Update: The article on budget for employee training was updated on November 6th
It's time to think about your budget for 2021. This naturally raises the question: How much should you budget for employee training?
The answer is not that simple. As a human resources manager in a small or medium-sized enterprise (SME), you know that the budget required for employee training can be quite high.
You know that many employees want more training from their employers and that learning and development are an important part of a positive employee experience – and also that companies that invest more in employee training can expect higher sales and profits .
What you may not know yet is how to turn all of this into a concrete number. This is where the challenge lies.
The thought of dropping everything and writing a draft budget can make the task seem so intimidating that you may not even want to tackle it. After all, no one is required to break down an exact budget for employee training, right? No.
But here's why you should do it anyway: SMBs that don't create a detailed training budget will only spend money on training when they have a surplus, quickly leading to them investing less than they need to to motivate and retain top talent.
When you walk the talk with your training budget, you ensure that your company is financially committed to training and developing its employees in order to retain the best employees and increase their motivation and productivity. In this article, we'll cover the key cost categories that every employee training budget should include and introduce two easy-to-use tools that you can use to create an initial budget draft right now. We'll also give you a few tips on how to save money on employee training.
The four most important cost categories in every training budget
Employee training for SMEs is no longer just about checking compliance boxes. Training is increasingly seen as a strategic measure that not only helps companies develop important skills and motivate and support employees in their daily tasks, but also attracts talented people who value their own learning.
Accordingly, spending on training has increased sharply in recent years:
Average spending of small businesses on employee training, 2012–2017
Budget for employee training Average expenses
Data source: Annual Training Industry Report, Training Magazine. Small companies were defined as companies with 100–1,000 employees ( source ).
For cost-conscious SMEs, this figure may sound frightening. Where does all this money go?
The answer varies from company to company, but generally there are four types of costs that should be considered in the employee training budget.
This is what your budget for employee training should look like
Budget for employee training allocation
1. Training staff (~50% of the budget)
Whether you decide to outsource training or employ training staff in-house, you need people in your company who are responsible for employee training.
This team is responsible for developing training materials, delivering the courses to learners (in person in on-site training or using training software ), and communicating the results to management.
It is not possible to say in general terms what ratio of trainers to trainees makes sense for every company, but one trainer for every 50 employees is a good starting point. Add to that staff for IT or support purposes and personnel costs can quickly make up half of your training budget.
2. Training tools and technologies (~25% of the budget)
How do you provide training to your employees?
For in-person training, you need to rent appropriate space - including all necessary equipment such as desks, whiteboards and projectors - or create it yourself. For remote training, you need a platform for a kind of virtual classroom. If you use online courses, you need computers, a learning management system (LMS) and an authoring system .
If your company is one of the many that uses blended learning ( learning methods that combine the advantages of face-to-face and e-learning and are considered particularly effective), you must consider the costs of the tools and equipment for both.
Are you planning to finally purchase a good LMS next year or make a long-needed upgrade to japan telegram data your existing system? There are numerous cost-effective options that even smaller companies can afford. But be careful not to cut corners: You should not forego options for support and system maintenance.
3. Training content (~20% of the budget)
When planning your budget, carefully consider all the topics you want to cover in the coming year. Next, you need to decide whether to develop the content for each topic in-house (which is more expensive but also more relevant) or purchase it ready-made from an external source (which is less expensive but also more general).
For face-to-face training, the content may include paper materials and tests, presentations, videos or lectures from external experts.
For online training, e-learning courses must either be created internally from scratch or purchased from a third-party provider.
At this point, you should also consider the cost of content and exams required to obtain (or not lose) certifications.
4. Other (~5% of the budget)
This last point includes everything that may arise during the year, for example: