What's The Real Cost of Training New Employees?

Michael Hansen
6 min read

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. The cost of training new employees provides a significant ROI and protects the health of your bottom line. Here’s how to determine the real cost of training new employees in your workforce.

How much does it cost to train new employees?

According to the 2017 Training 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.

Companies spend $1,075 on training per employee

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 the true cost of training new employees. 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 allows 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 employee’s 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.