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Calculating HRIS' ROI

Dec 5, 2014
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Human Resource Information Systems are computer software programs that

merge human resource management activities into a database. Payroll,
benefits management, Talent, performance, productivity ... can all be managed
through software programs, reducing capital requirements. Return on
Investment calculates how much money is saved, lost or earned from
instituting a new corporate strategy, such as converting to an HRIS system. It
is difficult to calculate ROI for HRIS, and in some instances it does not make
sense, because human resources is not a profit-seeking department within an
organization. Well in fact there are many different ways to get an ROI with
your HRIS, but here are some of the most understandable ones.

Calculate the expenses of implementing HRIS software. Expenses include the

actual cost of the software, training costs and implementation costs. If training
may be free, but will simply take time, calculate the amount of time in hours
needed for training and multiply it by the wages of each human resources
person who must have training.

Calculate the benefits savings. When an employee starts work in the middle of
the month, human resources typically starts their benefits from the beginning
of the month. HRIS systems allow an employee's benefits to begin on the day

they start work. Whether it is leave time, medical insurance or any other
benefit, you divide the number of total cost for the month by the number of
days in the month and then multiply this number by the number of days
before the employee started working, to get your savings. Calculate employee
terminations the same way.

Calculate the labor savings. Identify how much time each human resource
duty took before the software was implemented. Time each human resource
duty after the software is implemented and training has occurred. Subtract the
after from the before to get the number of hours saved. Then multiply this
number by the hourly wage of the human resources person who performs
these duties. This is your human resources labor savings.

Calculate the turnover costs. Identify the turnover from the year prior to
installing the HRIS system. Multiply this number by the average recruiting
costs incurred to replace these employees. Subtract from this number the
amount of current turnover multiplied by the cost of replacing the employees.
These are the recruiting savings you gain with the HRIS system.

Calculate the loss of income from turnover activities. Identify how long it took
to hire new employees before the software was used, and how many days it
takes to hire them after the software is in place. Divide the annual revenue by
the number of revenue-producing employees and divide it by 260 to get the

daily cost of losing an employee. Multiply this number by both the before and
after numbers you calculated and subtract the after from the before. This is

Identify and calculate any fees for late paperwork required. For example,
COBRA (US) has a \$100 fee for late employee notices and a \$7,000 fine can be
incurred for not getting the appropriate paperwork filled out properly. HRIS
software notifies you when it is time to fill out important paperwork, provide
paperwork to your employees and what the paperwork will look like when it is
filled out properly. Calculate your fees before and after the software was put in
place, and subtract the after from the before to get your savings.

Use the HRIS software to track workers' compensation and injuries. Identify
the departments and individuals who have been hurt, and look for trends. The
software allows you to identify trouble spots and implement new safety
procedures to reduce injuries. Calculate the workers' compensation claims
before and after the software is implemented and subtract the after from the
before number to get the savings.

Identify sick-leave abuse. HRIS software pinpoints individuals who miss a lot
of work and patterns in their time off. According to CompareHRIS.com, the
U.S. identified the cost of an unscheduled absence at \$400 per day, including
lost work, wages and benefits paid. Calculate the absence rate by multiplying

the amount per day to the number of employees who took unscheduled time
off during the year prior to the HRIS implementation. Do the same for the
time since the HRIS software was implemented and subtract the after from
the before to get your savings.

Add all your savings up and divide them by the cost to implement the
software to get your return on investment.