HR & Employee Management Articles

HR Software Costs Explained: What You Need to Know Before You Buy

by Abhishek Singh
Published on 30 November 2017

Human resources (HR) software tools promise to save you time and money, but how can you be sure you're getting exactly what you need-without paying for extra features you'll never use?

According to a Gartner forecast, the human capital management software market, which encompasses all the key HR software functions, is taking off, and it's expected to grow at a rate of 10 percent annually over the next couple of years. (Full report available to clients.)

What does this software boom mean for you? HR software vendors have begun to shift to a cloud-based subscription model, and small and midsize businesses (SMBs) are taking advantage of the benefits of software like never before. This means more competition between vendors, more options, and lower pricing.

But, with all the HR software options on the market, how do you know which one is right for you?

In this article, we're breaking it all down. Read on to learn about the key functionalities and features of HR software, how different features are priced, and some other important factors to keep in mind when making a purchase.

What is HR software?

HR software helps you automate redundant administrative tasks involved in recruiting candidates, performance tracking, training, and other aspects of the employee life cycle.

But, not every HR software platform is created equal, so it's important to understand your business's unique challenges, and which HR software features can address those needs.

For example, if you're a consultant that specializes in recruiting, you should look for HR software that primarily focuses on applicant tracking, and not necessarily performance management.

The core functions performed by HR software are:

HR software function Description
Performance management Track employee performance against goals and objectives and capture feedback, reviews, and ratings in one portal. Streamline and document the annual or quarterly performance review process.
Workforce management Manage administrative tasks related to benefits, attendance, leave, incentives, and more.
Recruitment and applicant tracking Create a centralized database of prospective candidates' information that can be leveraged by recruiters for future reference and helps manage the recruiting and onboarding process.
Leave management and attendance tracking Track attendance and leave time used by employees over a period to manage paid time off (PTO).

For an even more extensive look at HR software features, check out GetApp's HR software features guide.

What you can expect to pay

There are tons of HR software options to choose from, each offering unique pricing plans. So, which is ideal for your business's budget? How do you know you're choosing software with the right match of pricing and features? These are just some of the questions we'll help you address in this section.

We shortlisted 15 HR software vendors from GetApp's Category Leaders, which ranks software in a given market based on user reviews, integrations, mobile capabilities, media presence, and security.

Then, we categorized those 15 HR software tools into three main pricing tiers, based on the average price users pay within a range of users:

  • Starter price range
  • Mid price range
  • Enterprise price range

To make it easier for you to price software based on the number of users you'll have, we've created the HR software pricing meter below, which represents an estimate of the price within the number of users range. (Pricing information has been taken directly from the websites of the top 15 HR software GetApp Category Leaders.)

Note: Prices are on a per user per month basis. Pricing plan terminologies used by different software providers vary and may not exactly match the categories defined here. The categories here only provide a general estimate of the pricing ranges and target user base supported by different providers. See the Appendix to learn more about the methodology we have used to arrive at the three price categories.

Common pricing structures for HR software

Before purchasing HR software, consider the following pricing structures commonly offered by software vendors to determine which model suits your needs and budget the best.

Also note that, regardless of pricing structure, many HR software vendors offer free trials. They typically last 15 to 30 days and give users an opportunity to determine whether a particular application will meet their needs by giving them hands-on experience.

As a reference, we have also included some examples of software that follow each pricing structure below:

Pricing structure Description Examples
Free
  • Freemium: Offers basic software features for free in a more limited plan, with the option to add more advanced features for an extra cost.
  • Open source: The vendor provides the source code, which users can download and modify for free. Targeted mainly toward software developers.
By number of users
  • A popular pricing model followed by the majority of HR software vendors. You pay a monthly fee for each employee in your organization who needs a login. In the long term, the per user cost typically goes down as the number of total users increases.
  • If you are purchasing HR software for the first time, consider this pricing model, as you can opt out of software that does not meet your business requirements without having invested much upfront.
Subscription
  • Pricing is for a specific subscription period regardless of the number of users.
  • Subscriptions can be renewed monthly, biannually (every six months), or annually. With annual subscriptions, you often save 5 to 10 percent over the month-to-month subscription.
One-time payment
  • This pricing model is typically used for on-premise software licenses. Most HR software vendors in this pricing model offer an optional annual support fee or the option to purchase other add-ons a la carte.
  • Opt for this pricing model if you have already tried the free trial versions of the software, since you're making a larger initial investment.
  • If you have more than 100 to 500 hundred employees, you might want to opt for a one-time fee or a subscription that offers once annual fees, as most HR software vendors provide a discount for upfront payment for a large number of users.

Pricing of HR software based on common features

Choosing features for software is like creating a grocery list. However, when shopping for HR software, you need to be certain about which features will meet your business requirements, so that even if you are paying a lump sum for the software upfront, you'll see a return on your investment (ROI).

To help you choose HR software based on features, the table below summarizes some of the common features found in HR software depending on where it falls in our pricing categories.

Note: The above results are not based on a specific software product, but instead derived from analyzing the 15 applications from GetApp's HR Category leaders. The green tick mark represents the presence of a feature in a particular price range for 50 percent or more of the applications

Other factors that determine HR software pricing

We've discussed how features, number of users, and monthly or annual subscriptions play an important part on deciding the pricing of an HR software.

However, there are other factors that go into determining the price of software, which can also help you make a decision. These include:

  • Integrations. If you have an existing employee database, you may be able to integrate it with new applicant tracking software. Integrations allow you to expand the features of your current software by "connecting" or transferring data from one application to another through an application programming interface (API). Many HR software platforms offer integrations with existing accounting, applicant tracking, and learning management systems, among others.
  • Technical support. Troubleshooting technical issues can become a bottleneck for your business when implementing new software. Make sure the HR software you're planning to purchase provides some type of technical support, whether it's through a help desk, or at least online user guides and tutorials to troubleshoot any challenges that come up. Technical help desk is not always provided with free trial-based HR software, however you can often reach customer care through chat or phone to learn more about pricing for add-ons.
  • Mobile capabilities. Some HR software platforms offer separate apps for iPhone and Android devices, where users can access the same functionalities as on the desktop version. Mobile apps can be useful to recruiters working in the field who need to capture and upload potential candidate data; however, a mobile app may not always be offered by products in the starter or mid pricing ranges, so if you require mobile capabilities, be sure to ask vendors on your shortlist if they offer a mobile app.

Additional resources for choosing HR software

Choosing HR software is not as tricky as it seems, as long as you understand the features, pricing models, and integrations that you need to meet your business requirements.

If you'd like more information on HR software, check out the following GetApp resources:

  • GetApp's directory for HR software: Read more about HR software, pricing, and integrations.
  • HR software scorecard: Tell us what you need, and we'll help you choose the right product.
  • HR software Category Leaders: Find out how HR software rank based on review, integrations, mobile, media, and security.

Appendix: Price range meter methodology

Starter price range

The starting price of most of the products is $0 and this forms the lowest value of the range. The higher end of the starter price range is calculated by taking the average of the lowest prices of the top 15 products. This ensures that the starting price of most of the products fall within this range. Similarly, the number of users supported by a software in this price range is the mean of the number of users supported by the starter versions of the top 15 vendors.

Example: If the lowest pricing plan (other than free versions) offered by vendors A, B, and C are $10, $5, and $15 respectively, then the higher end of the starter price range would be $10 (average of all the prices).

Mid price range

The lower end of the mid price range segment is the higher end of starter price range. To get the higher end of the mid-range price segment, we took an average of the mid prices of the top 15 products. In cases where there were multiple pricing plans between the starter and enterprise versions, we have taken the average of those plans to identify the product's mid price value.

The number of users supported by a software in this price range is the mean of the number of users supported by the mid-price versions of the top 15 vendors.

Example: Suppose product A has four pricing plans: Basic, Professional, Business, and Enterprise at $10, $20, $40, and $60 respectively. Then the mid-price value for product A is the average of its Professional ($20) and Business ($40) plans, i.e., $30. If the mid-price of the other two vendors B and C are $20 and $40, then the higher end of the mid-range price segment is the mean of $30, $20 and $40 (= $30).

Enterprise price range

The enterprise pricing segment starts from the higher ends of the mid-range pricing segment. All prices above this value lie in the enterprise pricing range.


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