05 - Employee Training Cost and Effective Ways of Optimizing the Cost.

 

Introduction.

When considering on the organization growth and development, it is very important to understand the importance of conducting continues employee training programs. Arranging training to new recruits will direct that staff to do their job and set clear understanding about the company and expectations of the organization. Meanwhile, by training existing staff, will direct to improve current expertise, employee retention and will improve professional development. Every training program has its own cost, where organization has to bear and manage. Understanding about the cost of the training program and optimizing will also be an important factor (Bensla, 2023).

What is Employee Training Cost?

According to the Indeed (2023) employee training cost defines as the amount of money an organization expends to prepare their workforces with the required skills and knowledge which will be useful on performing their day today tasks. In general term, this is the budget that, which each organization allocated to training new and existing employees.

Factors that Affect the Cost of Employee Training.

Company Size.

Size of the company is one of the main factor of deciding the training cost. Employee training cost are higher in smaller companies than the large companies. And large companies spend more time on training people than smaller companies (Malik, 2021).

Industry.

Training cost differs according to industry where industry specific trainings will be higher than the generic training programs. There are some Industries such as leisure and hospitality which not required extensive training programs. On-the-job training will be sufficient. Healthcare industry will be another example where it has to spend more on employee training (Malik, 2021).

Profession.

To increase the effectiveness and the applicability, training should be more into role specific. Which support employees to perform better and which will be leading better business outcome. In some industries, employer cannot avoid these training cost, since it will ensure that the qualifications of staff comply with the local, industry regulations (indeed, 2023).

Experience Level.

To develop new member will take less resources than training an experienced employee, where they required a basic knowledge initially. Once they become ore advances and experienced on their profession, then they require more specialized trainings, where those training are more expensive (indeed, 2023).

Training Method.

There are few popular training methods available and each training method consist of its own cost and learning capabilities. For an example external instructor will be more costly than conducting the same training with senior manager who's is current employee of the organization. Likewise, e-learning has become cheaper because of the cost effeteness (Malik, 2021).

Complexity and length of training.

On-site training is he more cost effectiveness than the sending employee out for offsite trainings. Shorter training will cost less.

Hidden Cost.

As well as the direct costs, there will be and hidden cost also involved. Some of the hidden costs are,

•         Administrative costs.
•         Premature employee turnover cost.
•        Costs incurred due to low employee productivity.
•        Cost of supplies.
•        Travel costs.
•     The cost incurred due to engaging supervisor’s productive hours (Malik, 2021).

Calculating Training Cost per Employee.

Organization HRM is responsible of identifying the cost. When you identified all the indirect and direct costs involving for the particular training then you have identified total cost for the company (Gray, 2023).

Per employee training cost = Total costs / number of employees (eduMe Ltd, 2023)

 

Effective Ways to Optimizing Employee Training Costs.

Nowadays, most of the companies are more focusing on optimizing their costs due to the economic uncertainty. The challenging part is to reduce the costs without compromising quality or effectiveness. So it is very important to understand ways of optimizing the cost while still improving the impact of your employee training programs.

Continuous monitoring on workforce’s knowledge gaps.

Analyzing your employees knowledge gaps will define on exact need of trainings. Without proper analysis, organization will end up with wasting money and time in training program without addressing the organization goals and needs. Assessment and skills gap analysis are key exercises where it will help you to identify the gaps between the skills or knowledge employees and what they need. It also helps you adapt your upskill training programs to address those specific gaps, ensuring that investment is targeted and impactful (Karpenkova, 2023).

Reduce training costs that are not adding value.

HRM has to identify what are the training which are not aligned to strategic goals and can determine clear value and then need to remove those kind of trainings from the training list. Also HRM needs to  protect compliance training and other training directly connected to strategic goals perhaps sales to drive revenue, or service to retain customers, or processes to improve efficiency and reduce mistakes. As such, training on assertiveness skills or business ethics may just have to wait for a while (Tribal Habits Pty Ltd, 2023).

Use of free on-demand and eLearning resources.

Nowadays internet is a powerful leaning option, where consist of many valuable information that can supplement your training programs. There are many websites, blogs, and educational platforms offer free access to high-quality learning resources on diverse topics. HRM can use any of trusted web platform to assign relevant employee to follow them (Karpenkova, 2023).

Digitize training process will beneficial on reducing the associated expenses. These platforms offer a range of features that support the entire training journey, from employee onboarding to ongoing upskilling. Main benefit of this is employee can refer the same content anytime based on the need. Where it will help on boosting knowledge retention, improves training efficiency and also lowering the costs of ongoing training (Karpenkova, 2023).

Developing micro learning.

Microlearning will delivers short, stand-alone pieces of content that take little time. It breaks down information into smaller, more manageable units. Where typically range from a few minutes to around 5-15 minutes in length. This offers several advantages in terms of cost reduction. It excludes the need for extensive development of lengthy training materials, where user can create short and specific modules that address specific learning objectives. Since modules are short and focused, employees can access them as needed, minimizing disruptions to their work schedules. To implement the approach effectively, HRM has to consider microlearning platforms like 7taps or iSpring Learn (Karpenkova, 2023). 

Promote knowledge sharing and peer-to-peer learning.

There will be no cost involvement in knowledge sharing and peer-to-peer learning within the organization. Develop internal knowledge sharing platforms, such as intranets, wikis, or collaboration tools, where employees can contribute and access relevant information (Karpenkova, 2023).

Continually improve your training programs.

Regularly updating training programs, so that it will help to prevents from becoming outdated and costly to update in the future. HRM can take a view on training programs once in a while (at least every year) to recognize areas for improvement, addition of new knowledge and technologies, and ensure that training remains aligned with the developing needs of your organization. This proactive approach will minimize costs and disruptions to your organization’s learning initiatives (Karpenkova, 2023).

Prepare a cost-benefit analysis of training initiatives and cost-reduction strategies.

Arrange a cost-benefit analysis to identify the return on investment (ROI) of the training and to identify if program needs further optimization. First identifying all the costs associated with your training initiatives, including development, delivery, technology, and administrative expenses.  Evaluate both the tangible and intangible benefits that will outcome from your training programs.  Increased sales, improved performance metrics, or reduced errors can be included as tangible benefits. Where enhanced employee morale, increased job satisfaction, or improved teamwork can be count Intangible benefits (Karpenkova, 2023).

As per He, (2022), training costs consist of all funds and resources committed to educating workers directly and indirectly, including course fees, textbooks, and other instructional resources. Where reduce training costs include deducting unproductive training expenses, using in-house knowledge, and having more virtual learning sessions. These ideas aim to empower teams and provide workers access to the high-quality information required for effective performance. For any organization, reducing the budget allocated for training is also a risk. Deducting training budgets is also has to be done through a careful evaluation of the company’s education needs and reaching a compromise. So HRM has major role on evaluation the cost and arranging appropriate deductions where it will help organization in a good manner.

 

List of References.

Bensla, 2023. Employee Training Cost: Top 5 Tips on How to Optimize Your Budget risely.me [Online]. Available at https://www.risely.me/employee-training-cost/#:~:text=To%20minimize%20employee%20training%20costs,knowledge%20sharing%2C%20and%20regularly%20evaluate. Accessed on 12th of August, 2023 .

eduMe Ltd, 2023. What is the Average Cost of Training a New Employee? edume.com [Online]. Available at https://www.edume.com/blog/cost-of-training-a-new-employee Accessed on 12th of August, 2023.

Gray, 2023. patriotsoftware.com [Online]. Available at https://www.patriotsoftware.com/blog/payroll/cost-training-employees-average. Accessed on 12th of August, 2023

He, 2022, How to Reduce Training Costs in Business teambuilding.com [Online]. Available at https://teambuilding.com/blog/reduce-training-costs Accessed on 12th of August, 2023.

Indeed, 2023. Cost of training employees with types and tips indeed.com [Online]. Available at https://uk.indeed.com/career-advice/career-development/cost-of-training#:~:text=What%20is%20the%20cost%20of,training%20new%20and%20existing%20employees. Accessed on 12th of August, 2023.

Karpenkova, 2023 14 Effective Ways to Reduce Employee Training Costs whatfix.com [Online]. Available at https://whatfix.com/blog/reduce-training-costs.  Accessed on 12th of August, 2023

Tribal Habits Pty Ltd, 2023. Top 10 tips to reduce training costs tribalhabits.com [Online]. Available at https://tribalhabits.com/10-tips-to-reduce-training-costs/. Accessed on 12th of August, 2023.