March 12, 2021

How much does employee training really cost?

By: ELM Learning

how much does employee training really cost
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Training by the Numbers

According to Training Magazine’s 2020 Training Industry Report, the average company in the U.S. spent $1,111 per employee this year on training costs: that’s $175 less per person compared to 2019. 

 

When you break the numbers down by size of company, the numbers become more interesting. 

 

Small companies (100 to 999 employees) increased their per person training to $1,678 in 2020 from $1,511 in 2019, while mid-size companies (1,000 to 9,999) decreased their per person spending from $829 in 2019 to $581 in 2020, down by almost 30 percent. Large companies also saw a decrease—from $1,544 in 2019 to $924 in 2020—or 40 percent. This article will distill additional findings from that report, in addition to findings from other industry leaders.

 

Of course, the above numbers have been greatly influenced by the COVID-19 pandemic. According to the Training Magazine report, total U.S. training expenditures declined more than half of a percent, from $83 billion to $82.5 billion. The decrease is attributed to a decrease in training staff payroll due to layoffs and furloughs, which was offset by increased spending on outside products and services such as consulting services, off-the-shelf and custom content, products, services, and technologies, and by, surprisingly, increased spending on facilities, travel, and equipment. But again, when you look at these numbers by size of company, the mid-size companies tell a different story. 

 

Average training expenditures for mid-size companies dropped by nearly $900,000 to $808,355; large companies increased overall training expenditures to $22 million in 2020 from $17.7 million in 2019, while small companies increased from $367,490 to $506,819.

 

When asked specifically about what types of training products and services companies expected to purchase next year, learning management systems scored highest, at 41%, followed by online learning tools and systems at 40%, authoring tools and systems at 37%, and content development at 34%.

Employee Training Costs by the Numbers

Overall, even while spending less per learner this year, companies provided more hours of training than last year (55.4 hours in 2020; 42.1 in 2019). Again, the size of the company matters. It turns out that large companies increased their training from 38.8 hours per employee to a whopping 102.6 in 2020 while decreasing their per person costs; small companies decreased training hours from 49.8 hours in 2019 to 41.7, even though they increased the per person cost. Mid-size companies increased their training hours from 33.9 in 2019 to 34.7 hours in 2020 while also decreasing their per person costs.

 

All of this needs to be considered in light of overall changes in training budgets. Mostly likely due to the pandemic, the number of companies reporting that their training budgets decreased doubled to 28 percent, up from 12 percent last year. That’s a big number. There were overall increases in training budgets of 23 percent, while 49 percent remained the same. When asked why their budgets decreased, cuts due to COVID-19 (67%) and reduced training staff (24%) were the primary reasons. For companies with increased budgets, their reasons were increasing their scope of training (64%), purchasing new technologies and equipment (47%), and adding training staff (47%). When asked what their highest priorities for training were for 2020, companies responded that they wanted to increase training program effectiveness, reduce costs, improve efficiency, increase the number of learners using their training programs, and measure training impact.

 

So who will get the highest share of the training budget next year? Customer service training gets top billing, followed by industry-specific training, IT/Systems training, and mandatory compliance training. Not surprisingly, when companies were asked how much of their training was put on hold during the pandemic, 16 percent responded that more than 75 percent was put on hold, 20 percent responded that 26-60 percent of their training was on hold, while 14 percent reported that their training wasn’t affected at all. When asked about the biggest training challenges during the pandemic, the top responses were as follows: Technology/ramping up to remote training – 28 percent; lack of resources/personnel – 13 percent; converting content to digital format – 18 percent; getting people engaged in remote training – 19 percent.

How per-employee training costs are calculated

Put simply, you can determine the per-employee training cost by dividing an organization’s training expenditure by the number of employees. But what exactly goes into a company’s learning expenditure? ATD Research, who publishes the yearly State of the Industry Talent Development Benchmarks and Trends, describes it this way:

 

This figure is composed of talent development (TD) staff salaries (including taxes and benefits), travel costs for TD staff, administrative costs, nonsalary development costs, delivery costs (such as classroom facilities and online learning technology infrastructure), learning supplier expenses, and tuition reimbursement. It does not include the cost of the learner’s travel or lost work time while engaging in learning activities (2020 State of the Industry, p. 15).

How training was delivered in 2020

There were some notable trends in how training was delivered in 2020. Blended learning techniques went up 5 percent, from 28 percent in 2019 to 33 percent in 2020; virtual classroom learning (online instructor-led learning) was up 8 percent from 2019 to 23 percent in 2020, while the percentage of training delivered via mobile devices doubled from 5 percent last year to 10 percent in 2020. It’s interesting to note that cutting-edge technologies like virtual reality and artificial intelligence did not catch on in 2020. Nonetheless, instructor-led training is still at the top, with an overall 40 percent of training hours being delivered in a classroom setting.

 

As to what that training will look like post pandemic, 54 percent of companies reported that they will try a hybrid model, with a return to classroom training and keeping remote learning, while 12 percent will return to regular classroom training, and 14 percent will deliver only remote training. 11 percent will keep remote training and create new classroom training.

What do employees want to learn?

Now that we know trends in per-employee training costs and how training is being delivered, what do companies want their employees to learn? What do employees want to learn? In a survey of over 500 global professionals by Udemy for Business, it’s clear that upskilling takes top priority. As a matter of fact, Udemy reported that 38% percent of the workforce was upskilled in 2020, as compared to 14% in 2019. According to The PwC Report, “Seventy-nine percent of CEOs worldwide are concerned that a lack of essential skills in their workforce is threatening the future growth of their organization.” In addition to upskilling—and perhaps, as an outgrowth of increased depression and anxiety brought on by the COVID-19 pandemic—employees are asking for mental health and wellness skills such as anxiety management, resilience, and stress management. In the healthcare field alone, consumption of stress management skills training went up by 5,408 percent, according to the Udemy report. That’s four digits! Udemy reports “that for every dollar spent on wellness programs, companies can expect their healthcare costs to decrease by approximately $3.27 (2021 Trends Report, p. 14).

 

The Udemy 2021 Trends Report also noted that the workforce is demanding skills in time management, focus, and self-discipline, as well as collaborative skills such as listening, business communication, and business writing (p. 17). According to LinkedIn’s 2020 Workplace Learning Report, the highest priority skills for L&D professionals are leadership and management (57%), creative problem solving and thinking (42%), and communication (40%). All of these trends are telling organizations that, in addition to skills-based learning, they need to have a holistic approach to employee learning.

 

Of course, all of this training takes time from the work day. According to Udemy’s 2021 Trends Report, lack of time is the biggest obstacle to achieving training goals (p. 8). LinkedIn’s report supports this concern, stating that 49% of learners say they don’t have enough time to learn at work. If they had the time, “learners are craving a highly personalized learning experience that serves up the right learning at the right time, without having to dig for it” (p. 26).

 

Numbers don’t lie; we’re seeing big changes in training costs industry-wide. Post-COVID, some of the changes will stick—most notably, an increase in remote learning. L&D professionals need to pay attention to remote learning trends and what training products and services companies—and employees—are seeking. 

Categories: How Employees Learn