How to find the real ROI of HRMS tool?

How to Find the Real ROI of HRMS tool?

In this blog, we have added a few key points that are essential to calculate the real ROI of HR software. These points will also assist you to understand the exact benefits of your HRMS.

Today, most of the companies that use manual spreadsheets to manage their workforce are finding it difficult to match with the fast-paced world. Such manual work is taking a large amount of time from their working hours. Thus, opting for cloud-based software that replaces all the redundant manual tasks is a smart move. However, this transition needs some prerequisites.

Firstly, companies need to re-evaluate their current onboarding and recruiting, core HR tasks, employee benefits, performance management, time & attendance, and learning management processes. Considering such requirements, there comes the budget part. Thus, companies can shortlist the best HR software with features they want within a specified budget.

But, how do you know if the features selected are working at their best? Therefore, it is necessary to calculate the output or the Return on Investment (ROI) of your HRMS tool. In simple words, the ROI of your HRMS tool is the cost against gains. For instance, to eliminate the cost of manual tasks, you have invested in an HRMS tool. Thus, your HR Software must reduce the cost of manual tasks to deliver a positive Return on Investment.

The question is How to Calculate the ROI of your HR software?

 ROI of your HR software

Here are the top ways to calculate the ROI of your HRMS tool:

1. Track the costs incurred in Manual Tasks

Elimination of manual work is the prime reason that majority of companies pick HR software. Simply understand how many labor hours are invested in performing manual tasks like calculating payrolls, onboarding processes, updating employee information, etc. These, labor hours invested directly translates to money invested in doing the manual work.

After understanding the cost of manual tasks, you can calculate the time required for the same tasks through HR software. This cost will give you a clear idea to differentiate the manual and automated work with exact money saved via HR tools.

2. Productivity comes with Time Saving

As you understand the time spent on both manual and automated tasks, productivity is one of the important factors that increase as well. Because the time saved with HR software can be utilized in other tasks leading to more work done. With HR software, employees get benefits like auto punch in-out, easy to use the dashboard to fill daily tasks and timesheet. With such features, employees don’t need to invest much time in updating their details, and that ultimately increases their work efficiency.

In such a case, productivity gain calculation is essential! There may be chances that employees find the HRMS tools difficult to use and they struggle with its features which in turn affecting their work performance and productivity.

Thus, to ensure higher productivity gains with HR software, companies can compare work done before and after the utilization of the HRMS tool. The comparison will also help the businesses to rectify lagging points in HR software.

3. Educate the manager's

the person that connects with employees on a daily basis is the manager of their respective team. If the higher management has deployed the HRMS tool, the managers must understand what real automation is. Most of the time, it may happen that managers don’t even know about the time consumption on an HR software and they ask employees to use it just because of automation. However, automation doesn’t mean digitalization. The real automation is that reduces efforts in doing the same tasks manually. Thus, if your employees are wasting a large time on HR software than they used to invest in manual tasks, then it is clear that the ROI of your HRMS is negative!

4. Employee satisfaction

Best way to know if an HR tool is delivering the results of employee feedback. Asking employees for their feedback is where most companies forget to interact with employees. Buying big research reports, finding future benefits, understanding the percentage gain, etc.are only virtual factors that are calculated by taking a constant figure. That constant figure is employed in various research findings. However, in a real work scenario, employee performance and understanding varies.

Some users get it right and others struggle to understand new software. Thus, considering the person who is actually using the tool and facing issues is one of the simplest ways to understand the ROI of your HRMS tool. Companies can set up a 1 to 10 rating form for employees. 1 is the least usable and10 is the highest usability. In this case, it is really important to ask for genuine feedback as employee satisfaction is the most crucial part to gain higher productivity and increase the company’s performance gradually.

5.Cost of maintenance, updates, server capacity, etc.

These are hidden costs that occur once a while on fix cycles. The addition of such costs to calculate the ROI can make a huge difference. As the HRMS tool should be constantly updated with improvements, it is essential for businesses to add up the maintenance cost in the overall cost of HR software. Sometimes, an HR tool may give a ton of features but offer limited cloud storage, and to go for higher storage, you need to purchase an upgraded plan with extra cost.

Such extra costs are often neglected while calculating ROI. Thus, whenever, you start the process of calculating the ROI of your HRMS tool, ensure that cost of maintenance, storage, updates, and other related investment is also taken into consideration. 
Today, there is stiff competition among HR software providers. As most of the organizations are going digital and bringing automation in the first place, HR tool providers are also luring customers with exciting features.

Going for a low cost and feature-rich tool is a good idea; however, it is also essential to understand the real ROI of your HR software. An HR software with a higher return on investment is always a better way to achieve long term benefits.

Thus, the above-mentioned points will help you to calculate the exact ROI of the HRMS tool and select the best HR software for your organization. 


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