HR Technology ROI: Cost Savings, Risk Reduction, and More

New technologies, from automation to artificial intelligence (AI), are hot topics on LinkedIn, but it can be tough to calculate the return on investment (ROI) of HR technology and make a business case to executives that it’s worth the up-front cost. So, how do you measure HR technology ROI?

The key is to consider the full impact of your HR technology investments: the time and money you save, as well as gains in productivity and employee engagement.

Here’s what HR professionals can do to convince decision-makers that their HR tech investments align with long-term business goals.

What Is HR Technology ROI?

HR technology ROI refers to the return on investment of your HR software and other HR tech initiatives. In most cases, you can use a simple formula to calculate ROI:

ROI = (Net benefit or return ÷ cost of investment) x 100

The trouble with HR technology ROI is that those benefits aren’t always clear-cut, and it can take time to see its full potential. 

For example, an AI-powered chatbot can reduce response times for employee complaints, but the real benefit is that it enables you to resolve issues faster and lower your employee turnover rate.

Likewise, a leave management platform can reduce the amount of time spent on employee leave requests — but it can also help you avoid penalties for non-compliance. 

To truly assess the ROI of HR tools, you need to account for all of these impacts, both inside and outside your human resources department.

5 Questions to Ask About HR Technology ROI

Making informed decisions about HR tech isn’t easy. In addition to financial metrics like cost savings, you’ll need to consider factors including work efficiency, productivity gains, and even the employee experience. This can make it hard to justify the cost of HR tech to key stakeholders, even when you know it would benefit your HR team.

Here are five questions to ask about HR technology ROI so you can better understand and demonstrate its impact on your bottom line.

1. How Much Time Are You Saving?

One of the key benefits of HR tech is the ability to streamline manual HR processes and replace them with automated digital workflows. For example, Pulpstream’s leave of absence automation tools reduce the time it takes to process a leave request from eight hours to as little as 15 minutes.

To calculate how much time you’re saving, you’ll need to measure the time spent on HR functions before and after rolling out your new HR tool. Use consistent KPIs and other performance metrics to track changes in your operational efficiency over time.

2. What Problem Is Your HR Tech Solving?

Some HR tools are designed to solve specific problems. Maybe you want to reduce your administrative burden and address compliance issues. Or maybe you want to streamline the onboarding process for new hires to increase employee retention.

When you have a limited budget, addressing a specific problem can be an easier sell than a complete digital transformation. For example, a new leave law in your state could be the push you need to implement a new leave management system.

3. Are Your Employees Using It Properly?

When making the case for new HR technology, HR management must get buy-in from the employees who will use it, not just executive-level decision-makers. A data analytics tool or self-service portal that no one uses can skew your ROI calculations and impact business outcomes.

Simply investing in a new HR platform isn’t enough to ensure adoption. Use a change management process to overcome objections and incentivize uptake, and base your ROI calculations on the actual, not projected, use of your HR software.

4. What Goals Does Your HR Tech Serve?

Not all HR investments are about solving existing problems. Forward-thinking business leaders are investing in HR tech to lay the groundwork for organizational success. 

For example, AI-powered talent management and workforce management tools can help you make better, data-driven decisions throughout the hiring process.

If your HR tech investment is part of a long-term strategic initiative, don’t lose sight of those organizational goals. Just because a tool is providing a return on investment doesn’t mean there isn’t more you can do to unlock its full potential.

5. What Are Employees Spending Their Time On?

The promise of artificial intelligence and HR automation is freeing your team up to focus on big-picture thinking and decision-making. Instead of manually overseeing every step of the employee lifecycle, your HR department can focus on performance management, workforce planning, and more.

But simply automating HR processes doesn’t guarantee your employees will spend their time on tasks that advance your organizational objectives. Use KPIs to track employee performance in real-time and include any efficiency gains in your ROI calculations.

3 Ways to Measure HR Technology ROI

Now that you know which questions to ask yourself when making the business case for HR tech, let’s take a look at how to measure HR technology ROI in practice.

1. Time Savings

Time savings are easy to calculate. Let’s say your HR team spends 20 hours per month on employee benefits enrollment. After implementing employee onboarding automation, it takes them only five hours per month to perform the same series of tasks.

You’ve saved 15 hours per month with HR automation. Multiply your hours saved by the hourly wage of your HR staff, and that’s how much money you’ve saved with your investment.

2. Compliance Risk Reduction

Compliance risk reduction can be harder to calculate because you can’t be sure how many penalties you’ve avoided with HR compliance software. But you can base your calculations on historical data. Maybe you’ve paid an average of $5,000 per year in non-compliance penalties; with your new HR software, you only pay $1,500.

Going forward, you can expect to save an average of $3,500 per year thanks to your new software. Divide that by the cost of the software and multiply it by 100 to determine your ROI.

3. Employee Satisfaction

HR technology ROI isn’t just about quantitative metrics like time and money saved. HR tools can improve the employee experience, increasing job satisfaction and reducing employee turnover. You can track employee satisfaction with surveys or by watching your retention rate to calculate ROI.

If it costs $5,000 to hire and train an employee, and your turnover rate drops from two employees per year to one, then you’ve saved $5,000 in hiring costs.

Achieve a Measurable ROI with Pulpstream

Whenever you invest in HR technology, it’s important to monitor your ROI: both to make a business case for the investment, and to ensure you use it to its full potential. You can calculate your HR technology ROI by determining your cost savings, productivity gains, compliance risk reductions, turnover rate, and other factors.

Pulpstream’s HR automation platform saves HR teams time and money by automating recurring tasks and streamlining workflows. Our built-in reporting dashboards make it easy to track your ROI and support the case for a digital transformation. Track time savings, employee performance metrics, and compliance risk all in one place.

Request a demo today to see how Pulpstream can deliver measurable ROI for your HR operations!