Figuring out how much to pay for an applicant tracking system, and how to drive that price down, shouldn’t be a pain in the neck. And while choosing the right one could certainly save you lots of time in the future (86% of recruiters say that an ATS decreased their time-to-hire) it shouldn’t be a months-long decision process either.
If you’re picking up the slack from a literal lack of a human resources department, or you’re the HR department and perhaps can’t devote much time to this, we’ve got you covered. This is an ultra-compressed guide on everything you should know about ATS pricing models, budget-range, communicating ROI internally, and negotiating a price once you’ve picked vendors.
The main ATS pricing models explained, why do they vary so much?
If you were confused by the talk of cost models above, or you’ve checked out a couple of vendor websites and haven’t been able to find a simple and concise pricing page, that’s because most systems tailor their rates according to factors like business size, number of job openings, integrations, modules, and many other things.
However, most of them start with one of the following models before they adapt their price to you. For that, it’ll help to know which are the main ones and how they work:
- Flat rate: This is the easiest ATS pricing model to grasp, since it’s one amount regardless of the user count, or any count, for that matter. It’s usually calculated according to company size and is best for large enterprises that can shell out the money for a multi-year long contract at once.
- Pay per user: This one tends to be good for smaller companies since you get charged only for the number of users that will be on the admin side of the applicant tracking software. In other words, you could potentially have only the recruiter or recruiters use it and save money, but it’s definitely best to have more people involved in the recruiting process.
- Pay per vacancy: “Vacancy” here is just another word for the job postings. On this model, you pay depending on how many active job openings you’re working on. This works fine for small businesses as well, if they have low hiring volumes. For companies that are always hiring, it may be more expensive than it should need to be.
- Pay per module: This pricing model applies when the applicant tracking software comes as a part of a larger platform. It’s one more feature that you can add to what you already pay for other sorts of HR software, like a CRM or a platform for onboarding or employee engagement.
What do I need to do to set a budget for an ATS?
Whether you’re confused about recruiting software pricing models or not, it will help little to understand them if you’re unsure about how to set up a budget in the first place.
While some professionals might say that you should pick a system and then budget for it, we would argue that it makes more sense to create a business case for the tool, so we can then understand the scope of the project and its desired impact, and budget accordingly.
This will also make the process of selling the tool internally much easier, instead of running into pushback from the finance department after you’ve already demoed a solution or two.
For this to work, the business case should truly communicate the objectives of the new software, what problems it will solve, and how fixing those issues will result in value for the company at large.
How much does an ATS cost?
Naturally, the objectives and expectations will vary from one company to another, but there are certain price ranges for an ATS that you can consider depending on business size:
- Small Business: A small operation, as in, less than 100 employees, will likely have very limited hiring needs and be cost-sensitive. Paying per user or per vacancy would make the most sense here, and systems with that pricing model would range from $20 up to $2500 USD per month.
- Medium-Sized Business: If the company is between 100-500 employees, paying per user will make sense if only the hiring managers and certain stakeholders will need access to the tool. However, a flat rate can work here as well, and that way you mitigate the risk of going beyond the user or vacancy limit. Either scenario can fall between $10,000 to $15,000 per year.
- Large Business: With a larger business, the price will be more sensitive to the features that would be needed to accommodate the hiring processes already in place. The same goes for integrations that are must-haves. Businesses with 500-5,000 employees will likely pay something in the range of $22,500 to $50,000+ annually.
- Enterprise: Lastly, with businesses with more than 5,000 employees, a multi-year contract with a flat rate is likely the way to go. A budget for this would likely go beyond $125,000.
How do I get the best possible pricing?
The main thing to know here is that all the prices that a vendor originally quotes for you are negotiable. This is particularly true if you’re going to sign a year or multi-year contract. But how do you start negotiating?
To begin, we recommend taking the advice of Neville Postwalla, AVP of Talent Management at the Harbinger Group. Neville says that you have to know exactly what you need so that you can talk about getting rid of certain features, modules, add-ons, integrations or any optional functionality that might just be inflating your costs unnecessarily.
Coupled with that, you should also evaluate more than one vendor to compare costs and make sure that you are not just looking at the priciest end of whatever spectrum you’re in. Also, many vendors start off their pricing with a margin to be able to bring it down in case they get word of you possibly going with the competition. This is when discounts for a multi-year contract or pre-payment can be a strong possibility.
Communicating the ROI of ATS Software
Lastly, when gearing up to present the business case to the finance department, you should prepare some stats or projections of what the tool can do for the business. This should help justify the cost you now have in mind and should looking something like this:
- Our new ATS is going to make recruiter’s faster at their jobs thanks to automation, smarter sourcing, and the quick identification of top applicants, saving man-hours that translate to XYZ dollars and cents.
- If our ATS improves the overall candidate experience and recruitment process, more people will apply and our talent acquisition workflows will be faster and easier, resulting in a decreased cost-per-hire.
- Our time to fill each position can decrease by days or even weeks, saving us the cost derived from having those positions open for a long time.
- By using an ATS, we’ll be able to cut down what we spend on staffing agencies, job boards, recruitment marketing, and social media ads.
- An ATS can also help us streamline tactics like employee referrals and social recruiting, enabling a more efficient candidate lifecycle, for instance.
- Recruitment software also comes with powerful metrics that will let us develop a clearer idea of how we’re doing and what needs improving.
Stats can get more and more specific depending on your business context. The software vendors you’re considering will likely be able to help out with estimating those. They could also present to you some of the results that similar businesses to yours have derived thanks to their solution.
Conversely, you can also use our free and customizable ATS ROI calculator to help build up your business case.
You’ve invested five minutes on this, what now?
An ATS can be a massive decision in terms of bringing value and savings for a business. Why else would 98.2% of Fortune 500 companies use one?
However, it is precisely for that reason that so many things can go wrong. While we hope you now have everything you need to be on your way to purchase the right software solution and, maybe even save money while you’re at it, be sure to take your time. Remember to involve every stakeholder in the process, and draft a hell of a business case before vetting the best ATS solutions out there. In the long-run, it may very well be worth it!
This post originally appeared on SelectSoftware’s blog where we write about the latest in HRTech.