HR Software Development Challenges and Cost Explained

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Human Resources (HR) are something nearly all businesses rely on for survival. From small start-ups to multinational conglomerates, HR services are an essential element. Over the years, hiring and managing employees have changed significantly. Today's Human Resources departments can now be divided into subdivisions that specialize in recruitment, onboarding, retention, etc.

HR software development enhances internal processes in companies. With an estimated global market worth over $14 billion and steadily growing, companies of any size tend to implement HR management solutions into their strategies.

This blog will address the challenges associated with HR Software development as well as its overall development cost.

Challenges in HR Software Development

Each custom HR software development process is different, yet we have noticed several recurring obstacles along the way. Here, we outlined major development obstacles so that you can avoid or minimize them:

1: Unnecessary Tools

Custom Software providers frequently promote small apps with limited functionality as providing you with the benefits of human resource management when, in reality, their goal is to make more money for themselves.

As an example, they might offer an app for HR automation, another for onboarding and offboarding processes, plus another tool to automate job postings - as well as several others that allow users to see statistics, manage payrolls, provide training, etc.

But this approach can be time and cost-prohibitive. Therefore, search for one solution that can take care of all or most of these tasks and save you money in the process.

2: Absence of Employee Involvement

A good HRM tool should engage all department managers (not only HRs) as well as employees in creating an efficient management process in a company for two main reasons.

First and foremost, most of today's workforce consists of millennials who exhibit an eagerness to take initiative when it comes to work processes, developing new skills while being crucial contributors, and pioneering new work strategies.

Second, people today are fascinated with statistics pertaining to their professional growth. Therefore, an HRM system that offers this data will serve as an added motivational factor for employees.

3: Clunky User Interfaces

At many HR software development providers, we have observed that their UI designs may be lacking, leading to users getting lost in its complex structure and never realizing its full potential - opting to switch back to manual operations instead.

HRM tools may still not function optimally on mobile devices and tablets or may not offer this capability. As most company personnel rarely stay glued to a desktop all of the time. This poses a potential threat of losing information or violating security protocols.

IT consulting services offer custom software implementation services with thoughtful UI/UX designs to make users' experiences positive.

4: Lack of Scalability

Ask any business owner their desired goal for the next five years, and most would likely respond "business growth." Your current venture may look entirely different in five years!

Your HR software needs to adapt as your business changes - be it expansion or contraction - so as to remain effective and responsive to these shifts. Signs your HR system isn't scalable include:

  • Reliance on manual payroll systems

  • Systems don't communicate together

  • Employees are self-reporting their work hours

  • You're unprepared for remote workers and contractors

  • Your recruiting process is outdated

  • Only you know how to run your HR system

  • Your HR processes don't undergo periodic auditing

Therefore, when selecting your top five HR software providers to make your selection from, always keep these features at the forefront:

  • Payroll integration

  • Self-reporting

  • Remote and contracted worker management

  • Recruitment tools

  • Data and analytics

5: Limitations and Lack of Integrations in HR Software

No HR software is perfect. Therefore, when choosing an HR product and its use in your organization, please make a list outlining all expectations you have for it and its implementation to identify any limitations or HR issues related to its implementation and usage within your organization. This will enable you to address any limitations or HR difficulties it presents during implementation.

Integration and reporting are some of the many missing features and system limitations we frequently hear from larger businesses. This often results in cumbersome HR software that hinders rather than supports their operations.

6: Insufficient Budget

Securing approval to implement a new HR system can be challenging when company leaders view it as expensive. The project risks not receiving enough funds if any one or more of the following issues arise:

  • Underestimate licensing costs

  • Exclude the contingency budget altogether or make too small of a contingency budget

  • Leave out consultant fees or temporary help costs

  • Leave out change request costs

  • Underestimate costs related to particular requirements, such as interfaces to other systems

  • Exclude post-implementation costs such as issues resolution, enhancement requests, and ongoing support services.

Project leaders who have already made mistakes and run out of funds have two options to pursue: approaching their executive sponsor for additional funds or altering the implementation scope to complete some work in the next phase.

Another option would be working closely with the implementation partner to find cost-cutting alternatives to expensive requirements or moving some project payments forward into the following fiscal year.

7: Data Capture but No Reports

HR software was designed to provide data so you can optimize your processes. However, manual report creation can be laborious, one of the primary challenges associated with HR systems. Unfortunately, many of those we meet struggle to create reports with their existing HR system. This presents one of their major drawbacks.

Your HR software should generate and export intuitive reports within minutes, giving you more time for analysis and taking proactive measures toward reaching your goals.

When selecting HR software, it must come equipped with reporting functionality built in. More sophisticated reporting software even allows users to drag and drop key information regarding stats and facts that matter to your business.

8: Employee Satisfaction Issues

People are the cornerstone of any HR initiative, so your HR software must work hard to enhance employee satisfaction. Furthermore, performance management features should provide tools that empower, motivate, and inspire staff members.

Things to look out for include:

  1. Establish a Performance Review Schedule

One of the main shortcomings of outdated HR systems is inconsistency when it comes to performance reviews, making regular meetings with each employee difficult for managers. A performance review schedule ensures they conduct consistent evaluations throughout their tenure with your organization.

  1. Empower employees to set, view, and amend performance goals via an app.

A mobile app provides your workforce with an efficient means of keeping track of their individual goals in an organized, timely fashion.

  1. Performance Review Templates

Performance review templates can save users valuable time in setting up reviews by using premade templates that can be personalized according to job function and level of responsibility.

  1. Notify users when there have been changes to their performance management dashboard.

This feature keeps employees aware of any modifications made so that they can take swift and appropriate actions when required.

9: Lack of Mobile Application

The COVID pandemic has taught us one important lesson - adaptation. In response to working from home's new culture, organizations will need to alter how they communicate with their workforce and enable mobile-friendly HR software professionals to make decisions quickly on demand, leaving more time for strategic workforce planning than administrative work.

Mobile HR apps provide an effective solution to managing HR processes like viewing payslips, time entry, and holiday requests in one easily accessible place. For non-desk-based workforces, such as construction workers, who spend much of their day out and about without access to computers or similar systems, a mobile app solution may be more appropriate.

Desktop-only HR systems present one of the primary obstacles to employees without access to computers, so if your HR system is desktop-only, consider whether adding mobile-friendly capabilities could offer increased flexibility, communications enhancements, and accessibility benefits for all employees.

10: Poor Implementation

You have chosen your software; everyone is on board, and now comes the difficult challenge of implementation. Poor implementation can wreak havoc with what should otherwise be an exciting new chapter for your business - as you move away from cumbersome manual HR operations.

Common HR implementation hurdles include:

  • Implementing software without first understanding your team's needs

  • Migrating data so it is ready when you begin operations and is GDPR-compliant

  • Inadequate support from the provider during the implementation

Therefore, the provider you select must offer an effective implementation process.

11: Customer Support

Customer support is one of the final major HR software challenges, from signing to implementation to getting stuck or something not working as it should.

Your chosen provider must offer you access to a personal point of contact who is readily available to address any concerns. Furthermore, knowledge banks, articles, videos, and FAQs should allow for as much self-serve as possible.

Poor customer support often only becomes apparent once implementation begins, making it difficult to assess beforehand. We suggest reviewing testimonials and case studies from your chosen providers. This should give a good indication of their after sales support after implementation.

12: Multiple Vendors to Manage

Assuming your HR team finds using multiple HR systems exhausting, managing multiple vendors may make this even more burdensome. That means more third parties to contact when some technical questions or issues require resolution.

Ideal HR technology support would be easily accessible through one point of contact. Furthermore, when software developers release updates, your business may lose time and data while trying to reintegrate and sync all systems.

13: Compliance Issues

Businesses face an array of federal, state, and local regulations related to employment that frequently change - complicating matters further when they affect businesses that hire employees.

Staying current with regulatory changes across multiple locations is a full-time job for even a dedicated HR specialist, making this task even more daunting for a business leader responsible for multiple important responsibilities.

Outdated and non-integrated HR systems tend not to offer timely on-demand resources or real-time guidance from HR professionals on changes to employment laws per location. Furthermore, they don't automatically fix compliance issues, such as changes to payroll percentages for certain deductions, before becoming aware of them - like what can be accomplished using an all-encompassing cloud-based HR solution.

However, a robust HR management system can address these needs and can help your company avoid:

  • Complaints

  • Lengthy Investigations

  • Fines

  • Lawsuits

14: Insecure Data Storage or Transfer

We have all seen reports about employees' data being exposed when an unsecured laptop was left in public or paper records were damaged in a natural disaster. Storing employee information on an individual PC or in file cabinets can prove disastrous for both themselves and for any employees they represent.

An effective, cloud-based HR management system can securely store all your information to decrease theft or destruction risks.

But what about cybersecurity? In this regard, it may be tempting to believe that spreading data across various HR systems would be wise; after all, this gives hackers more systems into which they could gain entry.

Comprehensive HR management systems may need to comply with industry standards as stipulated by cybersecurity and privacy laws in order to maintain certain levels of security that will help protect sensitive information. Industry-standard certifications help facilitate this goal.

  • Demonstrate that a company adheres to industry-wide security principles and processes

  • Provide proof that an external body has approved of a company's compliance with certification principles

  • Assure your company meets certification requirements while safeguarding employee data in safe hands

15: Post-Implementation Support

Now that HR system implementation has concluded, maintenance must begin. To ensure an uninterrupted transition from external implementation partners to internal resources, create a plan with answers for key questions like these:

  • Who will train employees upon going live and beyond?

  • Who will be responsible for making configuration changes, and how many individuals are necessary?

  • How will employee questions be tracked, and who responds

  • When can we expect answers from third-party vendors supporting the HR system, as well as having signed contracts?

  • Will reports and dashboards be created when needed?

  • Who will enter and maintain system data?

It is wise to have an entry and maintenance plan in place prior to going live to avoid confusion over who should do what. Frustrating issues may take longer or never get resolved once the system goes live. When time is of the essence, create a short-term plan with key stakeholders while working on developing a long-term strategy.

Factors Affecting the Cost of Developing HR Software

The costs associated with creating HR Management software vary based on various factors, including its type, user count and types, features and implementation plans, hardware needs, and maintenance. Now let's examine some factors influencing its development costs.

Factor 1: Type of HR Software

The kind of HR software your business requires can affect costs. Integrated payroll, benefits, recruiting, and performance management solutions will cost more than separate systems; software development expenses may vary greatly depending on which HR package the company selects (HCM or HRIS).

Human Resources Information Systems (HRISs) are less expensive and capable of handling basic HR processes. Human resources systems and human capital management (HCM) offer more functionality as businesses grow. Thus, these solutions are the costlier options on the market.

Factor 2: Number and Types of Users

User count often determines the cost of HR software. Many vendors base their pricing model around user counts; with subscription-based offerings featuring self-service capabilities, companies may pay more or less each month as their employee count fluctuates.

Manufacturers vary in their definition of users. Some suppliers consider user staff members responsible for maintaining data within a system (for instance, HR, IT, or management teams).

Buyers of HR software should investigate how vendors of such platforms define users on their platforms since this may affect both the cost and affordability of HR software solutions.

Factor 3: Implementation

Companies should expect to pay an implementation fee depending on the vendor, which typically covers installation, data migration, and support from implementation specialists. Alongside direct costs associated with HR software implementation projects, such as installation fees and implementation specialists' support costs, should also be accounted for - these expenses include lost productivity due to the time IT and HR staff spend working on implementation instead of their regular duties.

Factor 4: Customization and Features

In general, the more features that a company needs from an HR software solution, the higher its costs will be. Most solutions offer a core set with "add-ons" for customization or additional functionality - add-ons can include integrations or customized workflows, which could add cost. Businesses should decide what features are essential, while others may be postponed until the budget allows.

Factor 5: Hardware and Maintenance

Total implementation costs will depend on whether internal servers or new computers are used to run HR software. At the same time, vendors can charge extra fees for system upgrades, security patches, and feature updates.

Companies with in-house IT departments do not need to worry about the cost of software. Still, how long their staff spends managing it could impact the return on investment (ROI).

Factor 6: Training and Support

Many HR software vendors include training as part of their fees. However, companies may incur extra costs for additional training post-implementation or recommendations to optimize workflows. Furthermore, time taken away from HR staff duties to train staff or hire additional staff members could add to total labor expenses.

Consultant fees that provide HR support or software should be included when considering the total cost of hiring software developers. In the United States, consultants cost, on average, $150 an hour. Still, this figure may differ significantly based on the project scope and timeline. Companies may opt to hire consultants for guidance with software selection as well as outsourcing tasks like hardware maintenance rather than hiring more staff members directly.

How Much Does HR Software Development Cost?

Software development costs vary significantly across the world as each company determines its rates. Rates tend to depend on two primary factors: where a company is located and the level of expertise among its engineers. We've used an industry average rate of $15 per developer hour as an indication of HR Management software development costs.

So, if you're seeking HR software development, our advice would be to first review the costs associated with various models for human resource management.

  • Recruitment modules typically cost between $5,000 and $10,000

  • HR administration modules cost between $5,000 and $6,000

  • Benefits management costs can reach $10 and $14,000

  • Payroll module costs average from $10,000 to $20,000

When combined, HR Management software development costs could range between $10,000-25000 depending on your business needs.


Human Resource Management Software is an indispensable asset to any organization. India offers some excellent outsourcing software development companies for those on tight budgets looking for effective HR software solutions.

Building an HR software system capable of covering all your management tasks at once takes considerable time and effort, but if you understand costs and challenge analyses for human resource systems as well as any potential development issues that might arise, this can become an exciting adventure rather than a tedious chore.

An outstanding HR & staffing software development services company with experienced developers can provide modernized HR software systems that will simplify managing your HR department. Their experts are familiar with any challenges you may face on this journey and have already constructed multiple complex HR systems across industries.

If, after reading this guide, you have any outstanding inquiries, don't hesitate to get in touch. Our engineers are always standing by, ready to create a tailor-made solution just for you!


Assim Gupta

Assim Gupta linkedin-icon-squre


Assim Gupta is the CEO and Founder of Closeloop, a cutting-edge software development firm that brings bold ideas to life. Assim is a strategic thinker who always asks “WHY are we doing this?” before rolling up his sleeves and digging in. He is data-driven and highly analytical, yet his passion is working with teams to build unexpected, creative solutions that catapult companies forward.

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