What's The Real Cost Of Training New Employees?

What's The Real Cost Of Training New Employees?
Summary: Consider this: For an investment of just 10% of an employee’s salary (or less!), you can help create employees who excel in their work and are invested in the success of your company. Here's how to determine the real cost of training new employees.

Discussing The Real Cost Of Training New Employees Today

According to the 2017 Τraining Industry Report, companies spent an average of $1,075 per employee trained. While this may seem like small potatoes, this is a $200 increase from the previous year. This translates, in cash dollars, to a nearly 33% increase in overall training expenditures in the U.S. from 2016 to 2017 for a total of nearly 91 billion dollars.

Training costs include the actual materials created or utilized for training and time spent in each training module or conference. This is calculated into the total because every moment an employee spends in training is time away from their job.

While training is crucial for your employees and the success of your business, it does take employees out of the mix for a period of time.

What Are The Hidden Costs Of Training A New Employee?

The training cost per employee formula used in the report above does not necessarily calculate all of the costs of training a new employee. Without diligent attention, hidden costs can add up.

Potential hidden costs of training new employees include:

  • Administrative And Onboarding Paperwork Time
    Filling out forms for benefits, taxes, and insurance ties up new employees and HR staff.
  • Premature Turnover
    This occurs when an employee is trained and then leaves a job in six months or less.
  • Low Productivity During Training
    It stands to reason that an employee will be less productive when they are still learning how to do their job.
  • Supplies For New Employees
    This can be a major expense if your company supplies employees with a full office of products that include printers, laptops, and other basic supplies.
  • Manager Attention
    New employees often need more attention from managers, which takes higher-paid managers away from their other work.

Many of these hidden expenses can be mediated with high-quality employee training, but some (e.g., manager supervision and supplies for new employees) are just the cost of doing business.

What Are The Risks Of Not Training New Employees?

Poorly trained employees are just not as good at their jobs. This makes employees unhappy, lowers customer satisfaction, and eventually leads to conflicts that could have been prevented. This all makes sense, however, these aren't the largest risks of neglecting to add a formal new employee training program. What is? The high cost of employee turnover.

Digital training options along with on-the-job training allow your new employees to become more settled in their jobs—and happier employees can lead to an increase in your retention rates. Up to 20% of employees in the U.S quit within 45 days of being hired for a job. That number increases to as much as 50% when it comes to retail employees!

A turnover can end up costing your company 16-20% of your employees' annual salary. As employees move up the ladder, this cost can skyrocket, with managerial level training budgets hovering right around $188,000 for larger companies.

Imagine nearly $200,00 walking out the door annually. That’s the risk of not training your new employees.

Making The Cost Of Training New Employees Effective

Making the best use of employee and company training time and money is the key to making the cost of training new employees effective and manageable. Here are 4 strategies to protect your bottom line while still giving your employees the tools they need to succeed.

1. Create Repeatable Onboarding Programs

If you have to continuously create new onboarding programs for each new hire that adds up fast.

Create repeatable programs that cover the basics that every employee needs to know, offering specialized training only to those who need it. Use checklists of employee procedures to create a record of training, and make sure all managers know what steps to take (and in what order!).

2. Use On The Job Training

Relevant, targeted, and timely on-the-job training can be an incredible training tool that brings the cost of training new employees down.

Because this type of training is specialized and focused on the specific tasks they'll perform, employees can immediately see the value of the information. This means better employee engagement with increased flexibility and efficient use of company time (and training dollars!).

3. Implement Microlearning

Microlearning is a cost-effective type of training that:

  • Usually takes only two to three minutes to complete.
  • Allows employees to choose when, how, and where they tackle their training.
  • Generally focuses on one, clearly-defined learning objective or concept.

This style of training has been called by different names in the past, such as "bites" or "nuggets" of content, and it overlaps with other instructional trends. “Just in time learning” provides training right when an employee needs it. “Spaced learning” gives employees bits of information over spaced intervals. This has been shown to help employees retain more knowledge, over a longer period of time. And, mLearning is simply a style of learning that takes place on a mobile, or smart, phone.

No matter what you call it, this type of training is a cost-effective way to deliver information in easily digested and absorbed bits and can help employees do their job (without overwhelming them!).

4. Create Better Training, Faster

As you likely know, it takes time to develop a high-quality learning course. How long? There are 4 basic forms of eLearning. As was noted on the ATD website, these categories are generally defined as:

  • Level 1 (passive)
    The learner is a receiver of information.
  • Level 2 (limited interactivity)
    The learner offers a minimal response to cues, perhaps as part of multiple-choice questions or simple selections.
  • Level 3 (complex interactions)
    The learner offers varied responses in different formats (e.g., written, multiple choice, etc.).
  • Level 4 (real-time interactions)
    The learner provides complex responses to real-life and real-time situations.

Most eLearning courses fall somewhere between levels one and two. Based on survey results, these courses took between 42 and 71 hours to develop. So how can you create these courses faster?

  • Start with a learning needs assessment: This clarifies goals and focuses your training.
  • Use Subject Matter Experts: There is no need to create content from scratch.
  • Set out a timeline to create your eLearning course: This keeps you focused and on track.
  • Don’t skimp on resources: Spend the time, money, and human resources it takes to create solid learning experiences.