The Hidden Costs of HR Software


Are you researching HR systems? You’re probably asking yourself: How much does HR software cost?

We can split this into the two main types of HR software: SaaS (cloud-based), and on premise. An on premise solution is physically installed on your company’s own servers, whereas a cloud-based system is accessed via your internet browser.

Before you decide, you should work out the hidden costs.

Are You Looking at the Tip of the HR Software Iceberg?

Many business owners and HR professionals think that SaaS systems are cheaper in the short term, and on-premise solutions are cheaper in the long-term. But this isn’t always true.

The reason why so many HR software buyers think this, is because they only look at the visible costs of HR systems. Such as:

  • Cost of buying the solution
  • Cost of renewing the licence
  • Monthly cost of membership

Beyond these visible costs, are a range of other costs hidden beneath the surface – something PeopleHR describes as being like an iceberg.

Hidden Costs Beneath the Surface

So what kind of costs is there beneath the tip of the ice berg? Well, there’s the most obvious to start with. The massive IT resource you’ll need to pay for to manage and maintain your system!

As well as having to pay for servers to store your software, you’re going to need a competent IT team to help you keep it healthy. They will fix things when they go wrong, help you apply updates and additional installations, and keep servers ticking nicely.

Beyond this, there’s the cost of customising the software (if this is what you want to do). Funnily enough, this is one of the few reasons why people still choose an on premise solution over a cloud-based solution. Yet many people forget that this costs money.

Why an SaaS Solution is Better

There are plenty of reasons why modern business owners and HR professionals choose cloud-based HR systems for their business, instead of an on premise solution. Three of the top reasons are:

  1. Less risk. Because there is no massive upfront investment for most SaaS products, you won’t lose much if you decide you don’t want the product any more. You’ll just need to cancel your subscription.
  2. Faster TTM. Your time to market will be rapid with a cloud-based solution. Web-based software is ready to go out of the box – just open a browser and login. No need to waste time installing systems on your local servers.
  3. Less downtime for updates. You’ll need to take servers offline to update an on premise solution. But with a cloud-based solution, it’s all done on the other end – and usually out of working hours.

Remember: An on premise solution might seem cheaper in the long run on the surface. But there are more costs to consider than first meet the eye!