The Deadly Costs of an Outdated HR System

The Deadly Costs of an Outdated HR System

Today, it seems as though the only thing constant in our work environment is change. Technological advancements and organizational growth are driving changes in the way we manage employees, recruit talent, analyze data, and more. However, some organizations are still trying to manage this modern workforce with old tools and processes- resulting in high costs and inefficiencies. As these costs accumulate, more and more organizations are choosing to automate and innovate their processes. In fact, 57% of organizations plan to make a major new HR software purchase in the next 18 months. Below are five of the deadly costs that come from maintaining old HR systems and processes:

  1. Fragmented, expensive, on-premise systems- On average, organizations have 3-4 different HR applications. The problem with this is that these applications are often pieced together with faulty integrations, causing inconsistent data and costly errors. If the software solution is an on-premise system, the time and money required to maintain the complex software could be monumental. Maintenance issues and high staffing costs are inevitable and in the long run, will end up costing your organization a lot more than a cloud-based system. With a cloud-based system, your organization can focus on your real jobs, not IT concerns.
  2. Time- Recruitment and training are two areas of HR that take up the vast majority of time. A long recruiting cycle with paper-based approvals and other inefficient methods can result in thousands of dollars in lost revenue from revenue generating positions (Ex: a vacant social worker position that would normally see 4 clients per day). In total, the cost of replacing talent can amount to 70-200% of their salary.
  3. Staffing costs- More employees are needed to run an organization on paper-based processes or a traditional HR system. If using manual processes, an organization of 100 employees might need 3-5 HR personnel to handle benefits, payroll, taxes etc. Using automated HR and payroll software in the cloud could decrease this number to 1-2 personnel, saving more than $100,000 per year.
  4. Risk management- Requirements and regulations are constantly updated and can result in serious compliance issues if not monitored. With manual processes or outdated HR systems, there is a lot of room for error, which can lead to harsh and costly penalties for organizations to face. For example, the ACA’s regulations and reporting requirements are very complex, and for every instance of noncompliance on the IRS 6055 and 6056 reporting, an organization will incur a fine of $200 per employee.
  5. Payroll Processing Errors- When payroll is processed manually, the average employee is overpaid by 10 minutes per day. At an organization with 100 employees, with an average hourly rate of $12, that comes out to about $70,000 per year in overpaid wages. With an automated system, time card errors and overpaid wages will be eliminated completely and payroll will be processed in hours, not days.

The cost of maintaining outdated and inefficient systems are steep, but you can protect your organization and your funds by streamlining and automating your processes with a fully unified HR and Payroll software. The modern workforce cannot be managed with tools from last decade. Drive innovation and growth at your organization by using a best-in-class HR software to cut costs, increase efficiencies, and improve your organization’s performance.

This DATIS Blog was written by Ally Edwards, DATIS, on June 17th, 2015 and may not be re-posted without permission.

Written by Ally Edwards