HR Software: What It Costs And Purchase Factors To Consider
The HR software market is huge and varied, with a galaxy of options to choose from.
In this guide, I'll walk you through what HR software costs, helping you understand how to make a cost-effective decision that aligns with our shared goal: enhancing human resources operations without breaking the bank.
Types Of HR Software
HR software comes in many different flavors and, while some products will incorporate multiple features, you’ll likely have two or more different types of HR software as part of your HR tech stack.
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Common types of HR software include:
- Human resource management system (HRMS)
- Human resource information system (HRIS)
- Recruiting software
- Applicant tracking system (ATS)
- Talent acquisition software
- Payroll software
- Onboarding software
- Performance management software
- Learning management system (LMS)
While HRMS systems will offer a lot of functionality, the good ones are expensive. Smaller organizations, who probably don’t need all the functionality anyway, will likely benefit from integrating two less costly systems.
Factors That Impact HR Software Cost
The role of human resources in SME and large enterprises settings often requires careful selection of HR software that aligns with the company's needs and growth trajectory. When considering HR software, it's important to assess the sticker price and the total cost of ownership.
The total cost is influenced by various factors, ranging from the scale of the organization using the software to the specific features and functionalities included.
Here are some key factors that can impact the cost of HR software:
1. Number of users
Many HR software vendors charge based on the number of seats (people who will be using the software). As the number of users increases, the cost typically scales up. This can be particularly significant for large organizations.
For example, HR tools for small businesses may cost less, support fewer users/admins, and have some feature limitations to keep prices lower.
2. Features and functionality
Software is driving a significant amount of the HR automation you see happening today. The more features and functionalities included in the software, the higher the cost is likely to be.
Basic features could include employee records management and payroll processing, while more advanced features might be AI-driven candidate sourcing and analytics.
3. Customization
The degree to which the software needs to be customized to fit specific business processes can also affect costs.
Custom features or adaptations to support unique workflows, compliance requirements, or integration with existing systems can increase expenses.
4. Deployment type
HR software can be deployed on-premises or hosted as a cloud-based service (SaaS - Software as a Service).
Cloud-based solutions typically involve ongoing subscription fees but might reduce costs related to IT infrastructure, maintenance, and upgrades. On-premises solutions might require a larger upfront investment in hardware, software, and implementation services.
5. Support and maintenance
The level of support and maintenance included in the package can also influence cost. Some vendors might offer basic support, while others provide 24/7 technical support and dedicated account managers. The frequency and extent of updates and upgrades to the software also play a role.
6. Compliance and security features
Features that ensure compliance with local, national, and international regulations (like GDPR in Europe or HIPAA in the U.S.) can also add to the cost.
Similarly, advanced security features to protect sensitive employee data from breaches will likely increase the price.
7. Training and implementation
The initial setup, training for HR staff and employees, and the complexity of the implementation process can also add to costs. Some vendors include these services in their initial pricing, while others charge additional fees.
8. Vendor reputation and market position
Well-established vendors with a strong market presence may charge more for their software due to their reliability and proven track record. However, this can also mean better customer service, more robust features, and greater reliability.
9. Contract length
Longer contracts might offer discounts or more stable pricing compared to month-to-month payments. Negotiating contract terms can influence the overall cost of the software.
10. Integration with other systems
The ability to integrate with other business systems (like ERP systems, financial platforms, or other operational tools) can be crucial and might add to the cost if extensive work is needed to create these integrations.
HR Software Pricing/Licensing Models
Different vendors will implement different pricing models to cater to different customers.
Some common pricing and licensing models include:
1. Per user, per month
- This is one of the most common pricing models. Companies are charged based on the number of seats (users) accessing the software monthly.
- It's particularly prevalent in cloud-based HR software (Saas), offering scalability as companies can add or remove users as their workforce changes.
- This approach typically includes hosting, updates, maintenance, and sometimes even support, making it easier to manage budgets without unexpected costs.
- Subscription models are generally more scalable, allowing companies to add or remove users as needed and adjust their plans based on changing requirements.
2. Flat fee
- Some HR software providers charge a flat fee for access to the software with all its features included.
- Typically billed monthly, bi-annually, or annually, this model is straightforward and predictable, making budgeting easier.
- It often requires a larger upfront investment and may also involve additional fees for ongoing support, maintenance, and updates.
- Perpetual licenses can be more cost-effective in the long term for organizations that prefer to maintain their systems in-house and have the IT infrastructure to support them.
3. Pay-as-you-go
- Under this model, companies only pay for the services they use. This could include payment based on the number of payroll runs, the number of recruitment ads posted, or the number of performance reviews conducted.
- This model offers high flexibility and is ideal for businesses with fluctuating HR needs.
4. Tiered pricing
- Vendors offer multiple pricing tiers offering progressively more seats, features, and functionalities. Companies can choose a tier that fits their needs and budget, with the option to upgrade the HR software as their requirements grow.
4. Site licensing
- A site license allows a company to install HR software on any number of computers within a predefined location at a fixed cost.
- This can be a cost-effective option for organizations with a large number of users concentrated in the same location.
5. Freemium model
- In this model, basic functionalities are offered for free with the option to pay for advanced features or additional services.
- This model is particularly attractive for startups and small businesses that need basic HR functions and are looking to scale over time.
6. Custom pricing
- Some enterprises might require a custom solution such as integration with existing systems, custom feature development, and a dedicated support team.
- Pricing is typically negotiated based on the scope of the customization and the level of support required.
7. Module-based pricing
- Instead of paying for an entire HR system, companies can purchase individual modules (like payroll, recruitment, or benefits management) according to their specific needs.
- This approach can be cost-effective for companies only requiring specialized functions and not a comprehensive HR management system.
HR Software Pricing By Type
HRMS pricing
HRMSs are comprehensive tools designed to automate and streamline many of an organization's human resource tasks.
An HRMS encompasses employee data management, payroll and benefits administration, recruitment and onboarding, performance evaluation, time and attendance tracking, learning management, and HR analytics.
Unsurprisingly, all this functionality can come at a cost but there are solutions to fit all budgets.
Small businesses: Can find HRMS solutions starting from as low as $4 per user per month. For more basic needs, such as employee records and time-off management, solutions like Zoho People offer free plans for up to five users. More comprehensive packages, which might include features like payroll processing or basic hiring tools, typically range from $6 to $12 per employee per month.
Bid-sized to larger enterprises: Pricing generally starts from around $15 per user per month and can go up to $100 or more per user per month for advanced functionalities and enterprise-level support. This can include extensive customization, comprehensive analytics, and integration capabilities with existing enterprise systems.
For further info, check out our shortlist of the best HRMS.
HRIS pricing
HRIS is designed to help you organize your employee data. The main purpose is to integrate core HR functions into one interconnected piece of software. Key features include centralized employee data management, payroll processing, benefits administration, attendance tracking, recruitment, performance evaluation, and self-service portals.
Small businesses: HRIS systems can be relatively affordable, with prices often starting around $6 to $12 per employee per month.
Medium and large business: Prices can rise substantially, often requiring a custom quote.
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For further info, check out our shortlist of the best HRIS.
Recruiting software pricing
Recruiting software is quite a broad category so I’ve broken down the prices of the main types.
Applicant tracking system
Applicant tracking systems are a type of recruiting software that helps you plan, track, and execute hiring plans. Basic systems will include a tracker for candidates and a tool for creating job postings. Others are more advanced, with career site plugins, analytics of your recruitment process, and built-in sourcing.
Small to mid-sized businesses: Prices can vary significantly based on the features and number of users. Some ATS providers offer packages that start as low as $24 per user per month, which typically includes basic features suitable for smaller teams.
Enterprise business: Pricing for these solutions is usually tailored to the specific needs of the organization and often requires direct negotiation with the provider. Enterprise packages can start from a few thousand dollars per month and go up significantly based on the scale and scope of the deployment.
For more, check out our pick of the best applicant tracking systems.
Talent acquisition software
Talent acquisition software is a digital tool designed to assist organizations in efficiently finding and hiring suitable candidates. It encompasses functionalities such as job posting, applicant tracking, candidate sourcing, CV screening software, and communication management.
Small to mid-sized businesses: Entry-level plans often start at affordable rates suitable for smaller hiring teams. For example, Manatal offers a small business recruiting software plan that starts at $15 per user per month, focusing on AI-driven candidate sourcing.
Enterprise businesses: Larger, more complex systems can be significantly more expensive, with prices often tailored to the specific needs of the organization. For example, Workday and other similar platforms offer customized pricing that usually starts higher but includes a breadth of features that support large-scale operations.
For more info, check out our shortlist of the best talent acquisition software.
Payroll software pricing
Payroll software helps allocate employee pay based on hourly rates or annual salaries. It's used by HR and finance teams to track employee work hours, pay rates, vacation accruals, paid time-off, payroll taxes, payroll deductions (like federal and local taxes), and more.
Small to mid-sized businesses: Entry-level plans typically range from $20 to $50 per month as a base fee. Additional per-employee fees can range from $4 to $12 per month. These plans usually include basic payroll processing and tax filing capabilities.
Mid-level plans generally cost between $50 to $100 per month with per-employee fees that might range from $5 to $15. These plans often include more advanced features like benefits administration, compliance support, and more extensive HR tools.
Enterprise solutions: For larger organizations, pricing usually begins around $100 per month as a base fee and can significantly increase based on the scope and scale of the operations. Per-employee costs can range from $10 to $25 or more, depending on additional features and customization required.
For more info, check out our pick of the best payroll software.
Onboarding software pricing
Onboarding software is designed to help manage and facilitate the process of welcoming and integrating new employees into an organization.
Key features of onboarding software include automated paperwork processing, employee training modules, task assignment tracking, and tools for communication and information sharing.
Small to mid-sized businesses: For smaller businesses, onboarding software prices are generally affordable and can start as low as $5 per month. Some providers offer basic packages that include essential HR management and employee self-service capabilities.
Enterprise solutions: For larger enterprises, the pricing is typically higher due to the need for more complex functionalities, integration capabilities, and customization. Prices for these services often start around $149 per month and can go higher depending on the depth of features required.
For more info, check out our shortlist of the best onboarding software
Time and attendance software pricing
Time and attendance software is designed for tracking and managing employee work hours and attendance. It automates the process of recording when employees start and end their workdays, manages leave and absences, and calculates overtime and holidays.
Small to mid-sized businesses: Prices can start as low as $2.50 per user per month. These basic plans usually include essential time tracking and reporting functionalities.
Mid-level plans typically range from $5 to $10 per user per month. These plans often include additional features like payroll integration, scheduling, and more advanced reporting capabilities.
Enterprise solutions: Larger organizations with more complex needs can expect starting costs around $8 to $15 per user per month. Prices increase with additional customization, integration capabilities, and advanced features.
For more information, check out our pick of the best time and attendance software.
Employee scheduling software pricing
Employee scheduling software is a type of workforce management tool that helps managers create digital schedules for their hourly or shift-based employees. Within the software, team leads can schedule shifts, breaks, and shift handovers as needed.
Small to mid-sized businesses: Prices can start as low as $2.50 per user per month for basic functionalities. For more comprehensive features, such as advanced scheduling capabilities, integration options, and additional management tools, the prices can range from $3 to $10 per user per month.
Enterprise solutions: Larger businesses or those requiring more customized features might expect higher pricing, which can start around $10 per user per month and increase depending on the complexity and scale of the software solution needed.
For more info check out our pick of the best employee scheduling software.
Performance management software pricing
Performance management software is designed to simplify the performance review process, set and track goals, analyze productivity, record achievements, and plan for the future. They also incorporate modern elements like collecting 360-degree feedback from team members, continuous feedback loops, and one-on-one check-in tools.
Small and mid-sized businesses: Entry-level pricing for performance management software can start as low as $2 to $7 per employee per month. This range typically includes basic features such as goal tracking and simple performance reviews.
More comprehensive solutions, offering features like 360-degree feedback, detailed analytics, and more customizable review templates, can range from $5 to $10 per user per month (People Managing People).
Enterprise businesses: For more advanced features like real-time feedback, detailed analytics, succession planning, and integration with other HR systems, prices can start around $8 per user per month and go higher.
For more, check out our pick of the best performance management software.
Learning management system pricing
Learning management systems provide a centralized space for creating, delivering, and tracking educational content and courses to employees.
Pricing for Learning Management Systems (LMS) varies significantly based on the scale of the implementation, the features required, and the number of users. Here are some general ideas on LMS pricing for different scales and needs as of 2024:
Small to mid-sized businesses: Plans for smaller organizations might start at around $69 per month, supporting up to 40 users. For businesses that require more users and features, prices can range from $149 per month for up to 100 users to $279 per month for up to 500 users.
Enterprise businesses: Designed for larger enterprises, these plans can cost $459 per month and support up to 1000 users.
For further details, check out our shortlist of the best learning management systems.
Expense management software pricing
How expense management software works is by automating expense recording, tracking, and approval. Users capture receipts, categorize expenses, and submit reports.
Small to mid-sized businesses: Prices for expense management software can vary significantly based on the features offered and the number of users. Some providers offer packages that start as low as $10 per user per month, which typically includes essential features suitable for smaller teams, such as receipt capture, basic reporting, and expense approval workflows.
Enterprise businesses: Pricing for enterprise solutions is usually tailored to the specific needs of the organization and often requires direct negotiation with the provider. Enterprise packages can start from a few thousand dollars per month and can increase substantially based on the scale and scope of the deployment, including advanced features like integration with ERP systems, advanced analytics, and multi-currency support.
For more, check out our pick of the best expense management software.
HR Software Cost Examples
Here's a summary table showing the top 10 HR software types and their costs, to give you a baseline for what to expect.
| Type of HR Software | Small / Medium Enterprise Cost Example | Enterprise Cost Example* |
| Human Resources Information System (HRIS) | From $8 per user, per month Reference: Rippling | Pricing upon request (quote based) |
| Human Capital Management (HCM) | From $8 per user, per month Reference: Eddy | From $13 per user, per month (minimum 1,000 employees)Reference: Oracle HCM Cloud |
| Human Resource Management Systems (HRMS) | From $7 per user, per month Reference: SageHRMS | Pricing upon request (quote based) |
| Applicant Tracking Systems (ATS) | From $15 per user, per month Reference: Manatal | From $600/month Reference: Pinpoint |
| Learning Management Systems (LMS) | From $4.08 per user, per month (100 users)Reference: iSpring Learn | From $2.83 per user, per month (500 users)Reference: iSpring Learn |
| Performance management tools | From $8 per user, per month Reference: Leapsome | From $11 per user, per month Reference: Lattice |
| Payroll software | From $5 per user, per month Reference: Paycor | From $160 per user, per month Reference: ADP Workforce Now |
| Employee scheduling software | From $1 per user, per month Reference: Zoho Shifts | From $7 per user, per month Reference: ClockShark |
| Talent management software | From $5 per user, per month Reference: PerformYard | From $85 per user, per month Reference: SAP SuccessFactors |
| Employee onboarding software | From $5 per user, per month Reference: GoCo | From $1,500 per year Reference: Qualtrics EmployeeXM |
*Please note that prices for enterprise-level HR software plans are usually only available upon request. The reason for that is because the pricing depends on the number of employees you have, as well as the specific software features you want to be included. In general, enterprise-level software plans have the most flexibility because the monthly subscription fees are also the highest.
When selecting a new tool, assess your HR software requirements carefully and prioritize solutions that offer comprehensive functionality to streamline HR processes, as some software options cover multiple HR functions.
How to Define HR Software Success
Before you decide to move forward with a new HR system, it’s essential to build the business case for HR software and define your goals in using it. What do you hope to achieve with your new software?
If you don’t set definitive measures of success ahead of time, you won’t know with clarity if the software did what you hoped it would.
Here’s an example:
If errors in work output cost your company a significant amount of money each month, automation could help. You’d be able to compare the amount of money lost before using the software versus the amount lost after implementing it—allowing you to see clearly whether the software has been beneficial in that specific area.
Is your time-to-hire too long? Perhaps automated applicant tracking would help get people through your process more efficiently.
Determining the ROI of HR Software
It's important to consider how much return on investment (ROI) your new HR software will provide, should you decide to invest in one. Here are some tips on how you can estimate your anticipated ROI in advance, as well as monitor it after your software implementation is complete.
Calculation Method: ROI = (Gain of Investment) - (Cost of Investment) / (Cost of Investment)
Example: Your employee engagement levels are low, leading to low employee satisfaction scores and high volumes of turnover. High turnover means you need to recruit new staff and train them for their roles, increasing operational costs.
Solution: You decide to invest in employee engagement software.
Key Metrics to Watch: To measure the ROI of your new employee engagement software effectively, record these key metrics before and after implementation.
| Key Metric to Watch | Expected Change in Metric | How to Measure |
| Employee productivity levels | Increased productivity | Business-specific. Could be task, revenue, or sales-based. |
| Employee retention levels | Increased retention (i.e., less turnover) | Turnover rate |
| Employee satisfaction scores | Improved satisfaction | eNPS score or survey feedback |
| Recruiting costs | Decreased costs due to less turnover | Monthly Recruiting costs + # of staff hours spent on recruiting |
| Training costs for new hires | Decreased costs due to less turnover & hiring | Montly training costs + # of hours spent by new hires in training |
Questions to Ask When Choosing HR Software
You’ll want to consider these questions when it comes to deciding which company to go with:
- In what areas could you benefit from HR software?
- What are your current pain points, and which type of HR software could solve them?
- What employees and departments would be impacted?
- How would a new HR software system reduce workloads, and for whom?
- Is the system you’re interested in compatible with businesses your size?
- What is the cost of implementing the software? (Remember to include cost estimates for installation, integration, and data migration.)
- Is there a cost for training staff on how to use the software?
- How user-friendly is the software?
- Are there additional fees for customer support?
- Is there an option for add-ons to include specific modules if needed?
- Is the software user-friendly for a remote workforce?
- Will the potential cost of ongoing consulting fees and software upgrades be worth the cost compared to the time and effort your staff will save?
- How will your HR team use their newly found extra time to support the business?
Choose The Best HR Software For You
Choosing to automate your business with HR software solutions will reduce margins of error and save employees time and energy. This equates to a more satisfied workforce and increased productivity.
Be sure to do the following:
- Consider your current needs and areas of improvement
- Identify how staff will manage the extra time created by using HR software
- Identify what time can be saved and spent on value-added work
- Decide where to begin first – are there areas of your business that need more immediate attention than others?
For more guidance on choosing the best HR software for your business, check out our pick of the best HR software.
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