As an SME manager, reducing expenses and optimizing your budget are among your top priorities. And one of the hardest expenses to estimate is training.
Whether it is for continuous training or onboarding new employees, the bill can get steep quite fast.
On the other hand, not training your employees can bring significant losses in terms of efficiency, inconsistencies in the service and a great fragility when it comes to internal expertise. In the end, neglecting training is also expensive.
Training employees is one of the most important investments you can make for your business. But how can you know if the cost of training is really worth it?
By calculating its ROI (Return on investment)!
Knowing how to calculate the cost of training and its ROI will allow you to make a more informed decision before investing in employee training.
Outline of the article
- Factors that affect the cost of training
- Hidden costs to watch out for
- How to calculate the ROI of your training?
- Employee training is a real investment
- Where does an LMS come in?
Reading time: 8 minutes
6 factors that affect the cost of training
What is training?
Training is a process that enhances an employees’ skills, knowledge set and abilities. It can be done through in-class learning, on-the-job learning or e-learning.
Knowing how much training costs involves more than just its total price or its price per person.
It involves its real cost and the return on investment (ROI) it will yield.
There are different factors that can affect the cost of training: the type of training, the size of the class and the duration of training; these are some key factors to consider.
The size of the company
You have several options.
You may choose an external trainer. External trainers are specialists in their field, and they sell their expertise. You can also opt for an internal trainer. This would be an in-house specialist who could share their techniques, tools and best practices with their colleagues.
One thing is certain: using an external training company is usually more expensive than opting for internal trainers.
However, if you manage a large company, you may be able to negotiate a better price per person.
Hiring an external trainer is often the most expensive option, but it can be very advantageous: you will be able to benefit from an expert-level training that is adapted to your company needs.
Although this is a cheaper option, there are also costs associated with using an in-house trainer: their remuneration and overheads.
When choosing a trainer provider, it is essential to compare their price per person with their experience and qualifications.
If your employees have little experience in the field that you would like them to be trained in, it will usually take longer and cost more to train them.
Inversely, if they are already familiar with the subject, it will be cheaper and faster to train them.
You can do a skills gap analysis to assess the current situation and better target the level that needs to be developed, according to your organizational priorities.
The training method
The teaching method you choose will also impact the cost of training. In-class learning is usually more expensive than online learning.
And even for online training, there are significant differences between the investment required for synchronous vs asynchronous training. Although setting up a pre-recorded training has a higher initial cost, it often yields a more interesting ROI in the long term.
Think about it: you only create the training content once, and you can reuse it for several years!
The type of position
The type of position will influence the type of training required, and involve online or field sessions, depending on the position needs.
This could impact the total training cost, since not everything can be done online.
The training location
Off-site training will inevitably be more costly than on-site training. If you opt for off-site training, you will have to consider the venue rental costs and your employees’ travel expenses.
However, this is sometimes the best option, especially if you have employees in several locations that need to be trained.
There is always the option to hold your training in the office. In this case, you will only need to account for travel for employees who normally work in other branches or work remotely. This is a good middle-ground option!
If you are considering online training, there are no costs related to conducting the session!
While training employees provide many benefits, it can also lead to loss of productivity. Obviously, employees cannot work while they are in training, and this cannot be avoided.
You also need to think about the amount of time your employees will have to adapt and apply the newly learned concepts, which can vary in complexity.
However, it is important to note that lost productivity is not always a negative cost. You also must measure its indirect benefits.
For example, training can sometimes help avoid potentially costly mistakes!
5 Hidden Costs to Watch out for
In addition to direct costs of training, there are hidden costs that you need to be aware of.
The trainer’s fee is usually the most important cost of the training. The trainer’s expertise and the duration of the session impact the cost of training.
Apart from the trainer’s fees, there are also travel and accommodation costs to consider, if the trainer comes from a different location.
Your employees’ time
The time your employees spend in training is another important cost to consider.
When employees are in training, you still have to pay their salary. You might also have to pay replacement salaries, if their positions are critical to the smooth running of operations.
Next, you have to consider training material costs, such as manuals and supplies.
And then, there is the cost of certification, which is inevitable if your company needs staff to be certified after being trained.
Employee travel costs
If your employees have to travel away from their usual workplace for training, they will have to pay for transportation costs.
For long training sessions, it is often recommended to provide meals or snacks, especially if the sessions are not being held at the office.
There are costs related to the administration of the training, such as application fees and venue rental. There is also all the time your human resources teams and managers have spent making an inventory of the training to be offered to each employee, and managing registrations.
These costs are not easy to estimate, but they must be included in your training budget planning.
How to calculate the ROI of your training?
How can you know if a training program is worth the investment?
It can be hard to determine whether a training program is worth the investment or not. You must consider all associated costs, both direct and indirect.
This brings us to the concept of return on investment (the famous ROI)!
The return on investment is a way to measure whether a particular investment is worth making (or not).
You calculate the return on investment by dividing the gain from the investment by the amount of money invested. The result is a percentage that indicates how profitable the investment is.
But how to calculate the cost of training and its return on investment?
There are different ways to do this, but the most common one is to divide the expected gain (benefits) of the training by the cost of the program (the amount you are investing).
(Gain – Amount invested / Amount invested = ROI
A good ROI comes close to 10 (the higher it is, the better).
For example, if you invest $500 in a training that allows you to earn $2000 per year, your ROI will be 3, or 300%.
(2000-500)/500 = 3
(2000-500)/500 x 100 = 300%
Cost of training calculator
Use this table to determine which costs apply to your training and calculate the total amount to be invested.
To estimate the average cost of training per employee, divide each item by the number of employees participating in the training.
Cost of purchasing the training
Travel duration x Payroll of participating employees
Salary for the creation of the training
Production time x salary of the employee in charge of creating the training
Coffee, meals, snacks and allowances
Training duration x Payroll of participating employees
Content creation software license
Divided by the number of training courses created in a year
Online training platform license
Annual invoice / amount of training courses to be published on the platform
Estimated cost of lost operational productivity while employees are in training
Cost of purchasing or renting content creation equipment
Divided by the number of content or training courses in a year or during the rental period
Time needed for organization and follow-up x Salary of the person in charge
Time for applying the training content learned
Allow 1 to 3 hours per employee to experiment, after the training x Payroll of the participating employees
Employee training is a real investment
Training is an investment, and like any investment, there are associated risks.
However, if you choose your training well and manage it properly, it can turn out to be very beneficial for your business.
Trained employees = Employees who are better equipped to meet your business needs.
Employers often consider training to be a cost rather than an investment, when they see it as an expense.
However, good training can be very profitable.
A company that trains its employees is better equipped to deal with its changing needs. Trained employees are also generally more motivated and have a better opinion of their company.
Here are some key elements to measure to estimate the benefits of training:
- More conversions by the sales team
- Reduced customer churn
- Improved customer satisfaction score
- Decreased support call numbers
- Faster and easier implementation of new systems or processes
- Increased average bills, as a result of good customer service
- Faster pace of daily production
- Decreased numbers of injuries and therefore absences
- Improved employee relationships
Therefore, training is an investment that has many potential benefits! When done right, it leads to increased profits, greater employee satisfaction and better customer relations, to list just a few!
The many benefits of continuous learning
Continuous training is an excellent way to develop and deepen employee skills and keep the company up to date with the latest technology.
Beyond the technical aspects, training on behavioral skills is also important.
Employees who receive behavioral skills training are more aware of their own behaviors and those of others. They can better communicate and collaborate, which leads to overall improved productivity.
Training allows employees to feel valued and motivated, which is crucial to a company’s success.
Where does an LMS come in?
A learning management system (LMS) is a powerful tool that helps companies reduce their training costs.
An LMS such as Didacte can help you optimize your ROI by allowing you to track the effectiveness of your training programs. You will be able to target your spending more efficiently and get a better return on investment. Ultimately, you can manage training processes more efficiently, thus making the most of your resources.
How is that possible?
Centralizing training allows the sharing of best practices, which leads to an increase in productivity.
Digitizing data yields time savings in management by human resources and managers. In addition, by digitizing the data, you no longer have to worry about losing important information (yay!).
- One way to reduce the cost of training is to use asynchronous training. This type of training helps employees become more autonomous in their learning, as they can learn at their own pace. They can spend less time on training, which in turn reduces the overall cost of training.
- Creating online content is a great way to reduce training costs. By creating the content only once, you can reuse it for different trainings. This not only saves you time, but also reduces the overall training costs.
Online content creation also provides more flexibility and creativity in the way the information is presented.
Therefore, an LMS clearly plays an important role in reducing training costs and increasing efficiency.
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