What is the ROI of HR Technology?

Nowadays, being able to pivot quickly and effectively is the key to any organisation’s success. And that is exactly where HR tech comes into play. 👇

HR technology helps HR professionals to make significant shifts while freeing up valuable time from administrative tasks. They get the chance to focus on more strategic initiatives so that any organisational change leads to constructive and fruitful outcomes. 👍

The true value of HR tech lies in its ability to serve the people who will use it and to continually optimise its features to meet their evolving needs. But c​onvincing key business decision-makers, such as owners, senior executives, and boards to invest in HR software can be challenging. 😟

​​In this blog post, we'll explore the multifaceted aspects of HR tech return on investment (ROI). We’ll go beyond the financial metrics to understand how it impacts employee experiences, productivity, and overall organisational success. Read on to find out exactly what the actual ROI of HR technology is ⬇️

The Benefits of HR Software

​​HR software offers numerous benefits that can significantly impact an organisation's overall success. Let's explore the most important advantages of implementing HR software and how they contribute to greater employee efficiency and productivity! 👇

✅ More efficiency + streamlined processes

HR software automates administrative tasks, improves communication, and provides employee self-service options. When you standardise HR processes and reduce manual approvals, you’re able to streamline workflows across the organisation, leading to increased efficiency and reduced time spent on routine tasks. 👍

✅ More data accuracy and better reporting

With HR software's automated data collection and report generation processes, the accuracy of employee information improves significantly. When you store all employee data in a unified database, you can minimise the possibility of human error and enhance the precision of reports, making strategic decision-making a lot easier. 

✅ Better employee experience and engagement

HR software, particularly employee self-service portals, empowers employees by providing easy access to their personal and professional information. This improved communication and engagement help create a positive work environment, leading to higher employee satisfaction and retention.

✅ Costs saved and resources optimised

HR software reduces the time and effort invested in manual administrative tasks through automation and streamlined processes. This not only boosts productivity but also optimises resource allocation, resulting in significant cost savings for the organisation.

✅ Stronger compliance and data security

Because it provides constantly accurate and up-to-date information, HR software ensures compliance with legal and regulatory requirements. What’s more, with robust access controls and centralised data storage, it enhances data security, safeguarding sensitive employee information. 🙌

✅ Talent acquisition and retention

Efficient recruitment and onboarding processes facilitated by HR software attract top talent and reduce time-to-hire. Additionally, improved employee engagement and performance evaluations lead to higher retention rates, reducing turnover costs.

✅ Performance management and employee development

HR software helps performance evaluations and tracks employee progress, enabling timely feedback and coaching. This fosters a culture of continuous improvement and employee development, contributing to better performance across the organisation.

✅ Access to HR analytics and predictive insights

Through real-time analytics and data visualisation, HR software offers valuable insights into various HR metrics, such as turnover, absenteeism, and salary changes. This data-driven approach allows organisations to make informed decisions and identify trends for strategic planning.

✅ Improved forecasting

HR software facilitates workforce planning by providing data on future workforce costs and headcounts. With better insights into skill gaps and succession planning, organisations can prepare for future challenges and adapt to changing market conditions.

Calculating the ROI of HR Tech

We may be biased, but the benefits of HR tech seem huge to us. It is perfectly understandable though that organisations will want to carefully consider the return on investment of such solutions. A few key factors need to be taken into account in order to accurately evaluate the HR technology’s ROI ⬇️

Key Factors in Evaluating ROI for HR Technology

Cost savings

First of all, you can start by evaluating the potential cost savings achieved through HR technology. Calculate the reduction in administrative expenses, paper-based processes, and the need for manual intervention. Additionally, consider the savings in resource allocation due to increased efficiency and streamlined operations. 💵

Other cost savings can look like:

• Reduced administrative burden
• Optimised resource allocation
• Lower employee turnover
• Time savings
• Talent acquisition efficiency
• Reduced paper and printing costs
• Lower benefits administration costs
• Efficient payroll processing
• Minimised overhead costs

Increased productivity

Measure the impact of your future HR tech on improving the productivity of the HR team and the overall workforce. Determine how automation and self-service options have led to more efficient processes, enabling HR professionals to focus on strategic initiatives that drive business growth.

This can look like: 

• Automated applicant tracking
• Self-service portals for employees
• Employee onboarding workflows
• Time and attendance tracking
• Performance management tools
• Training and development management
• Leave and absence management
• Compliance tracking
• Document management
• Employee surveys and feedback
• Benefits administration
• Task and deadline management
• Performance dashboards
• Employee offboarding processes
• Employee recognition programs
• HR help desk

Less employee turnover

Assess the contribution of HR tech in lowering employee turnover rates. Calculate the cost savings associated with reduced recruitment, onboarding, and training expenses, as well as the preservation of institutional knowledge and experience.

This can be:

• Reduced advertising and job posting costs due to optimised recruitment processes.
• Lower expenses on recruitment agencies or headhunters as internal recruitment becomes more efficient.
• Cost savings from streamlined applicant tracking and screening, reducing the time spent on manual candidate evaluations.
• Decreased onboarding expenses due to automated workflows and self-service onboarding portals.
• Training cost savings as HR software facilitates better tracking and management of employee development programs.
• Fewer training resources needed with centralised training management and online learning options.
• Reduced need for physical training facilities and materials with the adoption of virtual training methods.
• Minimised expenses related to compliance training and certifications through automated tracking and reporting.

Time savings

Quantify the time saved through HR technology by automating tasks and reducing manual efforts. Analyse how this time can be reallocated to more valuable activities, such as talent development and strategic planning.

This can be:

• Time saved in processing and managing employee data, such as personal information, work history, and benefits enrollment.
• Reduced hours spent on manual data entry and paperwork related to HR processes.
• Time saved in scheduling and conducting interviews through automated candidate screening and interview coordination.
• Streamlined performance management processes, leading to time saved on performance reviews and feedback sessions.
• Reduced administrative burden in managing time-off requests and approvals.
• Time saved in generating HR reports and analytics with automated data consolidation and visualisation.
• Fewer hours spent on repetitive communication tasks with employees through self-service portals and automated notifications.
• Decreased time spent on compliance-related tasks, such as tracking and reporting on employment law requirements.
• Time saved in managing employee training and development programs through automated enrollment and progress tracking.
• Reduced effort in managing benefits administration and open enrollment processes using HR software.

Improved data accuracy

Consider the benefits of accurate and up-to-date data management facilitated by HR technology. Calculate the reduction in errors, discrepancies, and the associated costs of correcting inaccuracies.

For example:

• Fewer errors in employee data management, leading to reduced payroll discrepancies and potential overpayments or underpayments.
• Decreased errors in benefits administration, resulting in accurate benefits enrollments and avoiding costly discrepancies in coverage.
• Reduced inaccuracies in time tracking and attendance management, leading to more precise payroll calculations and minimising time theft or miscalculations.
• Fewer mistakes in compliance reporting, helping avoid penalties and legal costs associated with non-compliance with employment laws and regulations.
• Reduced errors in performance evaluations and feedback, leading to fairer assessments and avoiding potential disputes or legal challenges.
• Decreased discrepancies in training records and certifications, ensuring employees have the necessary qualifications and avoiding fines for non-compliance in regulated industries.
• Improved accuracy in employee records and personnel files, reducing potential legal costs associated with disputes or audits.
• Fewer errors in recruitment and onboarding processes, preventing potential issues with new hires and avoiding the need for costly rehiring.
• Decreased inaccuracies in workforce planning and forecasting, leading to better resource allocation and cost optimisation.
• Improved accuracy in HR analytics and data-driven decision-making, avoiding costly mistakes in strategic initiatives and resource management.

Enhanced reporting and analytics

Analyse how HR technology enables real-time reporting and data-driven decision-making. Calculate the value of timely insights in optimising HR strategies and organisational performance. ⬇️

• Real-time data access
• Automated data collection
• Customisable dashboards
• Data visualisation
• Real-time analytics
• Dynamic reporting
• Improved accuracy
• Efficient data sharing
• Predictive analytics
• Agile adaptation

Compliance and risk mitigation

Evaluate the impact of HR tech in ensuring compliance with employment laws and regulations. Measure the reduction in legal risks and potential penalties by maintaining accurate records and following standardised HR processes, like:

• Automated compliance tracking
• Accurate record-keeping
• Timely updates on changes in regulations
• Simplified compliance reporting
• Integration with government databases
• Adherence to audit trails
• Identification of non-compliance risks
• Data security and privacy measures
• Customisable compliance workflows
• Reduced risk of penalties and fines

Talent acquisition and onboarding efficiency

Quantify the effectiveness of HR technology in accelerating the recruitment process and enhancing the candidate experience during onboarding. Consider the value of a streamlined talent acquisition process in attracting top talent. ⬇️

• Faster candidate sourcing and screening
• Enhanced candidate experience
• Increased candidate pool diversity
• Improved employer branding
• Efficient interview scheduling
• Seamless communication with candidates
• Quick offer preparation and acceptance
• Reduced time-to-fill vacant positions
• Effective recruitment marketing strategies
• Better alignment with hiring managers' needs

Employee engagement and satisfaction

Measure the influence of HR technology on employee engagement and satisfaction levels. Calculate the correlation between improved communication, self-service options, and increased employee morale.

This can look like: 

• Employee self-service portals for accessing information and resources
• Seamless communication and feedback mechanisms
• Recognition and rewards programs
• Performance management and goal tracking
• Learning and development opportunities
• Remote work and flexible scheduling options
• Well-being and mental health support
• Real-time feedback and continuous improvement
• Transparent and fair performance evaluations
• Employee surveys and sentiment analysis

Training and development impact

Determine the ROI of HR technology in supporting employee learning and development initiatives. Quantify the impact of upskilling and reskilling programs on employee performance and retention, like:

• Improved employee performance
• Enhanced job satisfaction
• Increased employee retention
• Adaptability to changing roles
• Reduced skills gap
• Talent attraction and employer branding
• Agile workforce
• Confidence and morale boost
• Cross-functional collaboration
• Future-proofing the workforce
• Succession planning
• Innovation and creativity

HR analytics and predictive insights

Consider the value of HR analytics in identifying trends and predicting workforce behaviour. Calculate the ROI of proactive workforce planning based on data-driven insights. ⬇️

• Trend identification
• Workforce behaviour prediction
• Data-driven decision-making
• Proactive workforce planning
• Optimal resource allocation
• Performance optimisation
• Employee engagement insights
• Talent management strategies
• Reducing turnover risks
• Identifying skill gaps
• Diversity and inclusion initiatives
• Organisational culture enhancement

Streamlined performance management

Analyse how HR technology facilitates continuous feedback and goal tracking, leading to improved performance management processes. Calculate the value of enhanced employee performance and productivity.

This can look like:

• Continuous feedback loops
• Real-time performance tracking
• Goal setting and alignment
• Transparent performance evaluations
• Ongoing skill development
• Performance improvement plans
• Employee recognition and rewards
• Enhanced coaching and mentoring
• Employee-driven development
• Data-driven performance insights
• Performance analytics and reporting
• Performance-driven culture

Impact on organisational culture

How to Calculate HR Tech ROI

Identify initial investment costs

Start by gathering all the data on the initial costs of acquiring and implementing HR technology. This includes software licences, hardware purchases, implementation fees, and expenses related to employee training. Don't forget to include any ongoing maintenance or subscription fees as part of the initial investment.

• Software licenses
• Hardware and infrastructure
• Implementation and setup fees
• Training and onboarding expenses
• Data migration and integration costs
• Customisation and configuration expenses
• Consulting and professional services fees
• Vendor selection and evaluation costs
• User licenses and subscriptions
• Integration with existing systems
• Testing and quality assurance expenditures
• Change management and adoption efforts

Determine savings from process automation

Measure the time and labour saved through process automation and reduced manual efforts. Identify the HR tasks that have been streamlined or automated with the new technology, and calculate the cost savings resulting from the increased efficiency of these processes.

• Automated employee onboarding and offboarding
• Streamlined recruitment and applicant tracking
• Automated time and attendance tracking
• Self-service portals for employees
• Automated payroll processing
• Digital document management and storage
• Automated leave and vacation tracking
• Automated benefits administration
• Real-time performance evaluations and feedback
• Automated compliance reporting
• Electronic employee record keeping
• Automated training and development tracking

Evaluate resource optimisation

Assess how HR technology has optimised HR team resources. Look for improvements in workload management, reduced administrative tasks, and other efficiencies gained. Calculate the associated cost savings of these optimisations. ⬇️

• Reduced HR staff workload and overtime costs
• Lower administrative overhead and support expenses
• Decreased paper and printing costs
• Savings on storage and physical space for documents
• Reduced reliance on external vendors or consultants for HR tasks
• Savings on postage and mailing expenses
• Minimised errors and associated costs of corrections
• Lowered costs for manual data entry and data verification
• Less need for manual tracking and follow-ups
• Savings on manual report generation and distribution
• Reduced training costs for HR staff on repetitive tasks
• Lowered costs for compliance-related penalties or fines.

Assess data accuracy and reduced errors

Quantify the cost savings resulting from improved data accuracy and reduced errors in HR processes. Consider the potential financial impact of errors in areas like payroll, benefits administration, and compliance. 👇

• Decreased costs of reprocessing and correcting errors
• Savings on time and resources spent on data verification and validation
• Reduced costs of duplicate data entry and data cleanup
• Lowered expenses related to employee disputes and grievances
• Minimised risks of compliance violations and associated penalties
• Savings on potential legal costs and settlements due to data inaccuracies
• Improved efficiency in payroll processing, leading to cost savings
• Decreased costs of employee onboarding and offboarding processes
• Lowered expenses on employee benefits administration and enrollment errors
• Savings on auditing and reconciliation efforts
• Reduced costs of data security breaches and data privacy violations

Consider HR analytics and predictive insights

Quantify the value of HR analytics in identifying trends, optimising workforce planning, and making data-driven decisions. Measure the potential cost savings or revenue generation resulting from more strategic workforce management. 

This can look like:

• Optimised workforce planning leading to reduced labour costs and increased productivity.
• Savings on recruitment expenses through better talent acquisition strategies.
• Revenue generation from improved employee performance and engagement.
• Reduced employee turnover costs and retention of valuable talent.
• Savings on training and development costs through targeted upskilling.
• Improved workforce agility and adaptability, leading to better response to market changes.
• Reduced absenteeism and associated costs due to improved employee satisfaction.
• Revenue generation from enhanced customer satisfaction through a motivated workforce.
• Cost savings from efficient scheduling and resource allocation.
• Increased revenue from improved sales performance through targeted incentive programs.
• Reduced overtime expenses through better workforce management.
• Savings on legal costs and compliance penalties by ensuring workforce compliance.
• Revenue generation through innovative ideas and improved creativity from engaged employees.
• Cost savings through optimised compensation and benefits packages.
• Revenue generation from increased employee retention and reduced business disruptions.

Factor in intangible benefits

Notice the intangible benefits of HR technology that may not have a direct monetary value but contribute to overall organisational success. These could include improved employee morale, enhanced employer branding, and a positive organisational culture.

Calculate ROI using the formula

Finally, use the ROI formula to calculate the return on investment percentage:

ROI (%) = [(Net Benefits - Initial Investment) / Initial Investment] x 100

Justifying HR Technology Investment

Investing in HR tech can be justified by highlighting its numerous benefits and the positive impact it will have on the organisation. First of all, it improves efficiency by automating tasks and streamlining processes, allowing HR professionals to focus on strategic initiatives and talent management. ✅

Secondly, it leads to cost savings by reducing administrative burdens, optimising resource allocation, and lowering recruitment and training expenses due to reduced employee turnover.

Thirdly, HR tech enhances data management, ensuring accurate and up-to-date employee information, leading to better decision-making and compliance with regulations.

Next, it facilitates strategic workforce planning through data analytics, enabling data-driven decisions for talent development and management. Moreover, it improves the overall employee experience by providing self-service options, timely communication, and easy access to essential information.

Additionally, modern HR technology enhances talent attraction and retention by offering a positive candidate experience and promoting employee engagement. Furthermore, it helps maintain compliance with labour laws, regulations, and data privacy requirements, reducing potential legal risks.

HR tech's integration capabilities and scalability make it adaptable to existing systems and future organisational growth. When they invest in HR tech, organisations gain a competitive advantage by optimising HR processes and fostering a positive employer brand. This long-term investment continues to deliver value over time, contributing to the organisation's sustained success. 🙌