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HR software pricing: which cost model is right for you?

This guide to HR software pricing looks at the different cost models available to help you find the best cost model for your business.

Are you in the market for HR software? You might be wondering how much it costs on average. The cost of an HRIS system is usually based on various options and your specific needs. In this article, we’ll explore the factors affecting HRIS software costs and compare the available solutions.

Note that most vendors don’t publicly list their pricing details, so you may need to contact them directly for a quote if you have custom requirements.

HR software subscription cost models

Human resources software costs depend on the features offered and the number of employees using the system.

For smaller businesses with fewer employees, a basic system may be sufficient. These systems typically offer only essential features, such as time tracking and payroll management. Prices for these HR software systems start at around $3 per user per month.

Premium plans are available for businesses with more employees or who need advanced features from their HR software such as performance tracking and talent management. These plans usually cost between $688 and $1,239 per month.

Finally, enterprises or businesses with very large teams may need a comprehensive system that offers all the features of a premium plan plus additional support and scalability. These advanced systems can cost up to $3,500+ per month.

HR software license options

The two most common types of pricing models are perpetual licensing (on-premise) and subscription hosting plans (cloud).

Perpetual license – paying upfront for HR software

Perpetual licensing is a type of software licensing where the company pays for the software upfront and hosts the data on its own servers. This option may be attractive for businesses concerned about data security or with complex needs (e.g., large organizations). Some perpetual licenses may require a recurring cost, such as maintenance or support fees (typically charged annually). Some popular providers of licensed-based HRMS software include SimpleHR, Oracle, and Kronos Workforce.

You can often choose this pricing model after trying free trial versions of the software and deciding to make a larger initial investment.

Pricing for perpetual license HR software

This type of pricing is common for enterprise software, such as the Oracle PeopleSoft Human Resource application, ranging from $85 to $225 per employee. For large businesses or enterprises with more than 100 to 500 hundred employees, it might be best to opt for a one-time fee or subscription with annual fees. Many HR software vendors offer discounts for upfront payment when there are a large number of users.

Subscription plans – paying monthly or annually for HR software

Many software providers offer their products as Software-as-a-Service (SaaS), which allows companies to subscribe to a monthly or annual service fee. This can benefit businesses that want to avoid hosting and managing their own data. Some subscription plans offer a pay-as-you-go with no contract required, while others may have a contract agreement.

Pricing for subscription HR software

The typical pricing structure is based on the number of active employees per month; however, some vendors use a per-user per-month rate that also covers administrative users, such as those in HR. For example, Gusto offers three different plans depending on the needs of your business. The core plan costs $60 per month and $9 per person, while the complete plan costs $39 per month and $12 per person.

Some other popular providers of subscription-based HRMS software include BambooHR and Cezanne.

Costs to consider when looking at HR pricing models

Before you choose a subscription package or perpetual license for your HR software, it’s important to consider the often-overlooked costs associated with it. This way, you can add them to your budget from the start.

Data migration, training, maintenance and upgrades, and IT support are all important factors to consider. Make sure you check with the vendor about these potential extra costs before making your purchase.

Free HR software solutions – open source vs. free software

Many software companies offer “freemium” versions of their products, which allow users to access basic features for no cost.

Pricing models that offer basic features for free are popular among those who need an HR tool but don’t have a budget. Such licenses often come with additional features that you can buy at an extra cost. Another option is to procure a software solution of another kind that has an HRIS feature included; effectively, you’re solving two needs with one purchase. Workable’s recruitment software, for instance, comes with a built-in HRIS to meet the needs of many small- and medium-sized businesses.

On the other hand, open-source software is designed using open-source code that can be downloaded and modified for free – particularly useful for software developers.

There are key differences between open-source software and other HR software offerings. With open-source software, companies download a vendor’s source code and then install or modify it for their own use, carrying the cost of hosting the software.

How to determine which HR software pricing model suits your business

Price is not the only factor to consider when choosing a solution.

You must also keep in mind the following:

  • Consider all features and functionality and the total cost for everything you need. This approach makes it easier for you to compare different platforms and systems with different features and pricing models.
  • An integrated HR software solution will automate and streamline your processes, increasing productivity and accuracy while reducing the workload for your HR team.
  • The total price may be more than the initial or monthly costs – but over time, it could save your company money by automating tasks, reducing errors, and even reducing staff turnover and recruitment costs. This is something to consider when looking at the return on investments of your HR software choice.

The bottom line is that the pricing model you choose for your HRMS can significantly impact your business, especially as you scale. Freemium and subscription models are popular choices, but the licensing approach may be a better fit for larger organizations with more bespoke needs.

Frequently asked questions

What are the factors that affect HR software costs?

HR software costs are typically based on the features offered and the number of employees using the system. The size of the business, the level of features required, and the type of pricing model selected can all affect the cost.

What are the different pricing models for HR software?

The two most common types of pricing models for HR software are perpetual licensing (on-premise) and subscription hosting plans (cloud). The pricing for perpetual licenses is based on a one-time fee, while subscription plans offer monthly or annual fees.

What are the costs to consider when looking at HR pricing models?

In addition to the monthly or annual subscription fees or one-time fees, businesses should also consider costs associated with data migration, training, maintenance and upgrades, and IT support.

What is the difference between open-source and free HR software?

Free HR software solutions, including freemium versions, offer basic features for no cost, while open-source software is designed using open-source code that can be downloaded and modified for free. Companies that choose open-source software carry the cost of hosting the software.

What should businesses consider when choosing an HR software pricing model?

Businesses should consider all features and functionality and the total cost for everything they need when choosing an HR software pricing model. They should also consider the return on investment over time, including the potential savings from automating tasks, reducing errors, and reducing staff turnover and recruitment costs.

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