How much can I save in Employee Engagement with an HRMS?

Employee engagement has a direct impact on productivity, retention, and overall business performance. By implementing an HRMS, companies can reduce disengagement-related costs, including lost productivity, turnover, and absenteeism. Below is a cost-saving estimate for a 50-person company with an average salary of $75,000 per year (including 20% overhead).

1. Productivity Gains from Increased Engagement

Studies show that engaged employees are 21% more productive. A conservative estimate assumes an HRMS improves engagement by just 5%, leading to a 1% productivity gain across the company.

• Annual payroll cost: $75,000 × 50 employees = $3,750,000
• Productivity gain (1%) with HRMS: $3,750,000 × 1% = $37,500 saved annually

2. Reduced Turnover Costs

Engaged employees are 87% less likely to leave, reducing turnover-related expenses. Assuming an HRMS reduces turnover by 2 employees per year, and the cost to replace an employee is 33% of their salary:

• Turnover reduction: 2 employees
• Replacement cost per employee: $75,000 × 33% = $24,750
• Total savings from reduced turnover: 2 × $24,750 = $49,500 saved annually

3. Reduced Absenteeism

Disengaged employees have 37% higher absenteeism rates. Assuming an HRMS reduces absenteeism by 10%, we can estimate savings based on reduced lost productivity.

• Annual absenteeism cost per employee (estimated 3% of salary): $75,000 × 3% = $2,250
• Total absenteeism cost for company: $2,250 × 50 = $112,500
• Savings from 10% reduction in absenteeism: $112,500 × 10% = $11,250 saved annually

Summary Estimated Cost Savings with an HRMS for Employee Engagement

Employee Engagement Enhancement with an HRMS

Improving Performance Management

An HRMS makes performance management more effective by eliminating outdated, manual review processes. Instead of managers scrambling to track down old performance notes or relying on once-a-year evaluations, an HRMS provides continuous feedback, goal tracking, and automated reminders. Employees stay aligned with expectations, feel recognized, and have clear development paths—leading to higher productivity and fewer disengaged workers coasting on payroll.

Enhancing Communication

Communication gaps are another major engagement killer. Employees who feel unheard or out of the loop disengage faster, costing companies in lost productivity and increased turnover. An HRMS centralizes company-wide announcements, employee feedback surveys, and real-time engagement tracking. No more critical messages getting buried in emails or employee concerns going unaddressed. The result? A more connected workforce that feels valued and informed.

Automating Training and Career Development

Training and career development are often the first things to fall through the cracks in a busy company, leaving employees feeling stagnant and unmotivated. Manually tracking training progress and career growth is inefficient, but an HRMS automates learning plans, tracks certifications, and provides employees with a clear roadmap for growth. Engaged employees are far more likely to stay, reducing costly turnover and the constant expense of rehiring.

Streamlining Recognition and Rewards

Recognition and rewards are also streamlined with an HRMS, ensuring employees are acknowledged for their contributions without the administrative burden of manual tracking. Whether through automated anniversary reminders, performance-based incentives, or peer recognition programs, an HRMS makes it easy for managers to show appreciation—boosting morale and engagement while reducing attrition.