Steps to Buying a Human Resources Information System

When companies choose their first human resources information system, or HRIS, there are a lot of factors to consider, says Diane Horton, a partner in PricewaterhouseCoopers Along with obvious cost constraints, she urges HR professionals to first look for a tool that will integrate with any existing systems, including payroll, then make a list of the features they want to automate, including recruiting, performance management, time entry and compensation. “Not all tools offer every feature,” she says.

Use that information to build a business case for the right product. If you can define the bottom-line business benefit of an HRIS, it will be easier to get stakeholder support, says Jason Carney, director of HR for WorkSmart Systems, an HR outsourcing firm in Indianapolis. “Spending $100,000 up front may seem like a lot, but compared to the cost of paying two full-time HR employees, it’s not bad.”

Fewer data errors, more-efficient recruiting, better performance management tracking and shorter time to fill vacancies are also measures that define the business value of an HRIS, Carney says.

The actual cost of your HRIS will vary wildly depending on the modules you choose, number of employees, the vendor, the robustness of the offering and whether you go with an installed or software-as-a-service model. But there are some rules of thumb: The most basic off-the shelf HRIS software can cost as little as $1,000, but it won’t offer much it terms of customization and will provide little room for growth. If you are buying an installed on-site solution, you’ll pay per-user licenses that will likely range from $40 to $100 per user for a basic system, to $200 to $300 per user for a more robust system, plus the cost of installation and annual maintenance fees that cover bug fixes and upgrades.

Software-as-a-service products are another option. These systems, which are accessed over the Internet, require monthly fees that can range from $2 to $10 per user, or a single capped fee of a few hundred dollars for unlimited use. These systems require no maintenance and come with automatic upgrades, making them a cheaper and easier choice. However paying a monthly fee over three to four years does add up, so it’s important to choose a system that will meet your long-term financial and operational goals.

And finally, don’t forget the training piece, says Andrea Ballard, CEO of HR consultancy Expecting Change. “Pay close attention to the support features when reviewing HRIS demos,” she says. “Otherwise on Day One, you might find out you don’t have the technical skills to use it.”

Sarah Fister Gale is a writer based in the Chicago area. To comment, email editors@workforce.com.