How much does HR software cost?

What is the average cost of a HR system in the UK?

According to our research, the average cost of a basic core HR system in 2023 is £2,763 per year or £7.57 per user per month. 

Do bear in mind that this is only an average, and HR and payroll systems can cost more or less depending on the size of your business, the software features you need and a variety of other factors. Due to this, reputable providers often won’t have a generic price list, preferring to give tailored, individual quotes based on the needs of the organisation. This approach allows for a much more accurate and transparent pricing process where there are no surprises or hidden costs. 

What factors influence the cost of HR software?

Software features

Additional features can push up the price of HR software, while a simpler offering could be more cost-effective. At the same time, it’s important to weigh up the value that different features could add. What does the return on investment (ROI) look like and will the features save you time and money in the long run?

Package inclusions

What’s included in the package as standard and what is an add-on that costs extra? Make sure you understand the cost of different modules when going through the pricing process with a potential provider – you should come away with an itemised quote, not one single price.

Staff training and onboarding requirements

Consider what will be required to get your team and the wider workforce up to speed with necessary features. Can your provider help with training and do they have any documentation to support the process? Or will your own teams need to take care of training?

Cloud-based or on-premise software

The type of software you choose will influence the cost. On-premise may only require one single payment if you own and manage the software yourself. However, more businesses are now opting for cloud-based HR software that’s fully managed by their provider, meaning they don’t have to worry about upgrades, maintenance, server storage, security and more.

Pricing plan

Different pricing plans exist to support organisations and make software costs more manageable. Find out if monthly payments will cost more overall and identify the most cost-effective way to pay for your software.

Number of users

If you need to add more users with administrative rights, this will usually incur an additional cost. However, there are different pricing models available, so if you have a lot of users and costs could become prohibitive, speak to your provider and consider a different pricing model instead.

Software integrations

Integrated HR software can cost more than a standalone system, but it has many benefits including a holistic view of data and futureproofing for business growth. It can also automate processes across your organisation, so despite higher costs, you stand to save time and money when you invest in useful integrations.

How much does it cost to implement a HR system?

There may be additional one-off implementation costs for a new HR system. The costs of implementation will depend on what you require, how well equipped you are to handle the set-up in house and the complexity of the processes involved. These are some of the costs to factor in to the implementation of a HR system: 

• Support. Customer support will be necessary to put any new system in place. This may be inclusive, or it could be an additional implementation cost depending on the provider. 
• Training. Initial training will be needed for the employees interacting with the system from the start.  
• Technical setup. This may require input from IT and technology departments to get systems up and running and manage the transition. 
• HR employee time. HR employees will be involved in setup, testing, project management and more – they will be integral to the software implementation project and their time needs to be considered. Do you need additional resources such as a consultant to make the project a success? 
• Integration. If your new HR software needs to be integrated with existing software, or you want a fully integrated HR software suite, this comes with an associated cost – but can deliver excellent ROI.  
• Data migration. Consider how this will be managed. What support will you need? Can your provider help or should your internal teams manage data for you? 

HR software costs – key considerations

Business size

You will need HR software that can support your business processes and all of your staff. Larger businesses will generally have more requirements; talk through options with your provider to make sure your software will work across your whole organisation.

Complexity of business requirements

A larger business with more employees is likely to have increasingly complex processes, meaning HR software needs to be able to handle them. This can push up the cost – but it’s always worth paying for what you need so your software will work for you. Trying to cut corners will lead to complications and you may have to amend your package, costing more overall.

Existing software

Do you have existing standalone systems such as payroll or recruitment software? Or do you have an existing software suite and need to transfer all data over when you switch? Be sure to make allowances for existing software management or integration.

Payment model

The primary HR software payment models are:

• Pay-per-user, where the price is based on the number of system users with administrative rights
• Pay-per-employee, where you pay a set amount for every person in your organisation regardless of whether they interact with the software
• One-time payment, where software is licensed to you after a larger one-off payment

Automated and customised features

HR systems have so many possibilities and there are options to automate processes across your organisation and customise features to suit your ways of working. These upgrades will usually add to the cost of your plan, so be clear on what you want and get upfront costs.

How to demonstrate the ROI of your HR software

HR software will undoubtedly add value for you, but many people wonder how to demonstrate this to colleagues, managers and the people who set the budgets. You can perform a simple ROI calculation based on the amounts you stand to save or gain by using HR software, which will likely be linked to process automation and streamlining. Some of the areas to consider for your calculation include:

• Rostering and scheduling
• Payroll
• Recruitment
• Onboarding
• Employee engagement and retention
• Employee productivity

What is the right HR software for your business?

The best HR software for you will support your business in all areas, making processes simpler, saving time and delivering excellent ROI. We always encourage our clients to think about it from an ROI perspective, selecting software that will add value rather than choosing the cheapest option.

You can follow a simple step-by-step process to work out what you need from your HR software before contacting vendors. Find out how to choose HR software for your organisation.

You might also be interested in:

• Top benefits of HR software
• Problems with legacy HR software and how to build a business case
• How to implement a new HR system
• HR software reviews: What customers say about PeopleXD