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How to Reduce Employee Training Costs

6 cost effective training methods for best practice employee training

employee training

You might have seen the shock research revealing how employee turnover can cost employers more than 33% of an employee’s annual salary.

A good chunk of this is the significant investment needed to train the new employee. This is an expense that can’t be skipped.

Training helps employees develop the skills to do their job well, fit in with the team, understand customer needs, communicate effectively, and handle challenging situations. It also increases retention and engagement.

So, when money’s tight, as it often is, how can a business reduce employee training costs without missing out on these benefits? We’ve done the hard research for you, and list out 6 cost-effective methods to try below.

What is the cost of training employees?

First up though, it's worth noting Training Mag’s 2022 Training Industry Report shows that in 2022 the average company spent $1207 US ($1806 AUD) per learner per year on training (scroll down to see graph). This is up from the year before, which was $1071 US ($1603 AUD).

While spending a bit more per learner, companies provided slightly fewer hours of training in 2022 than in 2021. On average, employees received 62.4 hours of training in 2022, compared to nearly 64 hours the year before.

Training Mag says most respondents who reported an increase in their training budgets attributed it to:

·       Increased scope of training programs.

·       Added training staff.

·       Increased number of learners served.

·       Purchased new technologies/equipment. 

What about the indirect costs of training employees?

Adding staff and increasing the number of training programs are direct costs of training, but indirect costs might also include transport to workshops and conferences, loss of productivity from being away from their desk, the time taken to design and develop training programs, need for temporary staff to cover for those away training, and any decrease in productivity as learning outcomes are discussed or implemented.

These costs could easily double the cost of training and should be taken into account.

What is the cost of not training employees?

"The only thing worse than training your employees and having them leave is not training them and having them stay." — Henry Ford, Founder, Ford Motor Company.

Here’s the intriguing thing. The cost of not training employees is far more expensive than training them.

Cutting corners on training or insufficiently investing in employee development poses significant risks to companies:

·       Without proper training, employees may lack the necessary skills and knowledge to perform their roles effectively, leading to decreased productivity, higher error rates, and compromised quality.

·       It may result in a disengaged workforce, as employees may feel undervalued and unsupported. This can lead to higher turnover rates, lower job satisfaction, and a negative impact on overall employee morale.

·       Research has shown that companies that neglect training and development initiatives have a 12% higher turnover rate compared to those that prioritise employee learning and growth.

According to a study by LinkedIn, employees are 47% more likely to stay with a company that provides opportunities for professional development and learning.

In other words, there’s a direct correlation between training and development programs and employee retention, engagement, and productivity. Perhaps that's why Training Mag's study shows large companies increased spending on training in 2022 (below).

training costs

Graph from Training Mag’s 2022 Training Industry Report (in U.S. dollars)

Training Current Employees vs. Hiring New Employees 

Building a thriving, learning culture won’t happen if current employees are sidelined in favour of newer, shinier staff.

Anyway, a 2016 study by the Society for Human Resource Management (SHRM) found that the average cost per hire is approximately $4,129 US ($6,179 AUD). This cost includes recruitment, onboarding, and initial training expenses.

Given an employee’s average training costs set out by Training Mag are $3000 US less than this, it’s a no-brainer to back the employees you already have.

As Robert Glazer says in Elevate Your Team, the key to accelerating an employee’s growth trajectory is doubling down on their personal and professional growth and making it more deliberate and company-wide.

“Organisations must find a way to give their rising stars an opportunity to learn and grow or risk losing them to competitors who will,” he says.

6 Cost-Effective Solutions to Reduce Employee Training Costs

Balancing the need for comprehensive training with the concern of managing training costs is top of mind for every business owner and manager.

However, there are cost-effective solutions available to meet training needs without breaking the budget.

Virtual masterclasses and other innovative approaches offer viable options for companies seeking efficient and budget-friendly employee training methods. Don’t put off capacity-building just because you have a small budget.

"Now is the time for businesses to invest in skills and development capabilities if we are to grow a resilient and competitive workforce." - Claire Hopkins, interim CEO of RMIT Online

Provide Structured On-The Job Training

According to a report by the Association for Talent Development (ATD), structured on-the-job training is highly effective, with an estimated 80% of workplace learning happening through on-the-job experiences.

By focusing on learning the tasks that employees are expected to learn on the job, structured on-the-job training closely connects training outcomes and work expectations.

On-the-job-training is also cost-effective by:

·       Utilising internal resources (business can tap into the skills of their own employees for peer-to-peer learning).

·       Being targeted to specific job requirements (less “waste”).

·       Enabling employees to apply their newly acquired skills immediately in their work environment. This results in faster skill development and a quicker return on investment.

·       Being convenient. Training can be done within the existing workplace environment.

Invest in e-learning platforms

Since the pandemic, e-learning platforms have become the ideal training solution for teams due to their cost-effectiveness, convenience, effectiveness, and flexibility in delivering training content.

With a U.S. study showing 41% of workers (with jobs that could be remote) working in a hybrid format in February 2023, e-learning is a workable solution for a distributed workforce.

As well, virtual masterclasses, online tutorials, and video-based training materials help to reduce indirect costs of training.

According to Brandon Hall Group’s HCM Outlook 2017 Survey, e-learning can significantly reduce employee training time by 40-60% (compared to face-to-face training).

And, with yearly subscriptions as low as $498 AUD for a Growth Faculty membership, companies can offer 12 months of interactive and engaging learning experiences for less than a third of the average training budget.

Consider mentoring programs

John Crosby, former CEO of the Crosby Group, stated, "Mentoring is a brain to pick, an ear to listen, and a push in the right direction."

Mentoring is effective and it reduces training costs by offering workplace coaching potentially in-house. 

Mentoring can take many forms:

·       Pairing experienced employees or managers with junior colleagues to provide guidance.

·       Establishing cross-departmental mentorship initiatives to encourage knowledge sharing.

·       Implementing reverse mentoring programs where younger employees mentor senior executives on emerging trends and technologies.

Mentoring also helps in retention. As Joyce University reminds us, studies cite that the average person retains 90% of what they learn when they teach the concept or immediately put it into practice.

Note, mentoring is not lecturing. As Michael Bungay Stanier says, when someone is constantly on the receiving end of advice, they lose motivation to bring their best self to work. Book your spot in our 2023 event with Michael Bungay Stanier.

Take Advantage of Free Learning Resources 

With little or no budget, companies can still offer a wide range of learning resources for employees.

Free learning resources can include a variety of materials and platforms such as templates, podcasts, YouTube videos, books, webinars, blogs and online articles, and open educational resources (OER).

Even small increments of self-guided learning can have a significant impact on employee growth and skill development.

So, do as executive coach John Spence urges, and cultivate a culture that embraces continuous learning and improvement. It costs very little to develop a growth mindset.

Utilise ATO Deductions 

Reducing training costs can also come from ensuring you claim deductions offered by the Australian Tax Office (or tax regulator in your jurisdiction).

According to the Australian Tax Office, you can claim a deduction for the cost of attending seminars, conferences, or training courses to maintain or increase the knowledge, capabilities, or skills you need to earn your income in your current employment.

You can claim:

·       Fares to attend the venue where the seminar, conference or training course is held (unless it is held at your normal workplace).

·       Registration costs.

·       Accommodation and meals, but only if you need to travel and stay away from home overnight to attend the event.

As well, small businesses may be eligible for the Small Business Skills and Training Boost.

Subject to law, small businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia.

Try Microlearning 

Microlearning involves bite-sized (5 minutes or so) learning snippets on one topic available on your mobile phone, tablet, or laptop.

According to Training Mag, employees learn more in less time with microlearning.

It says the important elements of microlearning are:

·       It is a cost-effective way of learning and training.

·       Delivery of training is rapid and efficient.

·       Promotes collaborative learning.

·       Easy and flexible training modules.

·       Accurate and to-the-point course content.

Microlearning can also include interactive learning with polls and quizzes.

Importantly for busy employees, the concise nature of microlearning enhances knowledge retention as learners can revisit and review the content as needed.

Discover a Cost-Effective Training Solution with Growth Faculty

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