ROI

When your company selects a new HRIS, there is an expectation that the investment will yield cost savings and other benefits. These gains can all be considered as part of the return on investment for the system. However, the chances are good that the ideas regarding ROI start out very vague.

The following are a few tips that can help your company narrow down ways a HRIS can provide financial benefit to your company. These tips can then lead you to logically estimate the ROI and use those estimations during the budgeting and selection processes.

Track Labor Hours Used for Manual Tasks

Labor hours translate to real dollars. Once you know how many labor hours are spent performing tasks such as calculating payroll, delivering updated job description information, onboarding, and updating employee information, you can easily convert those hours to real dollar amounts and determine how much money could be saved based on information provided by vendors.

The only hard part of the equation is devising a way to  track how much time is spent on those specific tasks that could be automated.

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Estimating Productivity Increases

To estimate productivity increases, it’s necessary to utilize outside information from similar companies that have already implemented a HRIS. You can compare your own productivity data to the other company’s productivity data prior to the HRIS implementation and after. This will give you a way to reasonably estimate how much more money your company could earn with greater productivity rates after implementing a HRIS.

Job Position Savings

If an entire position in the HR department (or more) could be saved by implementing HR software, it may have substantial financial benefit for an organization. Costs associated with recruitment, onboarding, training, and continuous salary should be figured into the calculation.

Of course, if downsizing the HR department means transferring an HR professional to another department or laying workers off, these costs should be deducted from ROI estimates.

Retention and Job Satisfaction Improvements

When employees are able to control  their own information through a self-service portal, have time off requests approved quickly, and play an integral role in their own development and training, it can boost employee confidence and ultimately job satisfaction. Satisfied employees will be more likely to stick around, which can also positively impact retention rates.

Current retention rates can be compared with data from other companies that have implemented HR software, in order to determine retention related savings estimates.

Unquantifiable Returns

Convenience, relief from everyday headaches, improvements in processes used to recruit employees, and many other HRIS benefits may be unquantifiable when calculating ROI. Instead of trying to determine how  to quantify these items, it may be helpful to create a separate area of the ROI report to simply list the expected “unquantifiable returns.”

In many cases, these returns act as perks during the period in which  the company is waiting to break even on the investment. Therefore, they may be a determining factor when  deciding to move forward with HRIS implementation.

Authored by: Dave Rietsema