How to Calculate Your Training and Development Budget: The Best Way

Techniques to Compute Your Training and Development Budget

 

Techniques to Compute Your Training and Development Budget
How to Calculate Your Training and Development Budget | Techniques to Compute Training Budget

 

Techniques to Determine the Training and Development Budget For Your Business

 

As per the Association for Talent Development’s 2017 State of the Industry report, establishments devote an average of $1,273 per employee for straight tuition expenditures. Establishments lesser in size spend more per employee and bigger organizations spend a lesser amount per employee but smaller organizations have a much smaller training budget than those bigger organizations.

There are a number of different techniques that establishments define what their training budget will be for the year, but one of the best common formulas for determining that is the dollar amount devoted to learning as a proportion of what is being expended on salary. Though, this may not at all times work for every business.

Also Read: Shrinkage, Attrition & Retention: Formulas & Calculations

Ways to Calculate Your Annual Training Budget

 

Total Training Budget(I)

 

Total Annual Salary Budget X 1-3% = Total Training Budget

 

This calculation consider the overall salary budget for the complete year and multiplies it by 1% to 3%. 1% to 3% is what you might use to represent size, industry or other organization specifications.

This method ensures that the organization is strategically committed to the learning and development of employees and leadership.

It can also be based on how much the company has historically spent on training. For instance, previous year we consumed 2.5% of our salary cost on training. If the requirement of training appears to be the same, the same % may be applied for the next year

 

Total Training Budget(II)

 

Industry Specific Average per Employee X FTE = Total Training Budget

 

Calculating a training budget based on a reputable industry report is a great way to benchmark it against similar companies in size and industry. Use these reports not only to ensure that training and professional development investments and strategies align with trends but also to ensure competitiveness within the talent market.

Predetermine training requirements, estimate and calculate costs

This calculation takes a little more work than the year before. It is less of a formula and more of an estimate based on the needs of the organization. Determine a training budget using identified training needs and projected costs for items such as materials, instructor fees, travel, technology, consulting, facilities rental, and more.

This technique of computing training budget is great when your requirements for the entire year are easily determined ahead of time and maintained by a strategic tactic to employee’s development.

 

Also Read: Attrition Calculations & Comparative Analysis

 

Start by identifying your key training initiatives. For example, over the next year, we are planning these training initiatives:

Leadership development

Plant operator training

Safety training

Supervisory training

On-boarding new fare

 

Next, estimate the costs for each initiative, which will take into account:

Number of participants

Cost of instructor

Travel & Accommodation

Stuff

Facility cost

Food

 

Like most things, there are pros and cons to each method of calculating a training-budget. For example, if you are anticipating a hyper-growth or acquisition phase, multiplying the annual salary budget by a percentage may not be ideal. By means of stated averages and FTEs may not precisely signify your organization’s needs. It is not always ideal to predetermine your organization’s training needs due to unforeseen circumstances such as a change in leadership or a trigger training for all employees such as harassment training or workplace safety training.

Whatsoever technique of calculation you may pick, it is always significant to remain supple and try to anticipate changes and vicissitudes in your training budget.

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