Training Budget: A Budget Allocation Guide for L&D managers

We all know that well-trained employees play a critical role in your business’ success. Right L&D activities increase the whole company’s productivity, as well as the employees’ confidence and commitment. The impact of COVID-19, unfortunately, makes many businesses decide to save costs by cutting the L&D budget. It’s inevitable. Consequently, the question for most L&D teams now is how to optimize the training strategy to minimize its cost. To find the answers, consider our guide below for your training budget allocation this year.

How much do businesses spend on training budget?

The training budget will vary based on the company size and its specific training requirements. But it accounts for, on average, 2 -2,5% of the company’s operational budget. 

It’s also important to go detailed for training cost per employee. About 2 – 5% of salary budgets are invested in employee training in medium and large organizations. That proportion in a small-scaled business is much lower. 

However, after the COVID-19 times, L&D might have to do more with less. According to a survey by IE University, 25% of companies said they had cut the training budget. 

When having a realistic estimation of the training budget, the next thing is to plan the training more feasibly. At this stage, you should focus on defining the actual training that is needed to optimize the employee training cost. For example, senior employees or managers can be much greater than outside trainers for industry-specific topics. And on-the-job coaching and mentoring also cost you almost nothing.

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How to calculate the training budget?

A typical training budget will include the following factors:

  • Training delivery types: instructor-led or e-learning courses, seminars, workshops, etc. 
  • Training materials including textbooks, presentations, videos, etc. 
  • Staff time, which includes replacement time
  • Instructor fee (if available)
  • Initial communication for the training
  • Travel expenses for related participants
  • Ongoing training: for example, reskilling or upskilling 
  • Contingencies

There are still some unforeseen events that can result in extra costs. They can be unexpectedly quitting or temporarily leaving, such as maternity leave, sick days, etc. So your teams always have to follow and manage the training budget to ensure that it stays on track. 

It’s clear that the training cost will increase when you require more external resources. Besides, the more your business grows in size; the more your cost of employee training will rise.

How to allocate and optimize the training budget?

So now you have clarified the training budget and the training priority based on your employees’ needs. It’s time you find a way to optimize all training factors above to be the most cost-efficient. 

Here are some of our suggestions to minimize the employee training cost to deal with your company’s budget cut:

Internally 

  • Finding internal trainers

As mentioned above, senior staff, leaders, or managers can train their colleagues as effectively as external trainers do. So find specialists right in your company and equip them with strong communication and interaction skills. They will become great trainers for the rest. 

  • Increasing group training

By joining multiple employees in a training session, you can significantly cut the expense for training operations. 

  • Hosting monthly or weekly events

Those internal open events like workshops or talk shows can be a great way to deliver knowledge without a formal course. Employees are always more engaged and motivated to join such events. 

What you need to do is pick a discussion topic in advance and list out all concerns participants may have. Collect all information shared in the events and summarize them. Then send out as follow-up emails or storage on the company shared-source library. 

  • Implementing cross-training

This training type is most suitable for businesses that have an agile workforce. Give employees the responsibilities and have them learn from another colleague who is an executive of that role. In this way, you can train the employees with the required skills. 

Cross-training can frequently occur with changing roles so that employees remain motivated with the learning. 

  • Starting a mentorship program

A mentorship program can be a part of onboarding training that you will pay at no cost. Senior workers will act as mentors for new employees. They can introduce the company environment and help new members to easily catch up on their works. This increases the accountability of your training programs. 

Externally  

You still have to pay much more for external resources than for internal ones, of course. But there are ways to distribute external resources without going over the training budget. 

  • Taking advance of reusable materials 

Textbooks, CDs, or videos are some material types that have a long shelf life. You can store them and then reuse them for other employees. At the same time, cut down materials that are not constantly in use. 

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  • eLearning 

Most of the knowledge and information from eLearning courses is available online. So you can reduce the materials costs such as workbooks. Additionally, no travel cost is required as all participants can join remotely. That’s why eLearning is becoming a more affordable alternative for traditional training. 

  • Joining associations’ events.

All industry associations or trade groups hold annual events, seminars, workshops with industry-specific knowledge. And many of them are free for their employees’ members. So make use of these as free training programs.

  • Turning to clients or vendors 

You can negotiate employee training costs from vendors for a specific product or project. This might offer you a reduced cost, or even free, training program. Clients are also likely to invest in your training if they know it results in better service. 

To sum up

Remember that the right training strategy can cost you immediately but will save you money in the long term. Employee training costs can benefit as an investment in your human resources. So do not rush to cut off all L&D activities. Consider trying those techniques above depending on your employees’ needs, individually or in a mix to optimize your training budget. 

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