How to Calculate the ROI of HR Technology

When you have a limited budget and a finance team to report to, implementing new HR technology at your organization can be an uphill battle. You have to choose the right solution and make the business case to other stakeholders that the return on investment (ROI) of HR technology will deliver value to your organization. 

Calculating the ROI of HR technology isn’t always straightforward. Beyond the direct cost savings and bottom line improvements, this investment also saves time, reduces human error, and enhances the employee experience. These softer metrics can be harder to quantify.

Here’s how to calculate the ROI of HR technology, and how HR leaders can measure cost savings and efficiency gains to build a stronger case for new initiatives.

What Is the ROI of HR Technology?

Understanding the ROI of HR technology requires understanding how it benefits teams. A key advantage is the automation of human resources processes, which makes them faster and less labor-intensive. 

HR tech also enables better data-driven decisions — unlocking your organization’s full potential and improving its operational efficiency — and helps HR teams anticipate trends, support strategic planning, and contribute to company-wide goals. 

Let’s take a look at four forms of HR technology ROI:

1. Cost Savings

Cost savings are often the most straightforward metric to track. For instance, say you choose a new cloud-based HR platform that allows you to go paperless. The money you save on paper and ink, and even on storage or administrative labor, represents a tangible ROI of HR technology. 

If you’re already using cloud-based HR software, consolidating services from providers to a single HR management platform can streamline your workflows, simplify your pricing plan, and reduce subscription costs. 

2. Time Savings

Many HR technologies are designed to save you time and effort, reducing the amount of manual labor required to complete a task. If your HR team is bogged down by spreadsheets and repetitive tasks, an HR tool that automates data entry or approval workflows can reduce disruptions and free up their time for higher-impact work. 

For example, Pulpstream’s leave of absence management software can reduce processing time from hours to minutes while minimizing time spent correcting human errors and addressing compliance issues.

3. Productivity Gains

HR tools that increase productivity and work efficiency provide a different kind of ROI: they allow you to achieve more with HR tech than you would have if you’d continued with business as usual — helping you meet or exceed your KPIs.

From AI-powered tools that support workforce planning to platforms that automate new hire onboarding and performance management, today’s business leaders are increasingly turning to HR tech to achieve productivity gains.

4. Increased Retention

Another less obvious ROI of HR technology is increased employee retention. Turnover is one of the most costly challenges HR teams face, and tools that address employee engagement and satisfaction issues can reduce attrition and, in doing so, improve ROI.

For instance, Pulpstream’s employee self-service portal is a great example of how HR tech can increase retention throughout the employee lifecycle. 

Employees can access their benefits and submit leave of absence requests in real time, increasing employee satisfaction and reducing turnover at your organization. This, in turn, can strengthen team cohesion and even boost companywide morale. 

How to Calculate the ROI of HR Software

There’s a simple formula for calculating ROI in almost any context:

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

You simply divide the benefits you can attribute to the investment (such as cost savings or productivity gains) by the cost, and multiply it by 100. Let’s say your new HR software costs $2,000 and delivers $4,500 in benefits—in this case, your formula would look like this: 

($4,500 ÷ $2,000) x 100 = 225%

In this example, the software yields a 225% ROI. Not bad! HR professionals can apply this formula to track the ROI of any strategic initiative, from investing in new time tracking software to upgrading their human resources information system (HRIS).

However, it’s essential to account for all relevant metrics. HR technology that costs a lot of money with no immediate gain may seem like a poor investment, but if it reduces turnover rates — and therefore hiring costs — it may deliver a strong ROI over time. 

A platform like Pulpstream, which streamlines leave management, can contribute to ROI in several ways:

• Reducing manual tasks (immediate cost savings)
• Improving employee satisfaction (reduced turnover)
• Ensuring HR compliance (time savings and productivity gains)

3 Guidelines for Smart HR Technology Investments

Choosing to invest in new HR software is a big decision. But the cost of inaction may be higher, especially as competitors invest in new tools to streamline or modernize their HR processes, improving efficiency and scalability. Here are three guidelines to consider during your decision-making process: 

1. Get Stakeholder Buy-In 

Secure buy-in from as many stakeholders as possible, and make the case using the metrics they care about. If a stakeholder isn’t convinced that a self-service portal will impact your bottom line, prove the ROI by addressing hiring costs.

If you can’t point to specific metrics within your organization, look for case studies at comparable organizations that use trusted measurements, such as Forrester’s Total Economic Impact™ (TEI) methodology.

2. Focus on Business Outcomes

While some members of your team may be drawn to the next must-have tool that promises to do it all, it’s best to avoid chasing trends. It’s often best to focus on functionality: does it solve the problems you have today while aligning with your long-term business strategy?

Take Pulpstream, for example. While its core selling point is leave of absence automation, it integrates with other HR platforms, so you can easily scale up at any time and use it alongside workforce management tools that offer additional features. 

3. Consider the Big Picture

Remember that the ROI of HR technology isn’t always immediate, but that cost savings, productivity gains, and other benefits can compound over time. These benefits depend on how seamlessly your organization implements your new HR technology.

The bigger the change, the greater the need for a change management process that guides key stakeholders and other employees through the transition.

Improve Your ROI with Pulpstream’s HR Software

Whenever an organization invests in new HR technology, it’s essential to track the ROI to ensure it pays off. You may need to make the case for the technology to key decision-makers at multiple stages—from the initial approval to post-investment review.

Although the formula to calculate ROI is simple, you’ll need to calculate all of the costs and benefits of your new technology, from time savings to productivity gains.

Pulpstream’s comprehensive HR management platform pays off in both the short- and long-term. By automating leave management and other HR processes, you can save time and money while reducing compliance costs. And by providing employees with a self-service portal, you can increase employee satisfaction and reduce turnover. 

Request a demo today to see how Pulpstream can improve your bottom line.