SaaS vs. On-Premises HRMS: Which is More Cost-Effective?

If you’re looking for a new HRMS (Human Resource Management System) for your organization, one of the biggest decisions you’ll need to make is whether to go with a SaaS (Software as a Service) or an on-premises solution. To lessen your efforts, we’ve already brought together some points that may help you make the right decision before going with any of them. In this article, we’ll compare them from a cost perspective, and provide some guidance on how to determine which option is more cost-effective for your organization. So, let’s begin:

What is SaaS HRMS?

The SaaS HRMS is a comprehensive, modern, digital solution that simplifies HR tasks and processes for businesses of all sizes. This cloud-based software system is tailored to streamline and automate a range of HR activities, such as recruiting, onboarding, performance management, payroll, and benefits administration. It provides several benefits, including cost savings, user-friendliness, and scalability, to help companies manage their HR needs efficiently.

One such cloud-based platform that performs all crucial HR tasks at one place is Pypa HR. It is a free HR management software platform that comes with a wide range of tools to automate all time-taking, manual HR errands which are also prone to human errors. With features like time and attendance tracking, leave and performance management benefits companies to stay organized and efficient. No wonder more and more companies today, irrespective of their scale and industry are turning to SaaS HRMS to help manage their HR tasks and simplify them further.

What is On-Premises HRMS?

On-Premises Human Resource Management System is a traditional software solution that is installed and run on a company’s own servers or computer systems. This approach to HRMS is sometimes referred to as self-hosted or in-house. On-premises HRMS solutions provide businesses with complete control over their HR software, including data storage and security, just like how Oracle HCM does. The software is installed on the company’s own servers or computer systems, giving companies complete control over the system. 

However, this people management software can also be costly, requiring significant upfront investment in hardware, software, and IT staff to manage and maintain the system. Additionally, scalability can be a challenge, as companies may need to invest further to upgrade or modify the software. Despite these challenges, many companies still prefer the control and customization that on-premises HRMS provides. So, without any further ado, let’s understand more about which one is more cost-effective with the help of the following points:

#1. SaaS vs. On-Premises: Initial Costs

As per initial costs, on-premises HRMS is usually more expensive than SaaS. This is because you need to purchase the software upfront, as well as the hardware and infrastructure to support it. Additionally, you’ll need to hire IT staff to install and maintain the software and hardware. On the other hand, with SaaS, you typically pay a monthly or annual subscription fee, which includes the cost of the software and infrastructure.

However, it’s worth noting that there may be some hidden costs associated with SaaS that you’ll need to be aware of. For example, some providers charge additional fees for implementation, data migration, and training. You’ll also need to factor in the cost of any integrations or customizations you require, which may be more expensive with SaaS than with on-premises.

#2. SaaS vs. On-Premises: Ongoing Costs

When it comes to ongoing costs, SaaS and on-premises HRMS have different cost structures. With SaaS, you typically pay a monthly or annual subscription fee, which covers the cost of the software, infrastructure, and ongoing maintenance and upgrades. On the other hand, with on-premises, you’ll need to budget for ongoing maintenance and upgrades, as well as the cost of any hardware replacements.

One advantage of SaaS is that it allows you to scale your HRMS as your organization grows. With SaaS, you can typically add or remove users as needed, and your subscription fee will adjust accordingly. With on-premises, however, you’ll need to purchase additional licenses and hardware as your organization grows, which can be more expensive in the long run.

#3. SaaS vs. On-Premises: Security and Compliance Costs

Security and compliance are critical considerations when it comes to HRMS. With SaaS, the provider is responsible for maintaining the security and compliance of the software and infrastructure. This can lead to an advantage for organizations that don’t have the resource to invest in top-of-the-line security and compliance measures

Alternatively, with on-premises, you (the organization) are responsible for maintaining the security and compliance of the software and infrastructure but it can be best for those organizations that have strict security and compliance requirements, as it allows them to implement their own security measures and controls. 

#4. SaaS vs. On-Premises: Maintenance Costs

Another important consideration when it comes to HRMS is maintenance costs. With SaaS, maintenance, and support are typically included in the subscription cost. This means that the provider is responsible for maintaining and updating the software and infrastructure, which can save organizations significant time and resources. 

Whereas, with on-premises HRMS, organizations are responsible for the same by themselves. This can be a significant time and resource investment, requiring dedicated IT staff to manage and maintain the system. Organizations may also need to purchase additional hardware or software licenses to keep the system up-to-date. Additionally, if issues arise, organizations must rely on their internal IT staff or pay for external support to resolve them.

#5. SaaS vs. On-Premises: Scalability

Scalability is another important consideration when choosing between SaaS and on-premises HRMS. SaaS solutions are often designed to be scalable, allowing organizations to easily add or remove users as needed. This can be particularly beneficial for organizations that experience rapid growth or fluctuating employee numbers.

On-premises solutions, however, can be more challenging to scale. Organizations may need to invest in additional hardware or software licenses to accommodate growth, which can be costly and time-consuming. Besides, scaling an on-premises solution may require significant IT resources and expertise.


Ultimately, the choice between SaaS and on-premises HRMS will depend on a variety of factors, including organizational needs and resources. While SaaS may be more cost-effective and easier to maintain, on-premises solutions offer more control and customization options. With the help of the points mentioned in this article, we hope you can carefully evaluate the options on hand and consider the long-term impact of your decision before making your mind.

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