The HR Tech Tax: 5 Ways Modular Software Hides Your True Cost

By The EvalFlow Team | Categories: HR Tech, Pricing Strategy, Performance Management

Stop overpaying for a complex system that was never designed for modern performance. If you’re a People Leader at a growing company, you’ve felt the pain of being nickeled-and-dimed by your HR software vendor. You bought a flexible, modular system only to watch your Per-Employee-Per-Month (PEPM) cost balloon with hidden fees and forced upgrades.

This is the HR Tech Tax: the premium paid for complexity and forced upgrades within a provider’s own ecosystem. It's the cost of trying to make a generalist HRIS (like BambooHR) or a modular performance suite (like Lattice) do the job of a modern, integrated, AI-native platform.

It's time to expose the five common traps that lock you into high costs and limit your People Team's impact.

1. The Illusion: Your $11 PEPM is Really $25+

Modular software, popularized by vendors like Lattice, offers a low base price for core features (e.g., Performance + Goals). It looks affordable on the surface.

The trap is that the features you need to run a modern, strategic People Team are sold as separate, mandatory add-ons:

For a 100-person company, the base quote might be $1,320/month. Once you add the necessary modules for a comprehensive solution, the true cost can easily jump to $3,000+ per month, without any real negotiation power.

2. Trap #1: The Minimum Annual Spend Trap

Modular vendors often target the enterprise market, and they cover their bases with high financial gates.

Many platforms, including top competitors, require a $4,000 minimum annual agreement—regardless of whether you have 30 employees or 60.

The Impact: This practice instantly prices out high-growth startups and small-to-midsize businesses (SMBs) who need advanced performance tools but don't have the headcount yet. You are forced to pay for seats you don't use.

💡 Actionable Advice: When getting a quote, ask: "What is the dollar minimum commitment, even if our headcount drops?" Demand zero minimums.

3. Trap #2: The Annual Lock-in Tax

This is the simplest way vendors protect themselves from accountability.

Nearly all major platforms explicitly require a mandatory annual contract—or often a 2- or 3-year commitment—billed up-front.

The Impact: You are locked in, paying every month, even if:

1. Manager Adoption stalls after the first review cycle.

2. Product Updates don't meet your needs.

3. Your team is shrinking due to market changes.

This structure protects the vendor's revenue stream, not your People Team's agility.

💡 Actionable Advice: Insist on vendors who offer a month-to-month option. They are confident enough in their product to earn your business every 30 days.

4. Trap #3: The AI Feature Wall

AI is no longer a luxury—it’s essential for fairness and manager efficiency. However, in modular systems, AI is often held hostage.

The advanced, high-value AI features—like AI Review Drafting (saving managers hours) or Real-Time Bias Checking—are often designated as an "Advanced" feature tier or a separate module that adds to your PEPM.

The Impact: You are forced to pay extra for the very innovation that promises to make your performance process better, faster, and fairer. You get basic performance management but miss out on the strategic advantages of true AI.

💡 Actionable Advice: Ask: "Is your AI used in core workflows like drafting and bias checking? Or is it just for basic survey sentiment analysis?" Demand that AI be included in the base price.

5. Trap #4: The Core-to-Pro Forced Upgrade

This trap is most common when using an HRIS (like BambooHR or Gusto) as your performance system.

You get a great, simple HRIS for core functions (payroll, time off, employee records). Then, to unlock essential performance features (360° reviews, goal tracking), you are forced to upgrade your entire account to their more expensive "Pro" or "Enterprise" tier.

The Impact: You end up paying a higher per-user fee for redundant HRIS functionality just to get one strategic tool. You are overpaying to use a generalist tool for a specialist job.

💡 Actionable Advice: Use a Specialist Platform for performance. Keep your great HRIS for records, but integrate it with a dedicated AI performance engine that focuses only on growth, fairness, and development.

6. Trap #5: The Implementation and Training Fee

Many legacy HR tech platforms have complex backends that require consultants to set up.

They often charge massive, non-negotiable implementation fees that can be 10% to 20% of your first-year contract value, plus separate fees for mandatory training.

The Impact: These fees raise your Total Cost of Ownership (TCO), slow your time-to-value, and create a dependency on the vendor's professional services team.

💡 Actionable Advice: Look for modern SaaS tools with an intuitive design and no implementation fees for core modules. Setup should be simple enough for your People Ops team to manage in a single afternoon.

EvalFlow: The Specialist, AI-Native Antidote

We built EvalFlow to eliminate the HR Tech Tax. We are the specialist engine designed for modern performance, not a bloated HRIS or a confusing modular solution.

EvalFlow vs. The Traps:

You don't have to choose between advanced features and an affordable budget.

Ready to see how simple and strategic performance management can be?