more overall when taking this approach.

 

Conclusion

There are many factors that affect the price, and overall cost structure when purchasing an HR system. Thankfully for the buyer it’s a competitive marketplace which puts the buyer in a strong negotiating position.

The key is to understand what’s important to you and be willing to negotiate for the best deal.

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