How to Establish a Budget for Your Employee Training and Development

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How to Establish a Budget for Your Employee Training and Development

Any company looking to grow will need to think about investing in the growth of their employees as well. In fact, many companies are actively shaping their Learning and Development departments to allow for personal and professional employee growth. Still, if you're at the beginning of this process you might benefit from a few tips and tricks to get you started.

First off, have a look at what other companies are spending on their employee training efforts. According to the 2018 Training Industry Report, although total expenditures seem to have gone down when compared to previous years, more companies are investing in employee training than ever before. This is partly based on the fact that:

  • Better trained employees earn more

  • Well-trained employees are more productive and satisfied at work

  • Productive employees need less supervision

  • Offering training programs makes employees feel valued and, in turn, they perform at higher levels

  • More efficient employees help increase the company‚Äôs bottom line

The other reason why companies are using employee training more is due to the rapid advancement of technology. Organizations are spending less on travel time, location overhead, meals, training staff, and training materials. However, they are spending more on providing bespoke eLearning courses, highly relevant content, better methods of knowledge delivery, and cross-platform technologies that allow for flexible learning.

After this initial research, figure out what you want to get out of your training course, how much money you can afford to invest in such a venture, and how training professionals might be able to develop the right program for your needs.

Why Have a Training and Development Budget?

It's important to have a budget in place for anything you want to invest in, in general. Having a budget in place for training efforts can save you a lot of hassle in the long run. You'll first need to determine how much of your company profit you can afford to invest back into your organization for training purposes. Having the actual numbers in front of you will help you make educated predictions about how this venture will affect your ROI.

A well-planned budget will help you reign in the costs of training and also assure you have some extra money set aside for unforeseen situations. On average, you should direct between one and five percent of how much you spend on salaries towards your training budget.

Ways to Calculate Your Training Budget

Your most important resource when looking to determine a training budget is your staff. Talk to your managers and HR staff to determine the following metrics:

  • What are the common employee gaps in knowledge?

  • What subjects do managers spend the most time on when training employees?

  • When and how often does training occur within the company?

  • What might be more efficient ways of training employees?

Answering these questions together will yield a unified battle plan for tackling the development of a budget and an effective training program.

Next, look at the numbers. As mentioned, try to use between one and five percent of your salary budget to deliver employee training. This percentage generally depends on the size of your company. You can use the following formula when estimating the yearly budget directed at training:

Total Salary per Year X 1-5%= Total Training Budget per Year

Depending on the resulting number, you can either add a bit more on top to account for unforeseen events or invest a bit less in the training and keep that buffer. You can also base your training budget on what similar companies are spending. This requires a more in-depth research phase. Although this might yield more accurate results, it might not be worth the time. Conversely, you can always hire a professional company to do this for you.

Steps You Can Take for Effective Training Budget Management

1. Survey Employees

It's best to try and align company goals with desired learning outcomes. This is the part where you would explain to your employees the importance of committing to the learning process. Use transparency to show them that the goal is to grow together, offer better services or products, and increase customer satisfaction.

You can then expand a conversation during which everyone can contribute. Ask employees or managers about existing knowledge and skill gaps, what ideas they might have for solving learning issues, what platforms employees prefer, and what learning goals they might have. Gathering this data will better position you to manage your training budget.

Also read:Tips for Managing Your Training Budget

2.Set Training Needs

Based on the previous subpoint, you can now define the training needs most of your employees present. Also, make sure your budget accounts for:

    • Salaries for trainers and consultants

    • Learning Management System (LMS) development

    • In-class instruction and tool costs

    • Travel expenses and facility overhead

3.Choose Your Learning Delivery Platform

You can choose to run in-class, Instructor-Led Training (ILT), or provide an eLearning course that employees can use for learning at their own pace. The delivery method depends a lot on employee preferences and skill level, as well as their proficiency with new online learning technologies.

4.Cut Costs

The fastest way to cut costs is to invest in an LMS and bespoke eLearning courses. Your online training budget will automatically be lower because you'll cut travel expenses, meals, location costs, and other classroom-based needs that an online environment can go without. Plus, by developing a cross-platform training experience, you'll allow learners to take their learning into their own hands, remove stress related to learning because of the learn-at-your-own-pace nature of the course, and empower them to apply new knowledge and skills immediately on the job.

Also read: Reducing Corporate Training Costs with eLearning

5.Leave Room for Changes

Regardless of how great a planner you are, remember that nothing ever goes according to plan. This is where that buffer will come in handy later. So, aside from leaving a portion of the training budget as a backup, also make sure that you're ready and flexible to quickly implement changes when needed. 


These are only some of the steps worth following when figuring out how to establish a budget for employee training. There are tons of other resources out there that can deepen your knowledge on the subject and give you a blueprint for how to follow through with building a smart, effective, and useful training initiative. Granted, all this information overload can make you feel overwhelmed. Avoid that by putting your project into the hands of people who have successfully done this before. Contact us today for a quote to find the custom eLearning solution that is right for your training budget!